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Contract Law: A general examination of the Laws regarding Contract and Liability Essay

It is my suggestion that you aim to prove that the defendant, Mr Lyman of Paperworks, made what is called a misrepresentation to you in selling you the machinery, inadequately protected. However I shall need a little more information before I can tell you exactly what chance you stand of sucessfully pleading your case in court.

For an untrue statement to constitute an actionable misrepresentation it must have two main characteristics;

i) It must be a misrepresentation of fact. An expression of opinion is not usually sufficient (see Bisset v Wilkinson 1927) unless it was given as a warranty; that is where the word ‘warranty’ is used in its true sense to denote a binding promise. For an example of this see Oscar Chess Ltd. v Williams (1957), where Lord Justice Denning said ‘Everyone knows what a man means when he says “I guarantee it”….He means he binds himself to it. That is the meaning it has borne in English for 300 years from the leading case of Chandelor v Lopus (1603)’

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Silence is not normally considered a misrepresentation but there are a group of contracts known as uberrimae fidei (of the fullest confidence) where it would be considered that the ‘promisee is bound to communicate to the promisor every fact and circumstance which may influence him in deciding to enter into the contract or not.’

ii) The misrepresentation must have induced the contract.

At this stage Mr Scott, I do not know if you have anything that could constitute a contract with Mr Lyman, e.g. if you have anything in writing. Moreover in order for us to take action against Mr Lyman we will need to prove that he gave you a false or inaccurate picture of the standard of guarding on the machinery. Obviously we have a stronger case if you do have some form of written evidence but if we have proof of a satisfactorily strong oral contract that may suffice.

The main objective of the defence will be to endeavour to prove that the misrepresentation over the aspect of guarding was not a fact that constituted a term of the contract. It is our job to prove that the standard of guarding was such an integral issue that had you known that it was inadequate you would not have entered into the contract. To support this we will cite the case of Couchman v Hill (1947), where the plaintiff bought a heifer he believed to be ‘unserved’ to mate with his own bullock. After the owner and the auctioneer assured him that it was ‘unserved’ the heiffer died in childbirth.

The court of appeal ruled that the answers which the owner and the auctioneer gave amounted to a warranty and that the misdesription amounted to a breach of condition and thus the plaintiff was able to treat it as a breach of warranty and recover damages. Here we may also cite the case of Oscar Chess Ltd v Williams (1957). The defendant part exchanged what she believed to be a 1948 Morris with the supporting registration book. The plaintiff subsequently found the registration book to have fraudulently altered and that the car was infact made in 1939. Lord Justice Morris said ‘The statement, (that it was a 1948 model), related to a vitally important matter: it described the subject matter of the contract then being made and the statement directed the parties to, and was the basis of, their agreement as to the price to be paid..’

We shall also attempt to find negligence under the principle of Hedley Byrne & Co. v Heller & Partners (1964). Here Lord Justice Denning stated ‘There is also in my opinion a

duty of care created by special relationships which, though not fiduciary, give rise to an assumption that care as well as honesty is demanded.’ In other words we will try to prove that Mr Lyman, as a professional, did not fulfil his duty to exercise sufficient care when representing his product to you, and that Mr Lyman had some skill or knowledge, as a stationer, not available to you, and that he was aware that you would rely on his representation when entering into the contract. We may also refer to the Unfair Contract Terms Act 1977 (which protects the weaker party where there is an unequal footing) that says ‘negligence’ is the breach of any obligation, arising from the express or implied terms of a contract, to take reasonable care or exercise reasonable skill in the performance of the contract;’.

Thus even without any written contract we may still prove that under the Health & Safety regulations Mr Lyman would have known that you, in a place of business, may not have used the machinery without adequate guarding. We may also allege a breach of contract under the Sale of Goods Act 1979 s.13(1) which says where there is a contract for the sale of goods by description, there is an implied condition that the goods will correspond with the description. Also s.14 (2) which says that the goods sold must be of merchantable quality; as Mr Lyman knowingly sold to a business he should have recognised the need for the goods to be up to safety standards.

Given that the goods were second hand there is a possibility that the defendant will try to attribute the negligence to the manufacturer in which case we will cite Dick Bentley Productions Ltd. v Harold Smith (Motors) Ltd. (1965) where the defendant, who sold a car whose milometre had been illegally altered and was then sued, was denied appeal on the grounds that ‘He ought to have known better’ as the judge considered the defendant in a position, professionally, to find out about the alteration before selling.

The remedies available to you are either i) damages or ii) recission. Damages would be awarded if the misrepresentation were fraudulent, but this is not only difficult to prove but probably not applicable. Recission may be a better policy whereby the parties are restored to the positions they held before entering into the contract, the contract is rendered voidable. There are however several bars restricting your right to rescind; i) affirmation i.e. that you have used the equipment after finding the fault. ii) time lapse i.e. you have waited too long before taking action and iii) impossibility of restitution i.e. if a party exercises his right to rescind he must be in a position to return to the status quo before the contract took place. However if you are aware that any one of these applies to you, bare in mind that under the Misrepresentation Act 1967 s.2(2) the courts have the discretion to award damages in lieu of recission if it considers it equitable to do so.

In summation it is my advice that you should allege negligent or innocent misrepresentation and apply for damages to upgrade the existing equipment.

To the seller Mr Lyman of Paperworks.

In my opinion the plaintiff, Mr Scott, will try to prove that, either fraudulently or innocently, you made a misrepresentation to him, with regards to the machinery you sold, which induced him to enter into the contract. Under the Sale of Goods Act 1979 s.13 (1) you are obliged to ensure that the goods you sell are of merchantable quality. In your favour is the fact that in your opinion the machinery sold was in working order, because Mr Scott’s claim is that it was not adequately guarded, not that it was not guarded at all. For difficulties in claiming damages for misrepresentation with a statement of opinion see Bisset v Wilkinson (1927).

In keeping with this we may also cite the Sale of Goods Act 1979 s.14(3) which states that goods sold for a particular purpose must be ‘reasonably fit for that purpose….except where the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the skill or judgement of the seller or credit-broker.’ Thus we shall attempt to prove that Mr Scott was, as a businessman, just as able to judge the suitability of the product for his purposes; and that if the standard of guarding, over and above a basic level, were an integral part of his entering into the contract it was his duty to ask more specific questions in that area. For this we shall allege contributory negligence, whereby the plaintiff proceeded into the contract without making clear his needs1 : Under the Law Reform (Contributory Negligence) Act (1945) s.1 if we can prove that the plaintiff’s negligence was either the cause or a contributing factor of his injuries, his damages will be reduced.

Moreover a plaintiff cannot recover damages unless he can establish a causal link between his loss and the defendant’s breach of contract2 . Under the Misrepresentation Act 1967 s. 2 (1) provided the defendant can prove that he had reasonable grounds to believe, and did believe, that the facts represented were true, then the onus to prove fraud is on the party who alleges it.

If you manage to prove that you believed the machinery was in proper working order you may only be liable for innocent misrepresentation and the injured party shall only be entitled to an indemnity (e.g. to cover expenses which the contract obliged him to incur)3 . The case of Oscar Chess Ltd. v Williams (1957) illustrates that something may be fundamental to a contract without constituting a term of that contract or a warranty; thus even if Mr Scott would not have entered into the contract had he known that the guarding was not sufficient, it does not mean that because the guarding was insufficient you have breached contract.

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