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Analysis of Freds Situation in Law - Essay Example

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This essay "Analysis of Fred’s Situation in Law" analyzes the situation based on the possible claims that Fred might have and provide legal solutions for each matter. The law of torts will be applied in this essay, the fact that it “will often help us not only to justify the existence of liability"…
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Analysis of Freds Situation in Law
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?TORT ESSAY In Fred’s situation, the legal regulations regarding the law of tort should be applied. The will thoroughly analyze the situation based on the possible claims that Fred might have and provide legal solutions for each matter. The law of torts will be widely applied in this essay, due to the fact that it “will often help us not only to justify the existence of liability, but also guide us to determining the extent of the tort.”1 1. Fred’s claim against Paul regarding the capital gains tax I believe Fred is entitled to sue Paul for the suffered economic loss because of the neglected duty of care on behalf of the latter. Paul had advised Fred to sell some of his stocks and shares in order to avoid the capital gains tax. Considering the fact that the question mentions Fred being surprised of the large bill from the Inland Revenue for capital gains tax, I suppose that he has listened to Paul’s advice and sold some of his stocks and shares. Fred’s selling some of his stocks and shares and later on, receiving a large bill for capital gains tax is a direct consequence of Paul’s advice which stated that selling some shares and stocks would help Fred avoid this tax. Due to the untrue information, Fred sold his shares and stocks and still received a large bill, which caused financial losses to him The rules of breach of duty are appropriate. Breach of duty occurs when the defendant owed a duty of care and his actions were lower than the reasonable standard. Smith &Keenan (2010, p.464) state that the test of a reasonable man should be applied to individuals “who have held themselves out as possessing a particular skill”2 as to average specialist in that domain. For example, as in Fred’s case, Paul – recommending himself as returning a small accountancy firm, which specializes in tax and other investment matters– was expected to act as an average accountant. By providing financial advice of poor quality, Paul provided misinformation to Fred. Paul ignored the duty of care, established by objective standards, and provided false information. He accepted to help Fred in filling his self-assessment tax return form. In addition, Paul, like in Hedley Byrne v. Heller (1963), established a “special relationship” with Fred. In Hedley Byrne v. Heller (1963), the Court held that “the relationship between the parties was "sufficiently proximate" as to create a duty of care. It was reasonable for them to have known that the information that they had given would likely have been relied upon … This would give rise to a "special relationship", in which the defendant would have to take sufficient care in giving advice to avoid negligence liability.”3 In this case, Paul’s advice, as coming from a professional was equivalent to a statement upon which the customer (in this case – Fred) would rely on. In Rowley & Ors v Secretary of State for Department of Work and Pensions (2007) the Court held that “a solicitor owes a duty of care in tort because, like any professional person, he or she voluntarily assumes responsibility towards an individual client”4, which applies to the case of Fred v. Paul. If we were to apply the test established in Caparo v Dickman (1990), it would be clear that the facts of Fred’s situation do fall within this case: 1. “The adviser was aware that the advice was required for a purpose” 5 - Paul was aware that the advice was necessary in order for Fred to fill his tax forms and avoid large bills 2. “The adviser knew that the advice was to be communicated to the advisee”6 - 3. “It was known that the advice will be acted upon by the advisee without independent injury”7- generally, such kind of professional advice is necessary in order for the person who asks for it to act upon it 4. “It was acted upon the advice” 8 - relying on Paul’s advice, Fred sold his shares and stocks. Even when applying this test, “There must be a limit to liability and no duty will be imposed unless it is just in all the circumstances.”9 According to Winfield & Jolowicz (2010, page 103), negligence is “Breach of legal duty to take care that result in damage to the claimant.”10 Therefore, Fred has a grounded action of breach of duty, caused by negligence, against Paul. 2. Fred’s claim against Paul regarding Grabitnrun Ltd Even if Paul had mentioned to Fred that investing in this company would be a good idea, he did mention that he is not sure about it and he musn’t be quoted. Considering the facts, I believe that Paul cannot be held liable for giving an informal advice on Grabitnrun. However, Fred should file a claim against Paul on this matter, too. He must prove to the Court that the test established in Caparo v Dickman (1990) applies to his situation: 1. “The adviser was aware that the advice was required for a purpose” 11 2. “The adviser knew that the advice was to be communicated to the advisee “It was known that the advice will be acted upon by the advisee without independent injury”12 3. “It was acted upon the advice” 13 - relying on Paul’s advice, Fred invested in Grabitnrun. Moreover, Paul – knowing that his advice is asked in a professional matter, should have advised Fred to find out more about Grabitnrun, before actually investing, as he himself is not sure if the investement would be profitable. Fred may file a claim against Paul for the damages suffered because of the defendant’s pieces of advice in the matters of the taxes and the investement in Grabitnrun. However, Paul is not liable for advising Fred on StudentOK. He did not actually advise Fred to invest in this company; Paul has just gave him a brochure and told Fred about his beneficial investment. Moreover, once StudentOK had gone into liquidation, Paul had suffered finnancial losses, too, along with Fred. 3. Fred’s claim against StudentOK Ltd. I believe that the financial loss suffered by Fred because of StudentOK’ going into liquidation may be caused by misrepresentation. Fred has suffered serious financial losses because of the false information contained in the brochure. According to Richards P. (217) “A misrepresentation may be defined… as a false statement of fact that induces another to enter into a contract.”14 It is obvious that StudentOK has made a false statement in order to induce customers, to enter into a contract with it. Moreover, the information contained in the brochure was practically the reason that convinced Fred to sign the contract. In Derry v Peek (1880) the House of Lords concluded that “Fraud is established where it is proved that a false statement is made: (a) knowingly; or (b) without belief in its truth; or (c) recklessly, careless as to whether it be true or false.”15 Therefore, StudentOK can be held liable for fraudulent misrepresentation Once fraudulent misrepresentation has been established, Fred has the right to rescind the contract. The Misrepresentation Act expressly stipulates “Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made the facts represented were true.”16 Therefore, the contract should be set aside ab initio and the parties are restored to their pre-contractual position (restitutio in integrum). Another mistake of StudentOK is the statement on the brochure saying that “StudentOK does not accept any liability for information contained in this booklet.” According to Section 2 of the Unfair Contract Terms Act 1977 “A person cannot by reference to any contract term or to a notice given to persons generally or to particular persons exclude or restrict his liability for death or personal injury resulting from negligence.”17 This means that StudentOK carelessly relied on the limiting liability notice, although understanding and accepting the possibility of its customers having to suffer. Moreover, Section 5 of the Unfair Terms in Consumer Contracts Regulations 1999 specifically stipulates that “A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer. A term shall always be regarded as not having been individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term.”18 This term, regarding the limited liability of StudentOK has not been negotiated with any of the company’s customers, including Fred and therefore, the bargaining powers are not equal. The notice in the brochure does not actually legally limit StudentOK’ liability and it should be held responsible for Fred’s financial losses. In conclusion, I would like to mention that the law of torts offers a secure protection to the actors of the relations established between them and other parties. In this case, Fred has suffered significant financial losses because of some groundless advice from his friend and a tentative to limit its liability on behalf of a company. It is imperative that the legal solutions provided in this essay are applied by Fred in order to re-establish his financial condition. Word Count: 1600 words Bibliography: 1. Caparo plc. v Dickman (1990) 2. Derry v Peek (1880) 14 App Cas 334 3. Hedley Byrne v. Heller (1963) 4. Kidner, R. Casebook on Torts.11th ed. New York:Oxford University Press, 2010. Print. 5. Misrepresentation Act 1967 6. Pasley v. Freeman (1789) 7. Richards P. Law of contract.8thedition. Edinburgh gate: Pearson Education Limited, 2007. 8. Rowley & Ors v Secretary of State for Department of Work and Pensions (2007) 9. Turner, C., Hodge, S. Unlocking Torts.3rd ed. London: Hodder Education, 2010. Print 10. Unfair Contract Terms Act 1977, sec. 2 11. Unfair Terms in Consumer Contracts Regulations 1999, Section 5 12. Wild C., Weinstein S.,. Smith and Keenan’ English Law. Text and Cases. 16th edition. Pearson Education, 2010. 13. Winfield & Jolowicz. Tort. Sweet & Maxwell, 2010. Print Read More
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