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Misrepresentation of Facts in Contracts

Discuss about the Construction Contracts for Vitiations and Remedies.

In this report, two cases will be discussed in order to give legal advice in each case. The first case deals with the issue of misrepresentation of facts. It is referred to the representation of a false statement or untrue fact which is made by a party with an objective to induce another party into signing a legal contract. In case a contract is formed based on misrepresentation of a fact, then the contract is considered as voidable (Anson et al., 2010). The representee or the party to whom the false statement is made has the right to rescind the contract and claim for damages or made it valid. In the second case, the issue is linked to the negligence of a party. It means when a person owed a duty of care which is imposed by the law and breach of such duty resulted in causing harm to another party. The court issues the remedies for a claim of negligence after assessing whether the elements of the negligence are present in the case or not. In order to properly understand each case, the report will divide each case into issue, laws, application and conclusion. The aim of this report is to provide legal advice to each party of the case.

Parties to a contract have to give the right information to each other during the negotiation stage of a contract because its terms legally bind them. Parties can misuse the contract and bind another party into a legal relationship by making a false or misleading statement. In order to protect itself, the innocent party can claim for the defence of misrepresentation. The defence is only available if the party of a contract makes a false statement in order to induce another party into signing the contract (Bisset v Wilkinson [1927] AC 177) (Ranjan, 2010). It is necessary that the untrue statement made by a party must not be an opinion or mere puff which cannot construct a suit for misrepresentation (Smith v Land and House Property Corp. [1884] 28 Ch D 7). Another key factor of misrepresentation is that the statement made regarding what a person would do in the future is not considered as misrepresentation of fact and it did not bind the party unless such statement is incorporated into the contract (Esso Petroleum v Mardon [1976] QB 801 and Edgington v Fitzmaurice [1885] 29 Ch D 459) (Andrews, 2016).  In case a party made a statement regarding the law, then an actionable claim of misrepresentation cannot be formed because it is presumed that everyone knows the law (Solle v Butcher [1950] 1 KB 671).

Negligence in Construction Contracts

Furthermore, the representor must not mislead another party by telling only a part of the trust, and non-presentation of the whole trust is considered as a misrepresentation of a fact (Nottingham Brick & Tile Co. v Butler [1889] 16 QBD 778). Another key element of misrepresentation is that it must be material which means the statement must be regarding a fact which is relevant to the formation of the contract or which is likely to induce a reasonable person into signing the contract (Museprime Properties v Adhill Properties [1990] 36 EG 114) (Haidar, 2011). Reliance is a key element of misrepresentation. If a misrepresentation is made a party, but the party is unaware about such misrepresentation than a suit for negligence cannot be formed; the reliance on such untrue statement is necessary, and the party must have signed the contract based on such statement (Horsfall v Thomas [1862] 1 H&C 90). It is considered that a party did not have a reliance on the misrepresentation if the contract is signed by the party based on his/her own judgement or after a proper investigation of the fact (Attwood v Small [1838] UKHL J60) (Anson et al., 2010). However, the court considers that reliance had been made by a party over a misrepresentation if an opportunity for checking the truth of the statement had presented by the party, but the representee rejected such offer (Redgrave v Hurd [1881] 20 Ch D 1).

A false statement was made by Jessica regarding the account of her business. Although one of her accounts showed a profit of $10,000 but it is considered as half trust which is considered as misrepresentation (Nottingham Brick & Tile Co. V Butler). However, Jessica can argue that Angela did not trust her statement and she checked the books of accounts based on which the statement cannot be considered as misrepresentation (Attwood v Small). Angela did check the accounts of 2007, but she did not check the accounts of other years because she had a reliance on the statement of Jessica (Redgrave v Hurd).

While living in a society, people have certain legal obligations for ensuring that their actions did not cause harm to another party. The law requires them to maintain a level of care in order to avoid causing injuries to other innocent parties. The parties which have such duties but still they failed to maintain a degree of care can be held liable for negligence. It is referred to the breaching of the duty of maintaining a level of care which is implied over them by the law in order to ensure the security of others (Luntz et al., 2017). However, it does not mean that every negligent action which resulted in causing damages or injury to another party is liable for damages. To determine whether a person owes a duty of care, the court uses a test called ‘neighbour test’. The test was given by the court in Donoghue v Stevenson [1932] AC 562 case. In modern cases of negligence, the test is used by the court for determining whether the defendant owed a duty of care or not. There are two elements in this case which include closeness in the relationship between parties and predictability or foreseeability of the harm (Bryden and Storey, 2011).

In case both these elements are present in a particular scenario, then a party owes a duty of care. Another popular test which is used by the court in case of economic losses is ‘Caparo test’. The court provided this test in Caparo Industries PLC v Dickman [1990] 2 AC 605 case. There are three elements of this test which include predictability of the harm, closeness in the relationship and that it is just and fair to impose such duty (Harpwood, 2009). In case these elements are present in a case, the parties can claim damages for the economic loss suffered by them (Equitable Life Insurance Society v Ernst and Young [2003] EWCA Civ 1114 and Berg Sons v Adams [1993] BCLC 1045). A claim for negligence can be filed by a party only if a breach of duty has occurred by a person who owed the duty for maintaining a degree of care (Condon v Basi [1985] 1 WLR 866) (Greenfield et al., 2015). While deciding whether damages for negligence can be issued, the present of causation is necessary. It means that the losses suffered by the claimant must prove that the defendant causes the injury suffered by him.

Generally, the court uses ‘but for’ test in order to resolve the question of causation in tort law. The test provides that the injury of the claimant will not have occurred but for the breach of the duty of the defendant, the party suffered loss (Chester v Afshar [2004] 3 WLR 927 and Performance Cars Ltd v Abraham [1962] 1 QB 33) (Edozien, 2015). Remoteness is another key element of a suit of negligence. It provides that the damages must be the foreseeable type and the claimant has to demonstrate that the injury suffered by him was not too remote or else a claim for negligence cannot be formed (Hughes v Lord Advocate [1963] AC 837 and Tremain v Pike [1969] 1 WLR 1556). It is necessary to ensure that the injury which is suffered by the party must be caused due to the breach of duty; in case the injury is resulted due to another reason than a claim for negligence cannot be formed (Bolitho v City & Hackney Health Authority [1997] 3 WLR 1151) (Robertson and Thomson, 2014). After proving that these elements are present in a particular situation, a party can claim compensation for the breaching party based on a suit of negligence.

In order to determine whether the family of Andy can file a suit for negligence, it is necessary to determine whether elements of negligence are present in the case. Firstly, it is necessary to prove whether Acme Cola Company Limited had a duty of care. While serving its customers or selling them products, a manufacturer owes a duty of care to ensure that such products are safe for consumption of customers (Donoghue v Stevenson). Therefore, a duty was owed by Acme. As per the neighbour test, there was a close relationship between Andy and Acme and Acme could have predicted the occurring to the injury. Based on which a duty of care is breached by Acme. The element of causation is present in the case because after examining it was found that Andy becomes ill because of drinking remains of a cockroach which was present in the cola bottle. Thus, the injury is a result of direct actions of the cola manufacturer. It can also be seen that the damages are not too remote because it is general knowledge that presence of remains a cockroach in the cola bottle can cause harm to the person who is drinking. Thus, all the elements of negligence are present in this case.  In order to demand economic losses suffered by the family of Andy, the court can use ‘Caparo test’ based on which it is just and fair to impose a duty over Acme.

Thus, the family of Andy can claim compensation for the money that they failed as hospital charges due to the injury of Andy which was caused due to the negligence of Acme.

Conclusion

In conclusion, the report evaluated two cases based on the principle of misrepresentation and negligence respectively. In the first case, it was determined that the element of misrepresentation were present. A contract was formed between Angela and Jessica because of the untrue statement of Jessica. Based on her reliance on the statement of Jessica, Angela suffered losses. Thus, it is advised to Angela that she should file a suit for misrepresentation to rescind the contract and claim damages for the losses suffered by her. In the second case, the element of negligence was analysed in order to determine the liability of Acme Cola Company Ltd. It was found out that the injury suffered by Andy is caused by the drink of Acme and due to its negligence. Thus, it is advised to the family of Andy that they should file a suit of negligence against Acme. They can claim for the losses suffered by the due to the negligence of the corporation.

References

Andrews, N. (2016) Misrepresentation and Coercion. Arbitration and Contract Law, pp. 189-203.

Anson, W.R., Beatson, J., Burrows, A.S. and Cartwright, J. (2010) Anson's law of contract. England: Oxford University Press.

Attwood v Small [1838] UKHL J60

Berg Sons v Adams [1993] BCLC 1045

Bisset v Wilkinson [1927] AC 177

Bolitho v City & Hackney Health Authority [1997] 3 WLR 1151

Bryden, D. and Storey, I. (2011) Duty of care and medical negligence. Continuing Education in Anaesthesia, Critical Care & Pain, 11(4), pp.124-127.

Caparo Industries PLC v Dickman [1990] 2 AC 605

Chester v Afshar [2004] 3 WLR 927

Condon v Basi [1985] 1 WLR 866

Donoghue v Stevenson [1932] AC 562

Edgington v Fitzmaurice [1885] 29 Ch D 459

Edozien, L.C. (2015) UK law on consent finally embraces the prudent patient standard. BMJ: British Medical Journal (Online), 350.

Equitable Life Insurance Society v Ernst and Young [2003] EWCA Civ 1114

Esso Petroleum v Mardon [1976] QB 801

Greenfield, S., Karstens, K., Osborn, G. and Rossouw, J.P. (2015) Reconceptualising the standard of care in sport: The case of youth rugby in England and South Africa. PER: Potchefstroomse Elektroniese Regsblad, 18(6), pp.2183-2217.

Haidar, A.D. (2011) Construction Contracts: Obligations, Vitiations and Remedies. Global Claims in Construction, pp. 51-83.

Harpwood, V.H. (2009) Modern Tort Law 7/e. Abingdon-on-Thames: Routledge.

Horsfall v Thomas [1862] 1 H&C 90

Hughes v Lord Advocate [1963] AC 837

Luntz, H., Hambly, D., Burns, K., Dietrich, J., Foster, N., Grant, G. and Harder, S. (2017) Torts: cases and commentary. London: LexisNexis Butterworths.

Museprime Properties v Adhill Properties [1990] 36 EG 114

Nottingham Brick & Tile Co. v Butler [1889] 16 QBD 778

Performance Cars Ltd v Abraham [1962] 1 QB 33

Ranjan, V. (2010) Ambiguous Terms in Fine Print Amounts to Misrepresentation. SSRN.

Redgrave v Hurd [1881] 20 Ch D 1

Robertson, J.H. and Thomson, A.M. (2014) A phenomenological study of the effects of clinical negligence litigation on midwives in England: the personal perspective. Midwifery, 30(3), pp.e121-e130.

Smith v Land and House Property Corp. [1884] 28 Ch D 7

Solle v Butcher [1950] 1 KB 671

Tremain v Pike [1969] 1 WLR 1556

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