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1 William Reynell Sir Anson, Sir William Reynell Anson, and Anthony G.., Ansons
law of contract (30th edn, Oxford University Press 2016) 320
The second condition that Aquafun must also establish is that Waterplanets
misrepresentation induced the contract. However, it is important to note that it is
not necessary for the misrepresentation to be the sole inducement 9 for entering
the contract; only that the misrepresentation induced the party in some way 10.
Innocent misrepresentation can be effectively ruled out of this list. Section 2(1) 15
of the Misrepresentation Act 1967 states that a 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. The statutory definition
tells us that an innocent misrepresentation only exists where the representor can
demonstrate reasonable grounds for belief in the truth of the statement. Thus,
because it is expressly stated that Waterplanet knew at the time that the Council
did have plans for the adjoining property, innocent misrepresentation cannot be
utilised.
It is now clear then that the type of misrepresentation that Waterplanet would be
liable for in this case is fraudulent misrepresentation. Fraudulent
misrepresentation was defined by Lord Herschell in Derry v Peek17 as a false
statement that is "made (i) knowingly, or (ii) without belief in its truth, or (iii)
recklessly, careless as to whether it be true or false." When applying the
definition of fraudulent misrepresentation provided by Lord Herschell to the facts
16 Esso Petroleum v Mardon [1976] & Williams v Natural Life Health Foods (1998)
TheTimes, May 1
Remedies
The immediate advantages of relying on fraudulent misrepresentation are that
Aquafun can recover all the directly flowing losses and it is also impossible to
exclude or limit liability; however, the burden of proof rests with the claimant,
thus making it more difficult to prove. The remedies for fraudulent
misrepresentation are rescission and damages in the tort of deceit 18. Rescission
may be defined as being the unmaking of a contract between the parties, which
aims to put them in a position as if the contract had never been made in the first
place and effectively sets aside the contract. It is possible for rescission to be
void if it is not possible to restore both parties to their original, pre-contractual
positions; or if such a step would upset the rights acquired by a third-party under
the contract. However, the right to exercise rescission is completely available to
Aquafun in this case.
The tort of deceit provides a civil remedy for an individual who has relied on a
false representation to their detriment. For there to be relief provided by the tort
of deceit it is important for the individual knows it to be false or was reckless as
to the truth of the statement, there is an intention to deceive and it is acted upon
and loss is suffered consequently. Since all these requirements are satisfied in
this case, Aquafun will likely be able to claim damages.
18 Jill Poole and James Devenney, 'Reforming Damages for Misrepresentation: The Case
for Coherent Aims and Principles' (Westlaw UK, 2007)
<http://login.westlaw.co.uk/maf/wluk/app/document?
&srguid=i0ad832f100000159fb96963ad0f007bd&docguid=I42561390DF1B11DB929F9C
45DFCF9B17&hitguid=I42561390DF1B11DB929F9C45DFCF9B17&rank=5&spos=5&epos
=5&td=45&crumb-action=append&context=28&resolvein=true> accessed 1 February
2017
Liability of Waterplanet for the Rusted Waterpipes
The second issue which needs to be investigated in this question is the rusted
waterpipes. The main questions that arise from this issue include whether
Waterplanet was under a duty to inform Aquafun about the rusted waterpipes.
Was Waterplanet Under a Duty to Inform Aquafun about the Rusted Waterpipes?
The general rule is that silence cannot constitute a misrepresentation. 19 The
effect of the maxim caveat emptor is that it is the buyer alone that is responsible
for checking the quality and suitability of goods before a purchase is made, and
thus the seller is normally not under any duty to disclose any other information
to the buyer. The only exceptions to the general rules are statements of half-
truths, statements which become false and contracts uberrimea fidei, which
translates to mean contracts of the utmost good faith. However, none of these
exceptions apply to this case. The general rule of silence not constituting a
misrepresentation is established in the case of Smiths v Hughes 20, in which the
defendant was aware that there was a mistake with an order for old oats but said
nothing. Similarly, Waterplanet cannot be liable for silence by virtue of Smith v
Hughes21 as the principle laid down by this case was that you cannot have
silence as a misrepresentation; and since Waterplanet never mentioned anything
in regards to the quality of the property, there is no misrepresentation regarding
this issue.
24 G.H. Treitel, The Law of Contract (14th edn, Sweet & Maxwell, 2015)
are two tests of necessity that can be applied to determine whether there is an
implied term in the contract: the officious bystander test 25 or the business
efficacy test26. The business efficacy test was established in The Moorcock.27 The
principle provides that without the implied term, the contract would not be
workable. Moreover, the courts may also apply the officious bystander test,
which was established in Shirlaw v Southern Foundaries28, and is applied by
asking whether the implied term was so obvious a stipulation in the contract that
it goes without saying, as said by Lord Right in in the case of Luxor29. This can
be applied to the given scenario as it goes without saying that it is necessary
for the Private Inspector to carefully inspect the property. Applying the officious
bystander test, a bystander would say that it is necessary for the PI to thoroughly
check the property to make the contract workable. When evaluating the
property, an officious bystander would believe this requirement be obvious. It
can be deduced from the facts of the case that the Private Inspector did not use
the necessary reasonable care and skill that is the sole purpose of his
occupation, that being for him to find what the average person would not.
Conclusion
To summarise, the claimant, Aquafun, may wish to pursue two different actions
against the two different parties. Firstly, Aquafun will be able to bring a
successful claim against Waterplanet for fraudulent misrepresentation and the
remedies available to Aquafun will allow them to claim damages and rescind the
contract; although they would not be able to bring an action against them for not
informing Aquafun of the issues with the water pipes, as silence in this case does
not constitute a misrepresentation. Secondly, they will be able to bring an action
against the Private Inspector for breach of condition, even though the remedies
are limited, in that it would be pointless to ask for specific performance or
rescission, due to the fact the contract has ended.
Bibliography
Table of Cases
Bisset v Wilkinson [1927] AC 177
Derry v Peek (1889) 14 App Cas 337
Edgington v Fitzmaurice (1885) 29 Ch D 459
Edwards v Skyways Ltd [1964] 1 WLR 349
Esso Petroleum v Commissioners of Customs & Excise [1976] 1 WLR
Esso Petroleum v Mardon [1976] QB 801
Gran Gelato Ltd v Richclif (Group) Ltd [1992] Ch 560
Luxor (Eastbourne) v Cooper [1941] A.C. 10
Matthias v Yetts (1882) 46 L.T. 497, CA, at 502
Poussard v Spiers (1876) 1 QBD 410
Redgrave v Hurd (1881) 20 Ch D 1
Shirlaw v Southern Foundries [1939] 2 KB 206
Smith v Land and House Property Corp (1884) 28 Ch D 7
The Moorcock (1889) 14 PD 64
Walters v Morgan (1861) 3 DF & J 718
Table of Legislation
Misrepresentation Act 1967, s.2 (1), s.2(2)
Poole J and Devenney J, 'Reforming Damages for Misrepresentation: The Case for
Coherent Aims and Principles' (Westlaw UK, 2007)
<http://login.westlaw.co.uk/maf/wluk/app/document?
&srguid=i0ad832f100000159fb96963ad0f007bd&docguid=I42561390DF1B11DB
929F9C45DFCF9B17&hitguid=I42561390DF1B11DB929F9C45DFCF9B17&rank=5
&spos=5&epos=5&td=45&crumb-action=append&context=28&resolvein=true>
accessed 1 February 2017
Table of Textbooks
Anson WRS, Anson SWR, and G.. A, Ansons law of contract (30th edn, Oxford
University Press 2016)
Cartwright J, Misrepresentation, mistake and non-disclosure (3rd edn, Sweet &
Maxwell 2006)
Chen-Wishart M, Contract Law (Oxford University Press 2015)
Poole J, Textbook on Contract Law (13th edn, Oxford University Press 2016)
Treitel G.H., The Law of Contract (14th edn, Sweet & Maxwell, 2015)