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Ian, an investment broker, wasapproached by Victor who asked him whether he should invest in WonderElectronics Ltd. Ian said " You certainly should, Lord Wellybob is a director.It is a very sound company. It is my view that it will go from strength...

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Introduction

Ian, an investment broker, was approached by Victor who asked him whether he should invest in Wonder Electronics Ltd. Ian said " You certainly should, Lord Wellybob is a director. It is a very sound company. It is my view that it will go from strength to strength. In fact, I own 5,000 shares myself which I can let you have.' Victor then bought the shares for �10,000 . The company went into liquidation a month later. The shares are now worthless. It now turns out (a) that Lord Wellybob resigned from his directorship a week after Ian's statement was made. (b) that Ian's statement regarding the prospects of the company was based on a report in a financial journal which was intended to refer to Wonder Electronics Ltd but gave the name of Wander Electronics by a printing error. Advise Victor; SUGGESTED ANSWER: In advising Victor it has to be determined whether he can sue Ian for misrepresentation on breach of terms of contract. Victor will first be advised whether he can sue for misrepresentation. Misrepresentation has not been defined as a statement of fact which is untrue and which induces the other to enter into the contract. ...read more.

Middle

And in consequence Ian would be liable for the misrepresentation. Next, one would advice Victor as to the nature of the misrepresentation in order to determine the available remedies. There are 3 types of misrepresentation: i) Fraudulent misrepresentation ii) Negligent misrepresentation iii) Innocent misrepresentation Fraud was defined by Lord Herschell in Derry v Peek as meaning that the representor made the false representation: i) knowingly or ii) without belief in its truth or iv) recklessly, careless whether it be true or false. Since Ian made the statements recklessly, knowing that Victor was relying on his expertise. But the burden of proof is on Victor and standard is very high, it requires evidence to allege fraud against Ian because the error in company name is as a result of printing error, be such it is not advisable for Victor to allege fraudulent misrepresentation. Furthermore the remedies for negligence under S2(1) M.A 1967 is more than the tortuous measure (out of packet rule) ie to put P into a position he would have been in had the representation been true. Watt v Spence, Roycot trust v Rogerson (1991) As to Negligence , it is defined as a false statement made honestly by a person who had no reasonable grounds for believing the statement to be true ie failure to take reasonable care to ensure that the representation is accurate. ...read more.

Conclusion

If Victor wishes to sue for fraudulent misrepresentation (which is not advised to) he can either affirm the contract and claim damages for the tort of deceit or rescind the contract and claim damages or plead fraud as defense in an action against him for breach of contract. In cases of fraudulent inducement it has given exemption of remoteness test Doyle v Olby (lronongers Ltd), East v Nlourer (1991) but not in tort. Advise to Victor could not be complete if he is not advised whether he can sue Ian for breach of terms of contract. Victor has to prove that the 3 statement made by Ian are term of the contract and not mere representation. The courts have formulated the following guideline for this : i) time lapse between representation and conclusion of the contract . Routledge v Mekay (1954) ii) was the oral statement followed by a written contract Birch v Paramount Estates iii) Did the representor have special knowledge or skill Dick Bentley Production v Harold Smith (1965) iv) Important of the statement Bannerman v White The representation may also be treated as collateral contract, Evans and Sons Ltd v Andrea Mezarao . The act may regards Ian's statement as mere representations and therefore it's advisable for Victor to sue for misrepresentation, further by virtue of S1(a) M.A 1967 Victor can cue for misrepresentation even though the representation is a term of the contract. ...read more.

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