Topic: Misrepresentation, the answer on the problem question PDF

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QuestionColin is the Manager of the Barton Bulldogs, a second division football club.He has three ‘star’ players: Lionel, Pepe and Mario.In June Colin calls Romeo, the owner of Neverton, a Premier League footballclub. He tells him all three players are for sale. He describes Lionel as being at ‘the ...

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Question Colin is the Manager of the Barton Bulldogs, a second division football club. He has three ‘star’ players: Lionel, Pepe and Mario. In June Colin calls Romeo, the owner of Neverton, a Premier League football club. He tells him all three players are for sale. 1) He describes Lionel as being at ‘the top of his game’ and having ‘the finest ball skills of his generation’, 2) he says that Pepe is ‘in superb condition’ and that 3) Mario is ‘utterly dependable’. Romeo immediately offers to buy Lionel for £20M. Romeo does not know much about Mario but offers to buy him as Colin ‘only’ wants £5M for him. Colin immediately accepts both offers. Romeo takes a month’s holiday on his yacht where he cuts himself off from all news. Consequently he does not hear that Pepe was involved in a car accident and suffered leg injuries. Romeo’s first act on returning to the UK is to ring Colin and offer £10M for Pepe which Colin quickly accepts. Romeo soon learns about the car accident and is furious. When Lionel starts training with Neverton it becomes clear that he has a ‘balance problem’. This condition was disclosed in a medical questionnaire which Lionel completed and which was sent to Romeo (but which he never read) when Romeo had previously enquired about purchasing Lionel. Further, it is discovered that Mario has a long standing drink problem and so often misses training at Neverton as he regularly did when he was at Barton Bulldogs. Romeo seeks your advice as to what remedies for misrepresentation he may be entitled to in respect of the purchase of Lionel, Pepe and Mario. He also asks what the consequences would be if he were to resolve Mario’s drink problems over the forthcoming season before taking any action for misrepresentation. Answer 1

The scenario identifies issues of misrepresentation topic, which arose in the contracts of football players’ purchase between Colin and Romeo. It requires performing of analysis of misrepresentation types for each of sub-scenarios and considering if each of the contacts may be rendered voidable on the basis of misrepresentation type, so Romeo may pretend on the remedies (rescission, damages, indemnity) accordingly to the type. According to the definition of a misrepresentation provided by Ewan McKendrick, it is “an unambiguous false statement of fact or law which is addressed to the party misled, which is material (though this requirement is now debateable) and which induces the contract.” Therefore, in terms of the misrepresentation analysis, it is important to establish whether (a) there is a unambiguous false statement; (b) it is statement of fact/law or opinion; (c) this statement induced the party to enter a contact (reliance on the statement). There are three types of misrepresentation to be tested within scenario analysis to define available to Romeo remedies: (a) fraudulent assumes that a representator knows the statement is false, or does not believe in it or does not care if it is true or false; (b) negligent appears in the honest believe of representator in the false statement, but fails to perform diligent check of its accuracy; (c) innocent means that the false statement is made in honest believe in it based on the reasonable grounds. 1) Purchase of Lionel In negotiation of Lionel sale, Colin provides Roman with statements, which describes Lionel as ‘the top of his game’ and ‘the finest ball skills of his generation’. These declarations could be considered “mere puff” or “opinion”, as seen in the case of Dimmock v Hallet, where auctioneer’s declaration that land was ‘fertile and improvable’ was not recognized as misrepresentation according to the court decision (as general description/advertising),

and in the case of Bisset

v Wilkinson, where representation of farmer, that the

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filed may support 2000 sheep was only express of opinion, as he had never attempted to account that.

However, Colin is an expert and has professional knowledge in the football players, therefore his statement as regards to Lionel’s performance is considered statement of the fact following the case of Esso v Mardon . The facts of the case are as follows. Experienced Esso representative declared potential tenant that petrol station sells 200 000 gallons per year, but access to the station was permissed only from a side road (not the main road as expected), so in fact, the tenant sold only 78 000 gallons and fallen into arrears. The court held that Esso provided tenant of statement of the fact, which appeared to be misrepresentation. Esso expert had skills and knowledge to forecasting petrol sales.

Roman was induced to enter the contact by Colin and relied upon his expert knowledge. Roman had an opportunity to check the statement, but he did not do so. It was an actual decision in the case of Redgrave v Hurd, where D misrepresented C that his practice was worth £300 a year and offered to check with the books, but C rejected the offer to check, so did not reveal the false. The court held, that D was still liable for misrepresentation. It was note that D had stronger position, so C believed this world and sis not check (O’Sullivan & Hilliard).

Following Redgrave v Hurd, it is reasonable to conclude that Roman was induced and relied upon by Colin’s representation. This misrepresentation is considered negligent type, because Colin’s representation does not contradict completely to the fact that Lionel has “balance problem”, he negligently did not pay the fact special attention. Remedies available to Roman may apply on remedies under the Misrepresentation Act 1967, which shifts the burden of proof to misrepresentor (Colin). Operation of the Act was illustrated in the case of Howard Marine v Ogden, where H misrepresented A that the carrying capacity of barges was 1600 tonnes, but in fact it was 1055 tonnes. The court found H liable for a breach of duty under the Misrepresentation Act 1967. 3

Following the decision on the case of Royscot Trust Ltd v Rogerson, Roman may receive damages compensation (all losses resulting from the contract). The facts of the case are as follows .

Rogerson placed a deposit for futher

car purchase from Royscot Trust Ltd, but dealer mispresented him about deposit rules, so he placed a deposit less than it was requred. Therefore, Royscot Trust Ltd sold the car to another purchaser. The court held, Rogerson was succeeded in the claim against Royscot Trust Ltd under s2(1). He was entitled to all losses resulting from the transaction regardless of foreseeability.

Another option is to claim confirmation of recession, which would require to pass the test of resection bars (mentioned below) and indemnity. According to the scenario, Roman should pass the resection test: “lapse of time” (must rescind within a reasonable time (Leaf v International Galleries)) has not passed; Roman has recently been informed, so “affirmation” has not formed (Long v Lloyd); no third party rights have been acquired and there is no limitation to restore the parties to their pre-contractual position (Clarke v Dickson). 2) Purchase of Pepe At the time when statement regarding Pepe’s performance had been made, it was true, but when Colin’s offer was accepted by Roman, it became false. But Colin kept silence and did not inform Roman about change in circumstances. Due to the general rule, silence is not considered statement (Keates v The Earl of Cadogan), however the rule does not cover cases when the circumstances changed. Following the decision in the case of With v O’Flanagan, Colin had duty to inform Roman about Pepe’s injure. Facts of the case: the doctor announced that price for his service was £2000. By the time when he was offered a job few months later, he had lost the efficiency due to illness. The court held that the doctor was obliged to inform about changes in circumstances. With respect to this issue, McKendrick concluded “the justification for the duty to correct rule is that once a representation is made it is 4

deemed to be a continuing one so that if it becomes false and the maker of the statement fails to correct it, then it becomes a misrepresentation.” Another relevant case, which is also exception to the general rule and was held as misrepresentation by conduct, is the case of Spice Girls Ltd v Aprilia World Service BV, where the band continued acting, as they did not know that one of them was going to leave, but they knew. This misrepresentation is considered negligent type, because Roman just kept silence about change in circumstances. Roman is recommended to claim damages under Misrepresentation Act 1967, which is most affordable for him.

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Roman also may pretend on resection and indemnity with the same arguments as it was mentioned on the contract with Lionel.

3) Purchase of Mario According to the scenario, Mario was alcohol addicted for a long time, therefore representation of Colin was false statement. This is affirmed by misrepresentation test, defined in the case of Avon Insurance plc v Swire Fraser Ltd: if reasonable person knew about that fact he would not be induced to enter the contact. Colin intentionally misled Roman, therefore the misrepresentation is considered fraudulent type relying on the criteria of fraudulent misrepresentation given by Lord Herschell in the case of Derry v Peek: ‘First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved when it is shewn that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false....To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth.’.

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Taking into account that the Misrepresentation Act 1967 is not applied

to fraudulent representation, Roman is recommended to claim confirmation of resection and indemnity. However, if he continues working with Mario and attempts to solve his addiction, he will lose the right to rescind the contract on circumstances of affirmation of the fact if misrepresentation ( Peyman v Lanjani.)

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