1 Contract Law
!emlma,anarLlsLandgraphlcdeslgner,hasrecenLlyboughLasmallprlnLlng
buslness.She does noL know much abouL prlnLlng Lechnology. So she
asks her frlend Chrls, who has worked ln prlnLlng all hls llfe, Lo
help her flnd a sulLable prlnLlng press.
ChrlsLakes!emlmaLoseeuavldwhodealslnallklndsofrecondlLlonedfacLory
machlnery.
!emlmaexplalnsLouavldLhaLsheneedsaprlnLlngpressLhaLcanLurnouL
13,000 sheeLs per hour, and produce good quallLy copy Lo a maxlmum
prlnL slze of 40
mllls.uavldshows!emlmaaLhree-cyllnderprlnLlngpress,cosLlng30,000.Pe
assuresherLhaL,'Lhlspresswlllbe[usLrlghLforLhe[ob'.Chrlsadds,'lLhlnkyou're
geLLlng a real bargaln here. lL's golng Lo be very efflclenL'.
!emlmalmmedlaLelydecldesLopurchaseLhemachlneaLaprlceof30,000.
PoweverfollowlngLhehealLhandsafeLyslLelnspecLlon,shedlscoversLhaLLherels
lnsufflclenLspacearoundLhemachlneLomeeLcurrenLsafeLyregulaLlons.She
decldesLopay10,000fornecessaryalLeraLlonsLoLhefacLoryspace.Powever,
when Lhe machlne ls flnally operaLlng, she dlscovers LhaL: (l) Lhe
maxlmum prlnL slze
ls20mllls,(ll)LhepresscannoLproducemoreLhan3,000sheeLsperhour,and(lll)
Lhe markeL value of Lhe press ls only 20,000. ln Lhe flrsL Lhree
monLhs, Lhe volume of prlnL produced ls half whaL !emlma had
expecLed.
Advlse!emlmaasLoanyremedlesshemayhaveagalnsLuavldorChrlslnLhe law
relaLlng Lo llablllLy for false sLaLemenLs ln Lngllsh law noLe:(l)
AnswerswlllbeneflLfromapracLlcalapproachLoadvlslng!emlmaln Lhe
clrcumsLances of her case.(ll)
?oushouldnoLconslderLhelawrelaLlngLolmplledLermsunderLhe Sale of
Coods AcL 2 In English contract law, a duty is imposed to the party
not to make any false statements to the other contracting party to
induce him to enter into the contract. In this case, Jemima has
been the victim of false statements from both David and Chris.
Thefirstissuethatarisesis:HastherebeenamisrepresentationfromDavid,asfaras
the machine is concerned? If so, what remedies can Jemima claim?A
misrepresentation may be defined as an unambiguous, false statement
of fact or law
whichisaddressedtothepartymisled,whichismaterial(althoughthisrequirementisnow
debatable) and which induces the contract.1
-This statement can be made by words. In this case, Jemima
explicitly told David she needed a printing press that could turn
out 15,000 sheets per hour, and produce good quality copy to a
maximum print of 40 mills, and David assured her that this press
[would] be just right for the job. However, the press can only turn
out 5,000 sheet per hour, and the maximum print size is 20 mills.
Davids statement is clearly unambiguous and false. -The statement
must be addressed to the party misled. In this case, David directly
told Jemima that the press would be right for the job.
-Thestatementmusthaveinducedthecontract.Ifthemisrepresentationwasenoughofan
inducement to have a reasonable person to enter the contract, the
onus of proof is placed on the representor to show that the
representee did not in fact rely on the representation2, as seen
inMuseprimePropertiesLtdvAdhillPropertesLtd(1991)3.Inthiscase,Jemima
immediately decide[d] to purchase the machine. She relied both on
Davids and on Chriss statement to make her purchase; however Davids
statement does not have to be the only one she relied on. Davids
statement clearly induced Jemima to entry into the contract. So
Davids claim that his press will be just right for the job is a
misrepresentation. 1 Ewan McKendrick, Contract Law (9th ed.
Palgrave MacMillan, 2011) p. 218. 2 McKendrick, ibid, p. 221. 3
Museprime Properties Ltd v Adhill Propertes Ltd (1991) 61 P & C
R 111, 124, cited inMcKendrick,ibid, p. 221. 3
TheremediesJemimamayhavedependonwhattypeofmisrepresentationitis.
FraudulentrepresentationwasanalysedbyLordHerschellinDerryvPeek(1889)4:there
mustbeproofoffraud;fraudisprovenwhenitisshownthatafalsemisrepresentationhas
beenmadeknowingly;andiffraudisprovedthemotiveofthepersonguiltyisimmaterial.
Thus it is only needed to show that David knew he made a
misrepresentation. In this case, David is a person who deals in all
kinds of reconditioned factory machinery, so arguably he knew the
machine he was trying to sell, and knew it was not conform to what
she
wanted.Jemimahadalsomadeveryclearthespecificationsofthemachinesheneeded,so
David cannot argue he did not know exactly what she wanted. David
knew his statement was false; therefore he has made a fraudulent
misrepresentation and is liable in the tort of deceit.
Misrepresentation also allows Jemima to ask for a rescission of the
contract.
TheMisrepresentationAct1967,section1,readsthatmisrepresentationrendersa
contractvoidableifthecontracthasbeenperformed.SoJemimamaydecidetorescindit.
Rescissionformisrepresentationhasbotharetrospectiveandaprospectiveeffect.Jemima
wouldthenbeentitledtorecoverthevalueoftheenrichmentwhichthedefendanthas
received under the contract prior to it being set aside5. The
parties have to be restored to their pre-contractual positions. In
this case, David he would give Jemima back the 30,000 she paid for
the machine; in turn
shewouldgivethemachinebacktoDavid.FollowingthedecisioninErlangervNew
Sombrero Phosphate Co (1878)6, Jemima would also need to give David
an account of any profit made through the use of the product
together with an allowance for any deterioration of 4 Derry v Peek
(1889) 14 App Cas 337. 5 McKendrick, ibid, p. 227. 6 Erlanger v New
Sombrero Phosphate Co (1878) 3 App Cas 1218. 4
theproduct7.Inthefacts,Jemimahasusedthemachineforthreemonths,andassuchshe
would have to give David a monetary compensation for the use of the
machine. If Jemima decides to rescind the contract, it is set aside
for all purposes, so she cannot claim any contractual damages.
However, as long as there is no element of double recovery,
fraudulentmisrepresentationallowstheclaimanttoclaimfordamagesinthetortofdeceit.
Tort of deceit which will put the claimant in the position in which
he would have been had the tort not been committed. According to
Doyle v Olby [1969]8, the defendant will also be liable for all the
damages created by the misrepresentation. In this case, Jemima has
paid 10,000 for necessary alterations to the factory space because,
following the health and safety site inspection, she discovers that
there is insufficient space
aroundthemachinetomeetcurrentsafetyregulations.HadntJemimareliedonDavids
misrepresentation, she would not have bought the machine, and
consequently would not have
hadtomakethenecessaryalterations.Thesealterationsthereforeflowdirectlyfrom
Davids inducement; he will have to compensate for her 10,000 loss.
In addition, Jemima has been affected by a loss of money from her
business. The volume of print is half what Jemima had expected, so
the profit she made is probably halved too. She may claim damages
against David for the loss of profit. The next issue that arises is
whether there has been a misrepresentation from David as far as the
price of the machine is
concerned.IthasbeenestablishedinKeatesvCadogan(1851)9thatthereisnogeneraldutyto
disclosematerialfactsknowntoonecontractingpartybutnottotheother.Thereisno
obligationofgoodfaithfromtheseller,whodoesnothavetosellhisgoodforthemarket
price. In this case, David told Jemima the machine cost 30,000 but
at no point did he tell her 7 McKendrick, ibid, p. 229. 8 Doyle v
Olby [1969] 2 QB 158. 9 Keates v Cadogan (1851) 10 CB 591. 5 that
it was the market value of the press. Therefore Jemima cannot claim
to have bought the
machinefor30,000becauseDavidimplieditwasthemarketprice.Shecannotclaimany
remedy against him for selling her the press for a higher price.
AsfarasChrisisconcerned,thecasethatappliesisChaudhryvPrabhakar(1989)10.
The claimant had asked her friend to help her a second-hand car
because he knew more about cars than her. When asked if the car had
been involved in a traffic accident, the defendant had stated it
hadnt; it was later discovered that this statement was not true.
The claimant decided to sue him for breach of the duty of care
arising from his accepting to help her choose the car. It was held
that the defendant could recover form the gratuitous agent[, as] he
owed a duty of care and his skill was to be measure objectively. He
fell below the standard expected.11
InJemimascase,sheaskedherfriendChris,whohasworkedinprintingallhislife,for
help in finding a suitable press. When David made his
representation about the machine being
justrightforthejob,Chrisconfirmeditbytellingheritwasgoingtobeveryefficient.
Having worked in printing all his life, Chris should have known
that this was a misstatement. In addition, when David told Jemima
he would sell her the press for 30,000, Chris told her:
Ithinkyouregettingarealbargainhere.Hemusthaveknownittobefalse,ashewasa
professionalintheprintingbusiness.AsinChaudhryvPrabhakar(1989),Chrisowed
Jemimaadutyofcareandhasbreachedhisdutytoexerciseskillandcare;anditwas
reasonable for Jemima to rely on Chriss claims.Therefore, she can
claim damages from him. 10 Chaudhry v Prabhakar (1989) 1 WLR 29
(CA). 11 Michael Connolly, Briefcase on Commercial Law (2nd
Edition, Cavendish Publishing Limited, 1998) p. 34.
