Offer and Acceptance, Misrepresentation, Rescission, and Remedies - Essay Example

Law of Contract The question raises the following legal issues; offer and acceptance, Misrepresentation, Rescission, and Remedies. Stone, R.(2005) defines an offer as;” indication by one person that he or she is prepared to contract with one or more others, on certain terms, which are fixed, or capable of being fixed, at the time the offer is made.” As soon as the offeree accepts the offer with all the terms contained in the offer, a contract takes effect. It should be noted that it is common for one party to make statements during the course of negotiations for a contract with the object and perhaps the effect of inducing the other party to enter into a contract. Where a contract of sale has been reduced to writing, assurances which were given by the seller as to his land or his goods, as the case may be, will probably be held not to form part of the contract if they are not referred to in the document. A statement of fact that is false will be actionable as a misrepresentation where the misrepresentor intends it to be acted on and where it is reasonably relied on by the misrepresentee. The issue of misrepresentation can be traced from 1881 in Redgrave v Hurd[1881] 20 Ch.D.1, in which the plaintiff, a solicitor, inserted in the Law Times an advertisement offering to “take as partner an efficient lawyer and advocate, about forty, who would not object to purchase advertiser’s surburban residence…” The defendant replied to the advertisement, and had two interviews with the plaintiff, at which, as Fry J found, the plaintiff had represented that his business was bringing in either about £300 a year, or from £300 to £400 a year. At a third interview the plaintiff produced summaries of business done in 1877, 1878 and 1879. The summaries showed gross receipts not quite amounting to £200 a year. The defendant asked how the difference was made up and the plaintiff produced a quantity of letters and papers which, he stated, related to other business which he had done. Fry J. came to the conclusion that the letters and papers, if examined, would have shown business of only £5 or £6 a year. The defendant signed a written agreement to purchase the house for £1,600 and paid £100 deposit. Finding, as he alleged, that the practice was utterly worthless, he refused to complete, and the plaintiff brought an action for specific performance. He alleged that he was induced to enter into contract by misrepresentations, and counterclaimed for rescission of the contract. “If he had intended to rely upon that parol representation,……having the materials before him, he would have made some inquiry into it: and that he ‘must be taken to have accepted the statements which were in those papers.”(Fry J) In Bisset v Wilkinson[1927] AC 177, the respondent purchased from the appellant two blocks of land in New Zealand for the purpose of sheep-farming. During the negotiations the appellant told the respondent that, if the place was worked properly, it would carry two thousand sheep. The respondent, it was admitted, bought the place believing that it would carry two thousand sheep. As both parties were aware, the appellant had not and, so far as appeared, no other person had at any time carried on sheep-farming on the land in question. “In ordinary circumstances, any statement made by an owner who has been occupying his own farm as to its carrying capacity would be regarded as a statement of fact…..This, however, is not such a case……In these circumstances….the defendants were not justified in regarding anything said by the plaintiff as to the carrying capacity as being anything more than an expression of his opinion on the subject.”(Sim J in Bisset v Wilkinson,1927) Their Lordships agreed to this view, and held that the purchaser had no right to rescind the contract,”….since an erroneous opinion stated by the party affirming the contract, though it may have been relied upon and have induced the contract on the part of the party who seeks rescission, gives no title to relief unless fraud is established….If a reasonable man with the vendor’ knowledge could not have come to the conclusion he stated, the description of that conclusion as an opinion would not necessarily protect him against rescission for misrepresentation, but what was actually the capacity in competent hands of the land the purchasers purchased had never been, and never was practically ascertained.” In a much later case, Economides v Commercial Union[1997] 3 WLR 1066, E’s parents moved into E’s flat bringing their valuables with them. When E renewed his house-hold insurance in January 1991 he stated that, “to the best of my knowledge and belief”, the value of the contents, including his parents’ valuables(which his father told him were worth about £4,00) was £16,000; and the valuables were worth not more than one-third of the total sum. E’s father seriously underestimated the worth of the parents’ valuables. In October 1991 the flat was burgled. It emerged that the true value of the contents was £40,000 and the property stolen was worth £31,000. The insurers repudiated liability, alleging misrepresentation and non-disclosure. E’s claim was dismissed and he appealed. “I would hold, therefore that the sole obligation on the appellant when he represented to the respondent on renewal that he believed the full contents value to be £16,000 was that of honesty. That obligation the judge apparently found him to have satisfied….Suffice it to say that I found little merit in Ms Kinsler’s argument that the appellant should at the very least have insisted on examining all the additional valuables for himself and have formed his own view on their worth. That seems to me wholly unrealistic.”(Simon Brown L.J allowing the appeal) A similar dispute of misrepresentation arose in Esso Petroleum Ltd v Mardon[1976] 2 WLR 583. The facts are that Esso’s experienced representative told Mardon that Esso estimated the throughput of petrol on a certain site would reach 200,000 gallons in the third year of operation and so persuaded Mardon to enter into a tenancy agreement in April 1963 for three years. Mardon did all that could be expected of him as tenant but the site was not good enough to achieve a throughput of more than 60,000-70,000 gallons. In July 1964 Mardon gave notice to quit but Esso was unable to pay for petrol at a reduced rent. Mardon continued to lose money and by August 1966 was unable to pay for petrol supplied. Esso claimed possession of the site and money due. Mardon claimed damages in respect of the representation alleging that it amounted (i) to a warranty;(ii) to a negligent misrepresentation. Lawson J. rejected the claim for breach of warranty but held Esso liable in negligence. The court of Appeal affirmed the finding of negligence. “Ever since Heilbut Symons & Co v Buckleton we have had to contend with the law as laid down by the House of Lords that an innocent misrepresentation gives no right to damages. In order to escape from that rule, the pleader used to allege-I often did it myself-that the misrepresentation was fraudulent, or alternatively a collateral warranty….In the present case it seems to me that there was a warranty that the forecast was sound, that is that Esso had made it with reasonable care and skill. The warranty was broken. Most negligently Esso made a “fatal error” in the forecast they stated to Mr Mardon, an on which he took the tenancy. For this they are liable in damages.”(Lord Denning M.R) Jason may be advised that the first –class acceptance letter sent to Leonard confirms that the contract exists. As soon as an acceptance takes effect, then a contract is made, and both parties are bound. It would seem, then, that in the normal course of events, retraction or revocation of an acceptance will be impossible. This general rule has been modified, however, in relation to certain types of consumer contracts. Under postal rule, acceptance is complete once the letter is put in the post. It does not matter whether Leonard got the letter or not. In Adams v Lindsell[1818] 1 B & Ald 681, the defendants sent a letter to the plaintiffs offering wool for sale, and asking for a reply ‘in course of post’. The letter was misdirected by the defendants, and arrived later than would normally have been the case. The plaintiffs replied at once accepting, but the defendants, having decided that because of the delay the plaintiffs were not going to accept, had already sold the wool elsewhere. The plaintiffs sued for breach of contract. The court decided that to require a posted acceptance to arrive at its destination before it could be effective would be impractical and inefficient. Jason should be further advised that he cannot rescind the contract simply because of the opinion given on the capacity of the land or the position of the tenant. Yes, Leonard never kept any sheep on the land, the tenant seems to have been in trouble, but his opinion that the land would hold 800 sheep was merely his personal opinion which does not amount to fraud. To succeed with his misrepresentation claims, Jason is required to prove that there was fraud in the statements raised by Leonard during the negotiations leading to the sales. In cases where fraud is found, the courts take the view that the plaintiff is bound to rescind the contract. In Oscar Chess Ltd v Williams[1957] 1 WLR 370, the defendant’s mother acquired a second-hand Morris can on the footing that it was a 1948 model. The registration book showed that it was first registered on April 13, 1948, with the changes of ownership between 1948 and 1954. In May 1955 the defendant acquired a new car on hire-purchase terms through the plaintiffs who took the Morris in part exchange. The defendant described the car as a 1948 Morris and produced the registration book. The plaintiffs’ salesman, who was familiar with the car, having often had lifts in it, checked the current price for a 1948 Morris in Glass’s Guide which was £290 and made the defendant an allowance for that sum against the price of the new car. Eight months later the plaintiffs discovered that the car was not made in 1948 but in 1939, the appearance of the model not having changed in the meantime. If they had known that it was a 1939 model they would have allowed only £175. They brought an action to recover £115 as damages for breach of an express term that the car was a 1948 model. The county court judge found that it was a condition of the contract that the car was a 1948 model. No misrepresentation was site by the court. The defendant appealed. Denning L.J said that in describing the car as 1948 Morris the defendant was perfectly innocent. He honestly believed that it was a 1948 model. “…Someone in 1948 must have fraudulently altered the log-book, but he could not now be traced….I entirely agree with the judge that both parties assumed that the Morris was a 1948 model and that this assumption was fundamental to the contract…..”(Denning L.J) In conclusion, Jason should be advised that the contract exists and the court is unlikely to raise misrepresentation in the case at hand. Bibliography Collins, H(2003),’The law of contract’, 4th ed. LexisNexis Butterworths, London. Cheshire, Fifoot & Furmston: Law of Contract, 5th ed, 2006, OUP, Oxford. Mckendrick, E(2005),’Contract law’, 6th ed. Palgrave Macmillan law masters, London. Mckendrick, E(2005),’Contract law: Text, Cases, & Materials, 2nd ed. London. Peel, E(2007),’Treitel: The law of Contract’ OUP, Oxford. Smith & Thomas: ‘A casebook on Contract’, 12th ed, Sweet & Maxwell, London Stone, R(2005),’The modern law of Contract’, 6th ed. Cavendish publishing, London. Statutes Misrepresentation Act 1967 Read More