The Law on Misrepresentation - Case Study Example

The Law on Misrepresentation Michael has a legitimate claim for misrepresentation. Jatinder violated the Misrepresentation Act of 1967, which in effect makes a person liable for damages for making fraudulent misrepresentations. The Act awards damages “where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result he has suffered loss”1. The Act makes persons liable for the losses that the other party suffered as a direct result of their misrepresentation. In this case, Jatinder, fraudulently misrepresented the attributes of the car and through such misrepresentation, Michael suffered a financial loss. She indicated in her advertisement that her car was good for another 50,000 miles. She also misrepresented the car to be economical. Jatinder’s claims were the basis of Michael’s agreement to buy the car, without such claims from Jatinder, Michael would not have bought the car. Gilham Solicitors define fraudulent misrepresentation as “a statement of fact made without belief in its truth either recklessly or without caring whether it is true or false, with the intention that it should be acted on and it is in fact acted upon”2. Jatinder knowingly misrepresented the attributes of her car in the advertisement; she knew that the car was involved in an accident which caused the leak in the petrol tank decreasing the car’s mileage, and yet she still claimed that the car can run for 50,000 more miles and is economical. Her actions imply malice in an attempt to persuade Michael to purchase the car. In instances when a contract is entered into through fraudulent misrepresentations, the offended party can rescind the contract, claim damages or both3. And the Misrepresentation Act allows for the offended party to cite negligence or fraud as basis for their legal claims. Applying these points to the case, Michael can choose to rescind the contract and get his money back; or he can keep the contract and seek damages for any loss he may have suffered from the purchase of the defective car; or he may choose to rescind the contract and claim for damages. I would advise Michael to rescind and claim for damages. Contracts of sale require the meeting of minds. “The seller must intend, or appear to intend, to sell the goods, and the buyer must intend, or appear to intend, to buy the goods on the agreed terms”4. The fraud which was present in this instance does not negate the aim of either party. The Shogun case goes on to say that when there is fraudulent misrepresentation, a person’s intent is founded on a false basis, one which the party involved knows to be untrue. And the effect of such fraud is to negate the rights and obligations that would have flown from such contract. And this consequently gives the victim the right to rescind the contract, and claim for any possible losses he may have suffered from such contract5. The fact that the car does not actually meet the terms of the contract, does not negate the existence of the contract. In response to Michael’s question on whether or not the car has ever been involved in an accident, Jatinder replied that she was a careful driver, which implied that the car was never involved in an accident. In fact her statement about being a careful driver was not true because three months prior to the sale of the car, she was driving too fast and was involved in an accident. In assessing her statements, there is a need to establish whether or not she misrepresented facts. Statements in a contract may be oral or in writing, and they may be implied from words or conduct6. The ambiguity or vagueness of these statements also needs to be checked. The statements may only be opinions or actual statements of fact. The level of expertise of the maker of the statement, and whether or not the person making the statement actually believes something different from what he is saying needs be established7. Jatinder was very clear in her advertisement about the mileage left in her car; however, these are statements she knows to be untrue because the accident she was involved in caused a leak in the gas pipe, thereby decreasing the car’s mileage. She also misrepresented the state of her mind, knowing that she was not actually a careful driver and knowing that through her recklessness, she caused the car’s capacity to be decreased. In the case of Akerheilm v. Rolf De Mare, the court ruled that fraud may be seen in a statement made “(a) knowingly; (b) without belief in its truth or (c) recklessly”8. This case also pointed out that the true test of fraudulent misrepresentation is on whether or not the person making the statement actually believed those statements to be true, from his point of view. Jatinder knew she was stating a falsehood when she said that she was a careful driver. She was in fact driving too fast when she had her accident three months before the sale of the car. All things considered, her statements can be legally construed as misrepresentations; therefore Michael is entitled to legal remedies. In the case of Derry v. Peek, the court ruled that there is a difference in a careless remark or statements and a true belief in the truth about a particular matter. The fact that Jatinder evaded giving a direct answer to Michael’s question about the car’s involvement in any accident indicates that she wanted to give an answer that would not directly answer the question, but would nevertheless satisfy Michael’s curiosity. However, her motives in not revealing the true condition of the car do not matter in the face of her fraudulent actions. “If fraud is proved, the motive of the person making the statement is irrelevant. It matters not that there was no intention to cheat or injure the person to whom the statement is made”9. In this instance, Jatinder was fraudulent in her misrepresentation and for that reason alone, she can be held liable. Michael was correct in assuming that the lower mileage he got from the car indicates reduced quality not commensurate to other cars under similar circumstances. If Jatinder’s statements were merely opinions or careless remarks then, Jatinder may be legally excused because such statements may not amount to “anything more than an expression of [his] opinion on the subject”10. However, her statements were not opinions. In the Smith v Land & House Property Corp, the plaintiff stated to the buyers that the hotel was let to a “most desirable tenant”. It was later revealed that the tenant was bankrupt, so the defendants refused to complete the contract. The hotel owner sued. The court ruled that the plaintiff’s statement were statements of fact, not opinion. And such misrepresentation entitles the defendants to rescission of the contract11. In the case at bar, Jatinder also made statements of fact, making her liable under the law on misrepresentation. Michael can seek to rescind the contract and claim damages in this case. In the case of Nottingham Brick & Tile Co v Butler, a buyer of land asked the seller’s solicitor if there were any restrictive covenants on the land, and the solicitor said he did not know of any. However, the solicitor did not actually bother to read documents indicating that there were indeed restrictive covenants on the land. The court ruled that his statements are nevertheless statements of fact and would entitle the buyer of the land the right to rescind the contract12. Michael was a victim of Jatinder’s fraudulent misrepresentation and therefore should be given the chance to recover his money and to claim for damages from the incident. The court had occasion to grant the victim’s right to rescission in the case of Car & Universal Finance v. Caldwell. In this case, Caldwell sold his car to Norris, who issued a check which was later dishonoured. Norris however, immediately sold the car to another buyer, who in turn, also sold it to another buyer. The court held that “the contract was voidable because of the fraudulent misrepresentation and the owner had done everything he could in the circumstances to avoid the contract”13. Jatinder can also be held liable for damages stemming from her fraudulent actions. Damages are awarded by the courts for fraudulent misrepresentation in order to restore whatever losses the injured party may have suffered from the contract. In the case of East v Maurer, the court granted damages to the injured party for profits lost. The defendant indicated that he owned two salons and agreed to sell one of these salons to the plaintiffs. He said that he was planning to work abroad and did not intend to work on the second salon. The plaintiffs bought the salon based on the defendant’s statements. However, it turned out that the defendant was still working at the second salon and brought all his clients with him. As a result, the plaintiffs lost profits and were later forced to sell. The court found the defendant’s representations to be false. It granted the plaintiff damages on a tortuous basis, “placing the plaintiff in the same position he would have been in, had the wrong not been committed”14. Such is the purpose of awarding damages. In this case, awarding damages to Michael will put him in the same position he would have been in, had the act not been committed by Jatinder. Works Cited Akerheilm v. Rolf De Mare (1959 AC 789) Brewer, G. (14 March 1996) Is it fact, opinion or belief? Brewer Consulting. Retrieved 15 April 2009 from http://www.brewerconsulting.co.uk/cases/CJ9609RR.htm Car & Universal Finance v Caldwell [1965] 1 QB 525 Derry v. Peek (1889) 14 App Cas 337 East v Maurer [1991] 2 All ER 733 Misrepresentation Act of 1967 (c 7) 22 March 1967 Misrepresentations Contract Law (2008). Gilhams Solicitors & Lawyers. Retrieved 16 April 2009 from http://www.gillhams.com/dictionary/217.cfm Nottingham Brick & Tile Co v Butler (1889) 16 QBD 778 Opinions of the Lords of Appeal for Judgment in the Cause Shogun Finance Limited (Respondents v. Hudson FC Appellant. 19 November 2003. Retrieved 15 April 2009 from http://www.publications.parliament.uk/pa/ld200203/ldjudgmt/jd031119/shogun-1.htm Oughton & Davis (2000) Sourcebook on Contract Law. London: Cavendish Publishing Smith v. Land House Property Corporation 1884 28 Ch D 7 Read More