Law of Contract - Vanessas Situation - Essay Example

In the case between Vanessa and Arnold, Vanessa entered into a contract of sale with Arnold to buy “Fitness Fortress” (hereinafter ‘FF a leisure centre, which Arnold described in an advertisement as “Probably the best fitness emporium in London”. During the course of their negotiations, however, Arnold failed to disclose certain facts regarding the conditions of FF’s facilities. First, when telephoned by Vanessa, he neglected to mention that out of the 100 rowing machines in FF, 20 of them require urgent repairs. Second, when examined by Joanne, Vanessa’s business advisor and representative, Arnold hid the fact that the wood panelling in FF’s sauna facilities are rough, unpleasant to the touch, and require repairs, such that without examining the facilities further, Joanne reported to Vanessa that the facilities were “first rate”. Furthermore, Arnold also informed Vanessa of further improvement he plans to have done on FF prior to the sale, particularly the installation of massage facilities, which he eventually forgone when he discovered the costs required for these improvements. Thus, Vanessa, in believing she was entering into a good bargain bought the leisure centre. It was only after buying FF however, that Vanessa discovered several work needed to be done on the leisure centre, particularly the need to repair the rowing machines, which costs £10,000 and the need to re-panel the sauna costing £5,000, leading Vanessa to believe she was misled by Arnold into entering their contract of sale. The main issue is therefore whether or not Arnold, in failing to disclose the facts that (a) 20 of the 100 rowing machines were not working, (b) that he no longer intends to install additional massage facilities, and that (c) the wooden panels in the sauna are not in good condition, has committed either a breach of contract or misrepresentation against Vanessa. Furthermore, other issues are also present, particularly whether or not Joanne, in failing to properly examine the leisure centre and reporting it as “first rate” to Vanessa renders her liable towards the latter. And whether or not, Vanessa has suffered losses resulting from the bargain; and if so, if she can claim damages for her loss. Given the contractual relationship between the parties, a breach of contract would have been committed by Arnold if it can be shown that he violated an expressed or implied term in their transaction, or a collateral contract resulting from their transaction. Hence, if a contract was drawn and terms describing the quality and state of the rowing machines, the wooden panelling in the sauna, and the installation of massage facilities were expressed within the contract, then Arnold is in breach of contract since FF’s facilities clearly does not correspond to these terms. Based on the facts, however, it is unlikely that these terms were expressed within contract. Hence, to prove a breach on Arnold’s part, Vanessa will have to illustrate that either the terms were implied from their contract, or were part of a collateral contract. With respect to implied terms, it should be noted that in the contract between Arnold and Vanessa, the contract was drawn for the sale of the leisure centre, and not for the sale of its individual facilities. Thus, even if Vanessa illustrates that there is an implied term that the property in question should be in good condition, the fact that 20 of the 100 rowing machines were not working and the wooden panelling in the sauna are rough and unpleasant to the touch, does not prevent FF to properly function and be used as a leisure centre. Hence, even though it is “less good” from what Vanessa expected, it is nonetheless in “good condition”. Thus, Arnold did not violate any implied term and is not in breach of the contract, either. Lastly, regarding Arnold’s expressed intention of installing extra massage facilities, Vanessa cannot hold him to a collateral contract, either. As illustrated in Heilbut, Symons & Co v Buckleton1, collateral contracts must be promissory in nature. In this case however, Arnold, in informing Vanessa of his intention to install massage facilities did not have the intention to be bound by it. Instead, he was simply stating a representation of his plans for the facility at that time, and is therefore not in breach of collateral contract. Vanessa can also depend on misrepresentation claims. First, Arnold committed a possible misrepresentation in expressing his intentions of installing extra massage facilities to Vanessa. In this respect, however, Arnold was not making a statement, in itself, but rather a statement of his intention. As previously mentioned, this statement was not promissory in nature such that Arnold did not promise to stick with his plans in the future. Hence, his statement of intention, at least during the time it was made was not necessarily untrue. Thus, as illustrated the case of Wales v. Wadham2, Arnold’s misrepresentation may not be actionable. However, as illustrated in Edgington v. Fitzmaurice3, Arnold can still be held liable if Vanessa illustrates that the statement made during the telephone conversation was dishonest, such that Vanessa can claim fraudulent misrepresentation. Unfortunately, it will be difficult to prove a misrepresentation because Vanessa will have to prove the state of Arnold’s mind. In this case, Arnold can easily claim that at the time of the phone conversation, he really had the intention to install the facilities and changed his mind only after the conversation ended. Nonetheless, as stated in Wales, while it may be “difficult to prove what the state of a man’s mind at a particular time is, […] if it can be ascertained it is as much a fact as anything else.”4 Furthermore, Arnold also made a representation in his advertisement, describing FF as “Probably the best fitness emporium in London”. This representation however, was a “puff”, which cannot give rise to an actionable misrepresentation unless it closely resembles a statement of opinion that is unreasonable or dishonest.5 Thus, in Arnold’s case, the statement was neither dishonest nor unreasonable. It was an advertising slogan meant to draw inquiries regarding the property, not to be relied upon. The use of the qualifier “probably” also indicates that the statement was entitled to debate. Lastly, as mentioned, the condition of the rowing boats and the wooden paneling does not necessarily take away the functionality of the facility as a whole. Thus, it is not an actionable misrepresentation. On the other hand, Arnold made two nondisclosures: (a) that the 20 rowing boats required urgent repairs and (b) that the wood panelling in the sauna is not in good condition. In this respect, the alleged misrepresentation is not a false statement, but rather a nondisclosure of the aforementioned facts. However, as illustrated by Keates v.Cadogan6, English law recognises no duty of good faith. As Lord Blackburn noted in Smith v. Hughes7, “whatever may be the case in a court of morals, there is no legal obligation on the vendor to inform the purchaser that he is under a mistake, not induced by the act of the vendor”. Thus, with respect to the rowing boats, Arnold therefore has no obligation to inform Vanessa, since Vanessa did not ask the right questions that will bind Arnold to respond to her truthfully. The same goes for the wooden paneling because even though Arnold tried to conceal its problems, it was Joanne’s fault for not examining the facilities carefully. Regarding the second issue, Joanne has a duty towards Vanessa to carefully examine FF and its facilities, as her representative; and to carefully assess whether Vanessa’s decision to buy the FF is a sound business move, due to their fiduciary relationship as her business adviser. However, Joanne failed to fulfil both responsibilities towards Vanessa. On one hand, she failed to adequately investigate FF for the latter, as evidenced by the fact that it was not difficult to discover FF’s shortcomings had Joanne examined the facilities carefully. As illustrated in Perry v. Sidney Phillips & Son8, Joanne, as Vanessa’s representative takes the obligation of a surveyor and therefore has a duty to exercise reasonable care – a duty, which Joanne failed to fulfil. On the other hand, this failure led Joanne to fail Vanessa once more when she reported the facility as “first rate”, even though it was evident that Vanessa was entering a bad bargain. Thus, Joanne was also in breach of her fiduciary duty towards Vanessa in providing an inadequate contractual response, as her business advisor. In this respect, Joanne is also liable towards Vanessa. Thus, based on the facts of the case, Vanessa has unknowingly entered a bad bargain in buying FF from Arnold. As a result she suffered losses based on either the property’s diminution of value or the cost of cure. Based on the possible claims that can be made against Arnold, however, short of a written contract which specifies that all 100 rowing machines and the wooden panelling in the sauna are in good condition, Vanessa can only claim misrepresentation against Arnold regarding his statement of intention that he will install extra massage facilities. In this respect, if she can illustrate that Arnold fraudulently or dishonestly stated his intentions, then she can be awarded indemnity and restitution under rescission, as well as possible compensatory damages for her loss. However, since rewards for damages under misrepresentation are backward-looking, she may not be awarded specific performance and force Arnold to install the massage facilities. On the other hand, she can also make claims against Joanne as illustrated in Perry such that Vanessa may receive damages that will place her in the position she would be in had Joanne exercised reasonable care in properly investigating FF and given her sound business advise. References List of Cases Heilbut, Symons & Co v Buckleton [1913] AC 30. Wales v. Wadham [1977] 1 WLR 199. Edgington v. Fitzmaurice [1885] 29 Ch D 459. Smith v. Land and House Property Co [1885] 28 Ch D 7. Keates v.Cadogan [1851] 10 CB 591. Smith v. Hughes [1871] LR 6 QB 597. Perry v. Sidney Phillips & Son [1982] IWLR 1297. Read More