Misrepresentation Under Contract Law

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Table of Contents

Cordelia Wainwright
Dazza Chav case
Gosia Business Strategy analysts
Squire finance case
Irine Insurance case
Conclusion
References

Cordelia Wainwright

This case is a case of negligent misrepresentation because the finance officer made the statement without knowledge of the capacity because he had not gone to the building to ascertain the facts of what he was saying; he had made the statements without reasonable grounds to believe on what he is saying. In such a case, the innocent party has a right to damages for misrepresentation if he suffers a loss. in law it is upon the maker of the statement to prove that he actually had reasonable ground to believe in the statement he made. The facts of this case are similar to the facts of the case of Naughton v o’ Callaghan (1990) (Abbort K Pendlebury N & Wardman K, p. 142).

In this case P purchased a racehorse (Fondu) for 26,000 guineas on the basis of a negligent misrepresentation by D as to its pedigree. at the time, if the pedigree had not been misrepresentation, it would have been worth about 23,500 guineas. the misrepresentation was discovered two years later, during which time Fondu had been raced very unsuccessfully and was worth about £ 1,500. P claimed the difference between the purchase prices of 26,000 guineas. Normally the courts would award the difference between the value of the goods as represented and the actual value at the time of sale. However P, succeeded since there were reasons for departing from the usual position (Abbort K Pendlebury N & Wardman K., p. 142).

From the facts of the case above I will advice Baron finance company that IFM will actually recover because the finance officer negligently misrepresented facts. He made statements without checking its truthfulness. IFM will only recover the difference between the loss and the sales value.

Dazza Chav case

In this case, there is fraudulent misrepresentation on the part of Steve Forest. Steve misrepresented the facts knowing very well that the person he is representing as having been employed had not been employed. However, Dazza Chav also relied on his judgment in increasing the amount of the investment because he had not met or heard about Baroness Von sass. If Dazza Chav discovered earlier about the misrepresentation then the contract could have been set aside. There is a case with similar;

Smith v Chadwick, 1884

A prospectus contained a statement that a certain man was on the board of directors of the company. Plaintiff admitted that he was not influenced by this statement while purchasing share. it was held by the court that the plaintiff could not rely on the misstatement and his action should fail (Hussein A, p. 162).

From the above case, with similar facts I can conclude that Baron finance company will not be held liable. If Dazza Chav decides to take a legal action it is bound to fail because at firs instance he was not aware of the person who they were talking about in the contract and relied on personal judgment to make a decision. Whether there was misrepresentation, it is immaterial at this point because the person who was misled relied on his own judgment as he had no information relating to the person who was quoted as having been hired. If he had relied on the information fully, then it could have been different case that is the Baron finance company would be held relied. This was held in the case of REDGRAVE V HURD 188.The facts of the case were as follows;

The plaintiff in the negotiations of the sale of his business to H represented that his income from the business was £ 300 a year, and produced some papers in support of it. H relied on R’s statement and bought the business without examining the papers. if he had examined tem, he would have discovered that the plaintiffs statement was false. It was held that as H had relied on the plaintiff’s statement was false and he could rescind the contract and it was no defense to say that he had the means of discovering the untruth (Hussein A, p. 162).

Gosia Business Strategy analysts

In this case, there was mistake but the facts were correct during the time the statement was made. They became untrue in the subsequent negotiations, the investor did not read the material facts of the report and the company failed to disclosed such kind of information therefore the contract became voidable at the discretion of the investor. The statements made in this case were actually innocent misrepresentation because they literally true but had a misleading impression. In the case of White v O’Flanagan (1936). The facts of the case were as follows:

W was induced to buy F’s medical practice on the representation that it was worth £ 2,000 a year. The representation was made in January, but the contract was completed in May. In the meantime, due to F’s illness his contract could be avoided owing to F’s failure to disclose the substantial reduction in his practice (Hussein A, p. 163).

Relying on the facts of the case above, I would advice Baron finance company that the contract was likely to be avoided at the discretion of the investor, however, since the investor has already invested and lost quite substantial amount of money damages will be recovered. Therefore the remedy available is action for damages, for the loss incurred and will be recovered. The fact that they relied on the information provided by the company stated that it was in excellent condition is enough to make them incur damages for the loss incurred.

Squire finance case

This case represents fraudulent misrepresentation where the party issuing the bond knew very well that the bonds were to be used for a different purpose and issued by a different company not Baron finance company. They have misrepresented the facts that the finance raised would be used on Baron Finance and they ended up using it on squire finance. In this case, Baron Finance will be held liable for damages incurred by the Bond takers. This is because the statement was made by Baron Company knowing that is untrue and that is why it arises to an action. A case with similar material facts of R V KYLSANT (1932).

A company issued prospectus, offering debentures for subscription and stated that the company had paid dividends every year for several years. The statement gave the impression that the company had made trading profits during those years, whereas in fact the company had incurred substantial losses and the dividends had been paid out of secret reserves. No disclosure was made of these trading losses. Held that the prospectus was false and the defendant was liable for misrepresentation ( Abbort K Pendlebury N & Wardman K, p. 140).

From the facts of the case above, the company will be held responsible because the company’s information about Baron finance company had a greater misrepresentation since it distorted the true statement about where the money was going to be used.

Irine Insurance case

The cases of insurance are supposed to be of utmost Good faith and there should be no misrepresentation or omission of any material facts thus they must be disclosed when making the contract. It is the duty of Ophelia chapette to disclose the facts of the £1,500 that had gone missing. But he did not disclose this information. In insurance, the insured person is assumed to be having knowledge of the facts likely to influence the insurer in deciding whether or not he should accept the risk. It is therefore reasonable that Ophelia Chapette should have made a frank and true discloser of all material facts known to him for the purpose of enabling Irine insurance to give a free consent. The case below had similar facts

Aveson v Kinnard, 1806

IN This case, the insurer escaped his liability to pay under a life insurance policy where the insured had stated in the proposal form that she was in good health, but had in fact privately mentioned to a close friend of her that she did not expect to live (Hussein A.,165).

In this case, the insurance will reject to pay for the loss because all the information that was supposed to be given to the insurance was not given during the contract time. The company became economical with information as they failed to disclose the disappearance of £1500 from petty cash. In another case of utmost Good faith, a company failed to disclose all the information that was required and the insurance was given rescission of the contract. The facts of the case were as follows;

LONDON ASSURANCE v MANSEL (18790 d FAILED TO disclose that several insurance companies had declined proposals to insure his life. this was held to be a material factor which should have been disclosed. rescission of the contract was therefore granted (Abbort K Pendlebury N & Wardman K 299-300).

All contracts that are misrepresented are voidable and this type of contract i.e. insurance contract is voidable on part of the insurance company. However since something has occurred before discovery of the truth, the Irine insurance will not accept the claim nor will they return the premium. My advice to the Baron finance company is that they are going to fail in lodging a claim.

Tarquin Farquarson

This case is a misrepresentation case where there is lapse of time. If the facts are misrepresented, lapse of time will not stop rescission on part of the affected party,if he has learnt the truth. Lapse of time will only work if he discovered the truth and moves on for some time. This is because time starts to be counted from the time when one learns the truth. In the case presented here there are so many parties involved Baron had bought the property from Cravat property on the ground that is was registered under England’s National trust. If Baron finance company had sold this property immediately without knowing that it was not actually used for luxury weekends and it was not registered under National trust then they will be able to recover damages from Cravat properties. The following is a case with similar facts;

Leaf v International galleries (1950)

P was induced to buy a painting by an innocent misrepresentation that it was by John constable. Five years later he discovered the truth and immediately claimed rescission. He could not therefore have affirmed the contract but his claim was held to be barred by lapse of time (Abbort K Pendlebury N & Wardman K., 143).

From the above case, it can be noted that lapse of time will not be applicable to this case, because Baron learnt of the fact that there was a misrepresentation eight years later. Britney Cidercan bought this premises and discovered immediately that they were not registered as stated, they can recover damages from Tarquin Farquaharson who will in return recovered the damages from Baron if they had not had information about being registered under National trust.

Conclusion

From the above six cases, various issues of misrepresentation has been covered. Negligent presentation has been covered in the first case. Fraudulent misrepresentation with personal judgment is in the second case. The third case presents fraudulent misrepresentation with subsequent changes in the material facts. The fourth case is a case of fraudulent misrepresentation with full knowledge. The fifth case is contract of utmost Good faith and the last case deals with lapse of time and misrepresentation.

References

Abbort K Pendlebury N & Wardman K (2007) Business law, 8th edition Thomson learning pp 140 to 144, 299
Hussein A. (2005); General principles and commercial law of Kenya. Business education series East Africa Educational publishers pp 162 to 165.

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