Determine the legal position of Mr Sagar and Mr Grove.

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Legal and Business Skills 1

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Mr Sagar and Mr Grove, sold a yacht called ' The Intrepid Adventurer' to Jetstone Ltd. The contract was drawn on the basis of statements made by Mr Sagar and Mr Grove relating to the condition of the yacht.

They had made statements concerning the refurbishment, repainting, and repair of the engine to be complete before the sale. Jetstone Ltd, however, claims that the repainting of the yacht is unsatisfactory and that the engine maintenance logs had not been transferred to Jetstone at the time of sale. Jetstone are unable to use the yacht as Mr sagar and Mr Grove have also failed to provide a saftey certificate to them.

Jetstone as result have refused payment of the yacht as its condition does not live up to the statements made prior to the formation of the contract.

In order to determine the legal position of Mr Sagar and Mr Grove, I am going to look at the legal stance concerning pre-contractual statements, misrepresentation, and its remedies, and relevant case law.

Any statement made during contract negotiations will be classified by the courts as either a representation or a term; a significance of classification being the consequences on breach. A term is a promise or undertaking which forms part of the contract, whereas a representation is a statement which induces one party to make the contract but does not become part of the contract itself. If a pre-contractual statement is found to be a term of the contract, which is subsequently proved to be untrue, this will give rise to an action for breach of contract. If however, the statement is classified as a representation and that representation proves false, the remedy will lie in an action for misrepresentation.

Whether a pre-contractual statement is a term relies primarily on whether there is an intention on behalf of the parties for it to be considered as such, and the test to determine contractual intention is an objective one. The approach adopted through the common law reveals that the judiciary have acknowledged several factors as being relevant aids to determining the application of the intention test. These include: the importance of the statement; reliance of the other party on that statement; and the relative knowledge and expertise of the parties.
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In Esso Petroleum Co Ltd v Mardon (1976), Mardon bought a garage that Esso said would sell 200,000 gallons of petrol a year when it only sold 78,000 in 15 months. Esso was found to be liable because they were experts in the petrol market.

A misrepresentation is a false statement of fact made by one party to another, which, whilst not being a term of the contract, induces the other party to enter the contract. The remedies available for misrepresentation depend on whether the representation is found to be fraudulent, negligent, or innocent.

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