Derry v Peek [1889]

Derry v Peek [1889] UKHL 1 is a landmark case in English contract law that delves into the realms of fraudulent misrepresentation and the tort of deceit. The case established a pivotal 3-part test for fraudulent misrepresentation, asserting that a defendant is fraudulent if they either (i) know the statement to be false, (ii) do not believe in the statement, or (iii) are reckless as to its truth.

The Plymouth, Devonport and District Tramways company issued a prospectus, falsely claiming to have permission to use steam trams. The reality was that the company did not possess such permission, as it was contingent on the Board of Trade's consent. The company, honestly believing they would obtain permission, applied for it after the prospectus was issued. However, permission was ultimately denied, leading to the company's liquidation.

Shareholders, led by Sir Henry Peek, who had invested in the company based on the misrepresented statement, sued the directors for misrepresentation. The House of Lords, in its judgment, held that the shareholders' action failed because it was not proven that the directors lacked an honest belief in what they had stated. Lord Herschell noted that while the unreasonableness of the grounds of belief is not necessarily deceitful, it can serve as evidence from which deceit may be inferred.

This case underscored the crucial requirement for establishing the tort of deceit, emphasising that the misstatements must be fraudulently made. The case validated the majority judges' perspective in the Court of Appeal in Heaven v Pender [1883], asserting that deceit or fraud necessitates showing that a defendant either knows a statement is untrue, has no belief in its truth, or is reckless as to its truth or falsity.

Importantly, the case clarified that no duty would be imposed concerning non-fraudulent misrepresentation in the absence of a contract, a fiduciary relationship, fraud, or deceit. However, this stance was later overruled in Hedley Byrne v Heller [1964].

The finding that the directors had an honest belief in the statement in Derry v Peek raised questions given the evidence suggesting their awareness that they did not yet have the required permission. Despite this, the court's decision emphasised the significance of proving fraudulent intent to establish the tort of deceit.
Back to blog

UOL Case Bank

Upon joining, you become a valuable UOL student and gain instant access to over 2,100 essential case summaries. UOL Case Bank is constantly expanding. Speed up your revision with us now.

Subscribe Now

Where are our students from?

Council of Europe
Crown Prosecution Service
Baker Mckenzie 
Yale University
University of Chicago
Columbia University
New York University
University of Michigan 
INSEAD
University of London
University College London (UCL)
London School of Economics (LSE)
King’s College London (KCL)
Royal Holloway, University of London 
Birkbeck, University of London
SOAS, University of London
University of Manchester
University of Zurich
University of York
Brandeis University
University of Exeter
University of Sheffield
Boston University
University of Washington
University of Leeds
University of Law
University of Kent
University of Hull
Queen’s University Belfast
Toronto Metropolitan University
Hong Kong University of Science and Technology
University of Buckingham
ESSEC Business School

  • Criminal Practice

    Diagrams and Charts

    Our carefully designed diagrams and charts will guide you through complex legal issues.

  • Criminal Law

    Clear and Succinct Definitions

    Key concepts are concisely defined to help you understand legal topics quickly.

  • Property Law

    Statutory Provisions

    Statutory provisions are provided side by side with legal concepts to help you swiftly locate the relevant legislation.

  • Public Law

    Case Summaries

    We have summarised important cases for you so that you don't need to read long and boring cases.

  • Evidence

    Rules and Exceptions

    Rules and exceptions are clearly listed so that you know when a rule applies and when it doesn't.

  • Company Law

    Terminology

    Legal terms and key concepts are explained at the beginning of each chapter to help you learn efficiently.

  • Case Law

    Case law is provided side by side with legal concepts so that you know how legal principles and precedents were established.

  • Law Exam Guide

    Law Essay Guide

    You will learn essential law exam skills and essay writing techniques that are not taught in class.

  • Law Exam Guide

    Problem Question Guide

    We will show you how to answer problem questions step by step to achieve first-class results.

  • Conflict of Laws

    Structured Explanations

    Complex legal concepts are broken down into concise and digestible bullet point explanations.

  • Legal System and Method

    Legal Research

    You will learn legal research techniques with our study guide and become a proficient legal researcher.

  • Jurisprudence and Legal Theory

    Exam-focused

    All essential concepts, principles, and case law are included so that you can answer exam questions quickly.