Problem Question. Contract Law 2 - 72% Grade Answer! PDF

Preview

Summary

My year 1, contract law 2 exam answer for problem questions. I received a 72% 1st class mark for this piece of work....

Description

Student Number: 2026383

Word Count: 2065

1)

Advising Jack involves multiple areas and routes to be considered. Firstly, it must be established as to what constitutes an actionable misrepresentation. If the necessary elements are found and there is an actionable misrepresentation, then the remedies available to Jack must be explored. Additionally, this answer will consider whether the statement made by Owen has become a pre-contractual term of the contract. The possibility of remedies for both a breach of contract and misrepresentation will be explored to determine the best route to claim for Jack.

First, it must be established what is required for an actionable misrepresentation. For a misrepresentation to be actionable, there must be a false statement of fact present. A statement of intention alone does not usually amount to a misrepresentation. However, if the person making the statement has incorrectly portrayed his or her intention, they have misrepresented the true intention they had. Which creates a false statement of fact, as Edgington v Fitzmaurice (1885)1 demonstrated. In addition, a statement that is based on an opinion does not amount to an actionable misrepresentation, this was shown in Bisset v Wilkinson (1927).2 However, in Smith v Land and House Property Corp (1884)3 the view was taken that a statement of opinion may sometimes amount to a misrepresentation. For example, when one party is in a better position to be aware of the truth, their opinion may amount to fact. As demonstrated in this quote from Lord Justice Bowen ‘[I]f the facts are not equally known to both sides, then a statement of opinion by the one who knows the facts best involves very often a statement of a material fact’.4 Also, when a statement of opinion is given by a party who’s in an advantaged position to have known the facts, as in Brown v Raphael (1958)5 this may also amount to a misrepresentation. When a statement is true at the time it is made, but due to a change of circumstances, it has become false and the known party withheld the change, this may be held as a

1 Edgington v Fitzmaurice (1885) 29 Ch D 459. 2 Bisset v Wilkinson (1927) AC 177. 3 Smith v Land and House Property Corp (1884) 28 Ch D 7. 4 Smith v Land and House Property Corp (1884) 28 Ch D 7 [15] (Bowen LJ). 5 Brown v Raphael (1958) Ch 636.

Student Number: 2026383

Word Count: 2065

misrepresentation.6 This was shown in the case of With v O’Flanagan (1936)7, this failure to disclose a change of circumstance may be the relevant case law to establish Owen’s potential misrepresentation.

Before it can be determined if Owen’s statement was an actionable misrepresentation, the second element must be established. Which is the reliance and materiality of Owen’s statement and if the statement induced the misrepresentee into the contract. In regard to reliance, it seems that Owen’s statement did induce Jack, as Jack’s need for 4 tonnes of capacity was made clear to Owen, and it is likely Jack would not have hired the crane from Owen, if the equipment was not adequate for his needs. This is further shown by conduct when checking the manual on several occasions. This would have induced Jack into the contract, which is a necessary element of an actionable misrepresentation, as shown in Smith v Chadwick (1884).8 The case of Horsfall v Thomas (1862)9 determined that the party who is claiming to have been misinformed must have been aware of the misrepresentation. In this scenario, Jack is most definitely aware of the misrepresentation after the crane failed to perform the purpose and caused the further loss. The misrepresentee’s reliance must be on the statement made by the misrepresentor. For example in Attwood v Small (1838)10 it was established that if the misrepresentee had an expert review the situation and relied on the expert’s statement, rather than the misrepresentor’s statement, there would not be sufficient reliance on the false statement of fact and no misrepresentation would be found. These facts appear similar to the problem, as Jack’s surveyor reviewed the manuals, however, it is likely that because the surveyor checked before the change in circumstances, Jack’s reliance is likely to still be on Owen.

It has now been determined that necessary reliance was present. Next, it must be established if Owen’s statement was materia’ because, without materiality, the statement is not an actionable misrepresentation.11 The element of materiality is an objective question as 6 Ewan McKendrick, Contract Law (9th edn, Oxford University Press, 2020). 572 7 With v O’Flanagan [1936] Ch 575. 8 Smith v Chadwick (1884) 9 App Cas 187. 9 Horsfall v Thomas (1862) 1 H & C 90. 10 Attwood v Small [1838] UKHL J60. 11 Elizabeth Macdonald and Ruth Atkins, Koffman & Macdonald's Law Of Contract (9th edn, Oxford University Press 2018). 289 - 290.

Student Number: 2026383

Word Count: 2065

to whether the average, reasonable person would have been induced by the misrepresentation. As shown in Museprime Properties v Adhill Properties (1990)12 it will be assumed that a misrepresentation did induce the contract if it is found to be material, as the courts make this assumption. The misrepresentor then has the responsibility to disprove this, and reasons why their statement would not have induced a reasonable person.13

From the facts of this scenario, a statement has been made by Owen, which although was believed to be true at the time it was made, has been made false by the change of circumstances and this would amount to a misrepresentation. Additionally, the statement meets the criteria of reliance, materiality and inducing Jack. From this information, it is likely this scenario does amount to an actionable misrepresentation, and subsequently the next step is to determine what type of misrepresentation is present, as this will determine the remedies available to Jack.

Prima facie, this could be a situation of innocent misrepresentation, as Owen made a statement, he believed to be true at the time it was made. However, negligent misrepresentation under statute of the Misrepresentation Act 196714 occurs when the person who has misled another, sincerely believes the false statement of fact and has reasonable grounds for believing so, but has not taken reasonable care to reach the belief they have stated.15 Negligent misrepresentation under statute of the Misrepresentation Act 196716 is likely to be the type present here because if Owen had taken due care and checked his email before completing the contract with Jack, he would have known the true facts before contracting.

There is the possibility that Owen’s statement had also become a term of the contract, and therefore he would have breached the contract. For a term to be made, there must be sufficient intention from both parties to be bound by this term. The test to assess this was set out in the case of Heilbut, Symons, & Co. v Buckleton (1913)17 and this need for the intention was later solidified in Oscar Chess Ltd v Williams (1957)18 when Lord Denning explained the

12 Museprime Properties v Adhill Properties [1990] 36 EG 114. 13 Elizabeth Macdonald and Ruth Atkins, Koffman & Macdonald's Law Of Contract (9th edn, Oxford University Press 2018). 289 - 290.

14 The Misrepresentation Act 1967. 15 Richard Taylor and Damian Taylor, Contract Law Directions (7th edn, Oxford University Press 2019) 173. 16 The Misrepresentation Act 1967.

17 Heilbut, Symons and Co. v Buckleton [1913] AC 30. 18 Oscar Chess v Williams [1957] 1 WLR 370.

Student Number: 2026383

Word Count: 2065

test is objective and ‘if an intelligent bystander would reasonably infer that a warranty was intended, that will suffice’.19 From the facts, Owen and Jack both appear to be aware that the contract is being made on the tonnage required, this is also further confirmed by both parties viewing the manual and checking this several times. Therefore, it is likely that the statement of the capacity of four tonnes, has become a pre-contractual term of the contract and this term has been breached.

Providing that an actionable misrepresentation is present, it is necessary to assess remedy options for Jack. Rescission is used to reverse a contract. When used, rescission will put both parties back in their pre-contractual position and as if the contract never had happened.20 Were Jack to use rescission, it would result in him returning the AB250 crane to Owen, and Owen returning the £10,000 to Jack. However, after this, Jack would not be fully in the position he was before the contract was made, as he has made a further financial loss due to the misrepresentation. There is a possibility for indemnity to financially assist the rescission, to put Jack back in his original position. Indemnity can cover the loss suffered as an obligation result of the misrepresented contract21. Jack’s extra loss of £1 million for the glass window, is likely to be covered by indemnity as it was a direct result of the misrepresentation. However, his other losses are unlikely to be recoverable under indemnity. This is due to the remedy’s restrictive and limiting character, as shown in the case of Whittington v Seale-Hayne (1900).22 Due to Jack potentially not recovering the total loss, it may be a possibility to recover damages in lieu of rescission.23 There are also bars to rescission, however, they are not relevant to this scenario. However, even if rescission were to be barred, the case of Production Technology Consultants Ltd v Bartlett (1988)24 illustrates that damages are still an option, even if recession is not.

19Oscar Chess v Williams [1957] 1 WLR 370. (Denning LJ). 20 Elizabeth Macdonald and Ruth Atkins, Koffman & Macdonald's Law of Contract (9th edn, Oxford University Press 2018).301.

21 Ibid. 303. 22 Whittington v Seale-Hayne (1900) 82 LT 49. 23

Elizabeth Macdonald and Ruth Atkins, Koffman & Macdonald's Law of Contract (9th edn, Oxford University Press

2018).300.

24 Production Technology Consultants Ltd v Bartlett (1988) 1 WLUK 345.

Student Number: 2026383

Word Count: 2065

Additionally, the fact that Owen’s statement may be both a breached term of the contract and a misrepresentation, does not equate to a bar on rescission,25 as confirmed in Section 1 of the Misrepresentation Act 1967.26 Jack is likely to have the option to rescind his contract with Owen, which would result in both parties being restored to their pre-contractual position. Jack could seek indemnity to help restore him closer to his original position.

Damages are a potential option for Jack if the court were to allow it, as it is possible not his full financial loss to be recovered from rescission.27

Misrepresentation damages are formulated on tort law, which means they are required to put the party in the circumstance they were in, before the misrepresentation occurred.28 If Jack were to claim damages for misrepresentation, the type appropriate to his situation is negligent misrepresentation through section 2(1) of the Misrepresentation Act 1967.29 Claiming damages for misrepresentation focuses on the reliance loss of the injured party. This means that damages are for the loss they have sustained due to the misrepresentation, but the profit they may have made if the contract was performed correctly, is not recoverable.30 The expenses Jack has suffered due to the misrepresentation would be the £1 million for the glass and £200,000 for the further loss. If Jack were to make a successful claim for negligent misrepresentation through section 2(1) of the Misrepresentation Act 196731 would receive a total of £1,119,000, this is the total sum after deducting his hire of the crane. Damages in this area would benefit Jack because all Jack would need to establish is that he entered into a contract under a misrepresentation. He would not have to establish a duty of care and the burden of proof would be on Owen, to prove that he was not negligent in his actions.32 25 Paul S. Davies, JC Smith's The Law of Contract (2nd edn, Oxford University Press

2018) 235.

26 Misrepresentation Act 1967. S(1). 27 Elizabeth Macdonald and Ruth Atkins, Koffman & Macdonald's Law of Contract (9th edn, Oxford University Press 2018) 300. 28 Paul S. Davies, JC Smith's The Law of Contract (2nd edn, Oxford University Press 2018) 241. 29 Misrepresentation Act 1967. 30

Elizabeth Macdonald and Ruth Atkins, Koffman & Macdonald's Law of Contract (9th edn, Oxford University Press 2018)

493.

31 Misrepresentation Act 1967. 32 Elizabeth Macdonald and Ruth Atkins, Koffman & Macdonald's Law of Contract (9th edn, Oxford University Press 2018) 295.

Student Number: 2026383

Word Count: 2065

Breach of contract damages put the injured party in the position they would have been in had the contract been correctly carried out and focus on the expectation loss of the injured party,33 as illustrated in the case of Robinson v Harman (1848).34 Had the contract been properly performed, Jack would have £1,240,000. £1 million for the glass window, £200,000 for further loss and £40,000 for the job he could have completed, had this contract been properly performed. Additionally, £10,000 would be deducted as if the contract were performed correctly, Jack would pay Owen £10,000 to hire the AB20 crane. Jack's total damages for breach of contract would be £1,230,000.

To conclude, in this scenario, there was a misrepresentation present, as a statement was made by Owen, which became a false statement of fact, caused by a change in circumstances. This was a negligent misrepresentation as Owen did reasonably believe his statement, however, due to Owen’s negligence he had not taken reasonable care to check his email and if he had, he would not have had reasonable grounds to believe his statement. The statement is also likely to have become a term of the contract, as a result of both parties' intention to be bound by the term that Owen needed a 4-tonnage crane and this term was breached by Owen. As a consequence of Owen’s misrepresentation, Jack has the option to use rescission to rescind the contract. Rescission could be used alongside indemnity, to help Jack with his financial loss. However, it is possible that due to this not fulfilling Jack’s total financial loss, that the court may look into recovering for damages instead. If it is possible for Jack to recover damages, he has the option of damages for breach of contract or misrepresentation, as both are present. After the assessment of damage options for Jack, it has been determined that a claim for breach of contract would award the largest financial gain. However, it may be better for Jack to claim for negligent misrepresentation through section 2(1) of the Misrepresentation Act 196735, as then Jack would not need to establish a duty of care against Owen, and this may result in a more likely successful awarding of damages.

33 Elizabeth Macdonald and Ruth Atkins, Koffman & Macdonald's Law of Contract (9th edn, Oxford University Press 2018) 293.

34 Robinson v Harman (1848) 1 Ex 850. 35 Misrepresentation Act 1967.

Student Number: 2026383

Word Count: 2065

Cases: Attwood v Small [1838] UKHL J60. Bisset v Wilkinson (1927) AC 177. Brown v Raphael (1958) Ch 636. Edgington v Fitzmaurice (1885) 29 Ch D 459. Heilbut, Symons and Co. v Buckleton [1913] AC 30. Horsfall v Thomas (1862) 1 H & C 90. Museprime Properties v Adhill Properties [1990] 36 EG 114. Oscar Chess v Williams [1957] 1 WLR 370. Whittington v Seale-Hayne (1900) 82 LT 49. Production Technology Consultants Ltd v Bartlett (1988) 1 WLUK 345. Robinson v Harman (1848) 1 Ex 850. Smith v Chadwick (1884) 9 App Cas 187. Smith v Land and House Property Corp (1884) 28 Ch D 7. With v O’Flanagan [1936] Ch 575.

Legislation: The Misrepresentation Act 1967. The Misrepresentation Act 1967. S(1).

Bibliography: Davies P, The Law Of Contract (2nd edn, Oxford University Press 2018). Macdonald E, and Atkins R, Koffman & Macdonald's Law Of Contract (9th edn, Oxford University Press 2018).

McKendrick E, Contract Law (9th edn, Oxford University Press 2020).

Taylor R, and Taylor D, Contract Law Directions (7th edn, Oxford University Press 2019).

Student Number: 2026383

Word Count: 2065...