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Online Class 3 – Misrepresentation

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Bob, a specialist toy seller, wishes to maximise his toy sales during the busy Christmas period and therefore decides to improve the website for his online toy store. He reads an advertisement in the local paper in which Scoop offers ‘professional web design services’ (statement 1). Bob calls Scoop who tells him that, if he opts for Scoop’s premium web design service, the number of potential customers clicking on his website will increase by 400,000. Bob

is impressed by this, as well as Scoop’s reasonable hourly rates. He therefore decides to contract with Scoop. However, Scoop is only a trainee web designer and makes little improvement to the website. The visitors to Bob’s online store do not increase and instead customers prefer to shop with Bob’s competitors. Bob is furious because he believes he would have made £30,000 in preChristmas profits had he got 400,000 more customers. Furthermore,

he is now unable to pay the rent on his High Street shop and he is evicted from the premises. Advise Bob. False said or done – contract - leads to losses – [Misrepresentation] Para 1: We understand from the facts that Scoop has made certain statements in respect of his web design business due to which a contract has been formed with Bob and thereafter the statements have proven to be false. Consequently, losses have been suffered by Bob. We need to determine whether Bob can initiate a claim against Scoop under the law of misrepresentation. Box 1: [false statement of fact] Para 2: To prove misrepresentation, the first issue is to determine whether there is a false statement of fact (this is to be proven by the claimant). [copy paste from notes] Esso petroleum – Smith v land house properties, bissset v wilkenson , dimmock v hallet. In our case, there are two statements, the first is the statement in the adveristment that “professional web design services” and the other is the direct sgatement given by S to B that if he choses his services then his customers will increase by 400,000. Accordingly,

we note that in respect of the first statement, it can be argued that the word “professional” does not clearly depict the level of experience a person should have in order for one to be known as a preofessional , i.e. if S had the relevant educational qualification and cerain experience in the industy then notwithstnanding that he was actually a trainee, he could label himself as a professional as the word itself is ambigious. Therefore, on balance, we believe that the courts would not consider this term to be a false statement of fact. However, as regards the second statement that he will increase customers to 400,000 this is a clear target that he has set and it is in line of his business which is a web designer and this statement is false as he did not achieve this and could also not achieve this as he was a trainee designer. Para 3: Since there is a false statement of fact, the second aspect that we need to determine in order to prove misrep is inducement. (copy paste from notes). In our case, there are two reasons why B entered into the contract with S, namely, the reasonable hourly rates and the increase in customers by 400,000. However, it is evident from the facts that B was desirous of securing maximum sales in the Christmas season, we also see no evidence that B had any financial issues whereby he could not have afforded any other designer. Therefore, whilst the reasonable hourly rates was one of the factors, the major factor why bob contracted with S was the increase in customer footfall by 400,000. There is also only one statement given by S which has induced B to enter into a binding contract. As there is a false statement of fact (i.e. 400,000 customer statement) and this is the major reason why he entered into the contract with S i.e. inducement, we can conclude that S will be liable for misrepresentation. Para 4: As S is liable for misrep, the next issue is to determine under which category of misrepresentation, we can initiate our claim as the remedies depend on the cataogires of misrep. We will not place our claim under Fraudulent misrepresentation as the burden of proof to prove fraud is very high and on the claimant and according to this high burden and the definition of fraudulent misrep set out [copy paste]. In our case, we may be able to prove negligence, but we will not be able to prove fraud as the burden is high and we cannot find such evidence from the perspective of Scoop. We will also not place our claim under negligent misrep at common law since the burden of proof to prove the hedley bryne principles is also on the claimant.

The most prudent route will be to place our claim under statutory misrep i.e. section 2(1) of the misrep act where [copy paste from notes]. Put facts of howards marine – [where the lyyods journal was relied upon by the def which was consdieered as a “bible for the shipping industy” did not discharge the burden of proof”]. In our case, Scoop clearly knew that he was just a trainee and we see no evidence from the facts in terms of any past experience or projects where he had achieved such tall milestoens, therefore, considering the high burden, we believe that S will not be able to discharge it as he has no evidence to back his claim. Hence, he will be liable under Statutory misrep. Para 5: As we have held the person liable for SM, the final issue now is to determine the remedies. For Statutory misrepresentation, Recession is available and the B can also sue for damages. [define recession]. In our case, B has given him money for the service, whereas S has given services which are intanginle. So S can give the mney back but recession means that both parties have to be put to the pre contrtual position – S has to be given the srvicces back by B which is impossible. Hence recession will not be available – time lapse. However, damages can be claimed – but SM damage calculation test was not defined – however, courts held in the case of royscot v rogerson that the same test for fraud will apply to SM misrep damage calaculation. In our case, he has loss of profits, sales and also lost his shop because he could not pay rent. Based on the test, all damages will be compensated that have been set out above....