Legal Issues In Misrepresentation And Negligence Cases

We recommend a minimum total of TEN statute and case references per question. Work that includes sources that are not properly referenced according to the “Harvard Referencing Workbook” will be penalised. Question One: 10% 800 words Answers must be supported by case and statute
references.

You need to closely consider Chapters 6, 7, 8, where relevant.
Angela enters into negotiations with Jessica to purchase her restaurant. During their discussions,Angela asks Jessica what are the annual profits of the restaurant. Jessica tells her that ‘the restaurant has been making $10,000 per year in profits’. She hands her a box of papers and says
‘Here are the accounts, you can check for yourself if you like’.
Angela trusts Jessica and only checks the accounts for 2007, which do show profits of $10,000.
Relying on what she has told them, Angela decides to purchase the business. However, after a few months, when business is very slow, she has another look at the accounts and realises that the business has only been making $2,000 per year for the last 5 years (since 2008).
Advise Angela of her common law rights.

Questions two: 15% 1200 words Answers must be supported by case and statute references. You need to closely consider Chapters 5,
Sandra Smith purchased a carton of cola from her local corner store. The following week, on a very hot day her husband, Andy, took a can from the refrigerator and drank it. He became violently ill and was rushed to hospital where he remained for three days. On closer inspection of the contents of the can it was found to contain the remains of a cockroach. The family faced large medical expenses, a problem exacerbated because neither parent could work in their casual jobs for a week.
The corner store has gone out of business due to bankruptcy and the family wishes to sue the
Australian manufacturer, Acme Cola Company Ltd. Advise the Smiths as to their chances if they were to sue Acme for negligence.
References must follow the Harvard referencing style. Refer to the Academic Learning Skills handout on Report writing. Please see Academic Learning skills staff for assistance with this, or any assignment.

Misrepresentation in Contracts

Case 1

In this particular case, the issue is raised by Angela regarding the false representation made by Jessica. In order to advise Angela whether a suit for misrepresentation can be formed, it is necessary to understand relevant laws and judgement of relevant cases. A party can be held liable for misrepresentation if it made a false statement with a purpose of inducing another party into signing a contract. The party which showed reliance on the untrue statement and create a legal relationship has the right to file a suit for damages. The contract which is constructed between two or more parties is not considered as void; instead, it is voidable (Knapp, Crystal and Prince, 2016). It means that the innocent party which contracted the contract has the right to make the contract void or valid. The party can accept the term of the contract and bind itself into contractual obligations or terminate the contractual relationship and claim for damages from the party. There are certain elements which are required to be present in order to generate a claim for misrepresentation. Primarily, it is necessary that the parties make a false statement to a contract in order to construct a case of misrepresentation.

In Bisset v Wilkinson [1927] AC 177 case, the court held that no actionable claim for misrepresentation could be formed in case the statement made by was party was just an opinion rather than statement of a fact; similar judgement was given in the case of Tai Kim San and another v Lim Cher Kia [2000] 3 SLR(R) 892 (Koh, 2013). It is also necessary that the purpose of such untrue statement is to induce another party or attracting them to create a contractual relationship (Museprime Properties v Adhill Properties [1990] 36 EG 114). The statement which is a mere puff cannot be considered as a misrepresentation of fact (Dimmock v Hallett [1866] 2 Ch App 21). A statement of law and fact is different, and a suit for misrepresentation cannot be filed in case of the untrue statement of a law (Pankhania v London Borough of Hackney [2002] EWHC 2441 and Solle v Butcher [1950] 1 KB 671) (Spark, 2013). In case the misrepresentation statement made by a party is ignored by another party that a suit for negligence cannot be formed (Attwood v Small [1838] UKHL J60).

If the rightness of the facts made by another party is checked, then a claim for misrepresentation cannot be filed by the party. Thus, reliance on the untrue statement is a key element of misrepresentation. In case the opportunity for checking whether the statement of a party is true or false is given to another party which was rejected, then a claim for misrepresentation can be filed (Redgrave v Hurd [1881] 20 Ch D 1 and Weir and others v Secretary of State for Transport and Another [2005] EWHC 2191 Ch) (Hudson, 2014). After proving that the contract is formed based on misrepresentation, then remedies can be demanded by the innocent parties (Royscott Trust v Rogerson [1991] 2 QB 297). The remedies issued by the court are based on the type of misrepresentation; there are three types which include innocent, fraudulent and negligent. In case of fraudulent misrepresentation, the aggrieved party can demand damages and termination of the contractual relationship (Smith New Court Securities v Scrimgeour Vickers [1996] 3 WLR 1051).

Elements Required for Misrepresentation Claim

Legal Advice for Angela

An untrue statement is given by Jessica during the negotiation stage which was not personal opinion, and it was a statement of the fact (Tai Kim San and another v Lim Cher Kia). The purpose of Jessica was to create a contractual relationship with Angela (Museprime Properties v Adhill Properties). Angela checked the accounts for 2007 based on which Jessica can claim that she had ignored the false statement based on which a claim for misrepresentation cannot be formed (Attwood v Small). Although Angela did check the accounts, however, she only checked the accounts of one year after which she relied on the statement of Jessica (Weir and others v Secretary of State for Transport and Another). Thus, it was a fraudulent misrepresentation based on which the remedies can be claimed by Angela (Smith New Court Securities v Scrimgeour Vickers). She can terminate the contract and claim damages for the losses.

Case 2

In this particular case, an issue is raised whether the Smiths can file a suit for negligence against Acme Cola Company Limited. In order to advise the Smiths, it is necessary to understand relevant laws and cases. While filing a lawsuit for claiming damages under a negligence case, it is necessary that all the elements are present. A suit can be filed if a person owes a duty of care and such duty was breached; it is necessary that breach of such duty must cause injury to another party to establish a claim of negligence (Studdert and Richardson, 2010). An important judgement was given in Donoghue v Stevenson [1993] AC 562 case by the court. In this case, a café was held liable by the court for breaching its duty of care by serving a drink to the customer in that remains of a decomposed snail were present. The person to who the drink was served suffered from serious illness and huge medical bills. The court evaluated the negligence of the café based on the ‘neighbour test’. The test judges a person’s negligence based on two key elements. Firstly, there must be a close relationship between the parties and secondly the injury must be foreseeable or predictable (Bolton v Stone [1951] AC 850) (Bond and Paniagua, 2009).

The court uses this test for assessing the negligence of a party. The court considers a number of factors while evaluating whether a claim for damages can be accepted in case of negligence. It is necessary that the party must take appropriate precautions in order to prevent any injury which might result in causing harm to another party (Latimer v AEC [1953] AC 643). The precautions are only required to follow by a party in case it has a duty of care to make such precautions (Imbree v McNeilly [2008] HCA 40) (Fordham, 2013). In case of a manufacturer, a duty of care exists towards customers. During designing and production of goods, a manufacturer is required to ensure that proper care is taken to ensure the safety of customers (O’Dwyer v Leo Buring Pty Ltd [1966] WAR 67). During packing of goods, the manufacturer is required to ensure that the products are safe and free from harmful substances which might cause injury to another party (Adelaide Chemical and Fertilizer Co Ltd v Carlyle [1940] HCA 44). While determining a suit for negligence, it is necessary that the injury suffered by a party must be caused due to actions of the defendant. In order to assess the element of causation, the ‘but for’ test is used by the court.

Types of Misrepresentation

The test provided that if an injury suffered by a party could be avoided but for the breach of duty caused by the defendant, the claimant suffered damages (Cork v Kirby MacLean Ltd [1952] 2 All ER 402 and Chapel v Hart [1998] HCA 55) (Stauch, 2017). The party that is claiming damages for negligence must prove that the injury suffered is caused by the breach of duty and the damages are not too remote. Remoteness of damages is another key element in a suit of negligence. It provides that the defendant is only liable for damages which are directly caused due to the breach of duty and the claimant cannot claim for damages which are too remote or did not cause directly due to the action of the defendant (The Wagon Mound No. 1 [1961] AC 388 and Amaca Pty Ltd v Ellis [2010] HCA 5). Thus, the claimant can only claim compensation for the injury suffered by him due to the breach of duty caused by the defendant and compensation for damages which are remote cannot be claimed by the claimant.

Legal Advice for Smiths

After drinking from a cola bottle, Andy suffered from serious illness and his family faced financial loss as well. It was found out that Andy become ill because the cola drink has remains of a cockroach. Acme Cola Company Limited manufactured such bottles, and the company has a duty to ensure that its products are safe for consumption by its customers. The duty was breached because the bottle had remains of a dead cockroach (O’Dwyer v Leo Buring Pty Ltd and Adelaide Chemical and Fertilizer Co Ltd v Carlyle). Along with Andy, his family suffered financial losses as well because of the breach of duty by Acme. The injury of Andy was occurred because of drinking the remains of a dead cockroach which was in the cola bottle due to the negligence of the manufacturer. There was a close relationship between the parties, and the harm was predictable. Thus, the elements of negligence are present in this case, and Smiths can file a suit against Acme. They can claim for compensation for the loss suffered by them due to the illness of Andy.

Conclusion:

It can be concluded from the cases mentioned above that parties can file a suit for misrepresentation and negligence and demand for appropriate remedies. In the first case, a legal issue was raised whether Angela can file a claim for misrepresentation. The level advice was given that the statement given by Jessica fulfilled the elements of misrepresentation. The statement was false, and its purpose was to attract Angela into signing the contract. Jessica is guilty of fraudulent misrepresentation, and Angela can file a suit against her for terminating the contract along with demanding appropriate damages for the loss suffered by her. The second case is related to the issue of negligence. The elements of negligence were fulfilled in this case based on which Acme Cola Company Ltd is guilty. There was a legal duty for maintaining a standard of care while producing and packing the products of customers and such duty by breaching in this case. Such breach directly caused the injuries, and the parties were in a close relationship. Smiths can file a suit for negligence and demand compensation for the loss suffered by them for Acme.

Legal Advice for Angela

The importance of contracts has grown substantially as more and more people create contractual relationships to perform personal or professional duties. It binds two or more parties into its terms, and each party can bind each other to discharge their legal obligations. The presence of misrepresentation in a contract resulted in making the contract voidable based on which the party has the right to rescind the contract or bind it upon himself and other parties. It occurred when a party make a false statement during the negotiation period of a contract for attracting another party into signing the contract. On the other hand, negligence is a key factor based on which parties which suffered loss can claim for damages. A party can file a suit for negligence if a duty of care is not maintained by a party which resulted in causing the damages. Two cases will be analysed in this report after analysing relevant laws and cases. Appropriate legal advice will be given in each case to the parties based on the evaluation of the relevant laws and cases.

References:

Adelaide Chemical and Fertilizer Co Ltd v Carlyle [1940] HCA 44

Amaca Pty Ltd v Ellis [2010] HCA 5

Attwood v Small [1838] UKHL J60

Bisset v Wilkinson [1927] AC 177

Bolton v Stone [1951] AC 850

Bond, P. and Paniagua, H. (2009) Understanding the law and accountability. Practice Nursing, 20(8), pp.406-408.

Chapel v Hart [1998] HCA 55

Cork v Kirby MacLean Ltd [1952] 2 All ER 402

Dimmock v Hallett [1866] 2 Ch App 21

Donoghue v Stevenson [1993] AC 562

Fordham, M. (2013) CONTRIBUTORY NEGLIGENCE AND THE DISABLED CLAIMANT: Town of Port Hedland v. Reece William Hodder by next friend Elaine Georgina Hodder (No. 2). Singapore Journal of Legal Studies, pp.192-201.

Hudson, A. (2014) Understanding equity & trusts. Abingdon: Routledge.

Imbree v McNeilly [2008] HCA 40

Knapp, C.L., Crystal, N.M. and Prince, H.G. (2016) Problems in Contract Law: cases and materials. Netherlands: Wolters Kluwer Law & Business.

Koh, P.M. (2013) A Reconsideration of the Shareholder's Remedy for Oppression in Singapore. Common Law World Review, 42(1), pp.61-90.

Latimer v AEC [1953] AC 643

Museprime Properties v Adhill Properties [1990] 36 EG 114

O’Dwyer v Leo Buring Pty Ltd [1966] WAR 67

Pankhania v London Borough of Hackney [2002] EWHC 2441 

Redgrave v Hurd [1881] 20 Ch D 1

Royscott Trust v Rogerson [1991] 2 QB 297

Smith New Court Securities v Scrimgeour Vickers [1996] 3 WLR 1051

Solle v Butcher [1950] 1 KB 671

Spark, G. (2013) Vitiation of Contracts: International Contractual Principles and English Law. Cambridge: Cambridge University Press.

Stauch, M. (2017) Text, Cases & Materials on Medical Law. Abingdon: Routledge.

Studdert, D.M. and Richardson, M.W. (2010) Legal aspects of open disclosure: a review of Australian law. Med J Aust, 193(5), pp.273-276.

Tai Kim San and another v Lim Cher Kia [2000] 3 SLR(R) 892

The Wagon Mound No. 1 [1961] AC 388

Weir and others v Secretary of State for Transport and Another [2005] EWHC 2191 Ch