Contracts And Misrepresentations: An Essay On The Case Of Barry And Angelo.

Validity of the Contract

Question:

Discuss about the Business Law for Asset Management Ltd.

In this contract Barry wanted to buy the shop a fruits and vegetables shop from Angelo. Angelo made an offer which stated that the shop was extremely profitable with a monthly turnover of $20,000, it was also stated in the offer that there were no competitors in the shopping village. The monthly expenses which were declared by Angelo were $8000. The offer which Barry made to buy the shop was a sum of $200,000. A van and also a loader was included in the contract. But, it was found out that Barry had to face serious problems. Those problems were that the shopping village had competition, the income was lesser than the amount which was actually stated in the offer. The delivery van was also repossessed as it was leased by the shopkeeper, replacement of the loader was all required.

The contract which was created among Angelo and Barry can be rescinded?

Australia and United Kingdom both of these countries include the common law principles in their legal system. As per those common laws a contact is valid only if certain components are present in it like offer acceptance, consideration and there is no vitiating factors like misrepresentation.

The existence of an offer as well as an acceptance makes up an agreement. The acceptance mentioned which makes up the base of the business should not be depraved. It requires true consent, such a consent is achieved lacking any kind of coercion, fraud, improper influence or any sort of misrepresentation. If any of the mentioned components are present in a contract, then such a contract is void and the parties will not be obligated by its terms.

Some particular acts might also be order by the court in some cases.

The offer which was formed to the community can be approved by any individual. This law was declared in case of Carlill v Carbolic Smoke Ball Company[1]. Nevertheless, it was stated in case of Hyde v Wrench that if an offer was made in response to another then it would edge towards the elimination of the offer, but also the alteration of the conditions mentioned in the original offer. Thus, such an offer required to be accepted by the person who created the original offer.

The false representation of the facts conferred towards the party in a contract is stated to be a misrepresentation. Such a misrepresentation requires the following components in order to make any contract void where Such a declaration achieving consent of the contract and is a wrong statements of the illustrated facts.

Misrepresentation in the Contract

If the above mentioned components are present in the contract is void.

Negligent, a mistake or fraud are various kinds of misrepresentation. The misrepresentation in which the individual who makes the statement is knowledgeable that this statement is false and still supports it then it is stated to be a fraudulent misrepresentation. It edges closer to the acceptance of such the offer or results in the other person making the offer. In the case of Smith v Land & House Property Corp (1884)[2], the applicant brought a hotel, the seller who sold it stated that one of the tenants present in the hostel as ‘most desirable’. The seller was also aware of the fact that the tenant was in debts and also the edge of being bankrupt. It was stated to be a declaration of the facts rather than belief because the seller was in a situation to know the facts. However, the court dismissed such an appeal. In case of Esso Petroleum v Mardon such a situation was also seen to be redone.

Different methods to cure are present in a contract where the approval is achieved by the fraudulent misrepresentation such as Reimbursement in Whittington v Seale-Hayne[3] and recession of contract in Doyle v Olby Ironmongers ltd[4] 

In the case of Carlill v Carbolic Smoke Ball Company, the offer which was put up by Angelo for the public, might be approved by any individual. Nevertheless, an offer was made to offset the earlier offer by Barry. Therefore, the original offer made earlier was said to be invalid as mentioned in the case of Hyde v Wrench. The term of price of sale was the only term which was different. Therefore, Angelo had approved the offer, and the original terms which were stated in that offer were still functioning except for the price.

Thus, the conditions that were stated by Angelo yet composed a portion in the contract. It was regarding the statement in which no competitors were present, meanwhile the statement made in relation to the income of the fruits and vegetable store would still hold a portion in this contract. It was discovered by Barry that the income per month is much lower that the income mentioned in the original offer, competitors too were present as a nearby grocery shop who was selling fruits as well as vegetables. As Angelo was committed to the business of selling fruits and vegetables in the area, it was understandable that Angelo is knowledgeable of reality that there was a nearby competitor and also in regards to the data of the monthly income.

Implication of Common Law Principles

Such descriptions led to the formation of the counter-offer by Barry. Therefore, under such a condition the agreement was acquired over misrepresentation. 

In case of Smith v Land & House Property Corp, it is clear that any such contract will be responsible to be void. Other fraudulent misrepresentations which are made with regards to the loader and the delivery van, and this also resulted in this contract to become void.

Conclusion 

Therefore, the validity of the contract might have been questioned by Barry, in regards of the commitments made by Angelo. As Angelo made fraudulent misrepresentation this contract is said to be void. According to common law judgements the contract is declared void. Different solutions such as compensation or damages were available to Barry and Angelo as a seller had violated his responsibilities in accordance to common law.

To find out whether or not there was a violation of the contract through Angelo, under such circumstances Barry did not want to make this contract void even after facing problems regarding misrepresentation. 

According to the law, the contract is considered to be violated if the legal terms are not seen to be abided by the parties towards the contract. 

As per the judgement made in the case of Ecay v Godfrey [1947], the violation of the contract is done or not, requires the analysis of the non complied terms which are present are truly the terms which are initially mentioned in the contract[5]. 

It is stated that the individual has the right to cancel the contract, as well has the right to claim for the damages which appeared because of the presence of misrepresentation, as mentioned in the case of Smith New Court Securities v Scrimgeour Vickers[6]. 

An individual not having the possession of the property or the title on the goods while transferring such goods to other party it will not be creating a sale which is valid because the seller will not be having the title of the goods, under such circumstances this sale is said to be invalid. This judgement was taken from the case of Car & Universal Finance v Caldwell[7]. 

The provision with regards to the sale of the goods in which the consumers are said not to be involved is governed through the provisions mentioned in the Sale of Goods Act. In accordance to  s. 19, it has been declared that proper responsibilities are required to be set on the seller for the quality of the products which needs to be of a moderate standard. This section indicates that provisions in regards to the quality of the goods are required to be implied into a contract for the sale of the goods. This refers that even though the quality of such goods are not purposely acknowledged by either parties in the contract, then it is said to be a contractual term. 

Through the provisions which are mentioned in the common law a few implied terms are seen to be present in the contract. A term is required to be joined in the contract for giving the needed business effectiveness towards the contract, similar judgement was declared in the case of Liverpool City Council v Irwin [1997][8]. In case of Addis v Gramophone[9], it is declared through the court that if contractual contraventions are taking place, in such a case the distressed party might be compensated for fixing the pre-contractual positions. 

According to the above question, it is seen that Angelo was liable for the negligent misrepresentation. Therefore, by the applications mentioned in the case Smith New Court Securities v Scrimgeour Vickers it is declared that because of misrepresentation Barry had the right to claim for the damages because of the violation. Meanwhile, Angelo did not have the possession of the delivery van as it was taken on lease by the previous owner. The delivery van was also included in the contract and was included in the sale as well. Angelo was unable to sell the van as it does not belong to him and therefore he had violated contractual terms as mentioned in the case of Car & Universal Finance v Caldwell. Angelo do not abide by the provisions under s. 19 the quality of the goods which were given by him were of no good as the loader was found to be broken and hence was of no use to Barry. Therefore, as a portion of the contract the court restores the pre-existing position of Barry

Conclusion 

A claim can be made by Barry in relation to the violation of the contract and the damages.

References

Addis v Gramophone Co Ltd [1909] AC 488

Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 525

Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1

Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158

Ecay v Godfrey [1947]

Liverpool City Council v Irwin [1976] UKHL 1

Smith New Court Ltd v Scrimgeour Vickers (Asset Management) Ltd [1996] UKHL 3

Smith v Land and House Property Corporation (1884) LR 28 Ch D 7

Whittington v Seale-Hayne (1900) 82 LT 49