misrepresentation-problm question

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Rothna Begum                assignment 1

P05092837                Obligations II

LLBP 2006

     OBLIGATIONS II

ASSIGNMENT 1

Hand in date: 27th November 2006

Word guide 2,000     Word limit 2,500

Sabrina owns ‘Witch Mobiles’, a mobile phone shop situated in Magic Street, Warlockshire. She has told Zelda that she is thinking of selling it, in order to set up a potion shop with the money raised. When Zelda expresses an interest, Sabrina said that the shop was making good profits, and if Zelda wished to check the books she would supply them. Zelda, trusting Sabrina, did not take up the offer. She guessed that Sabrina must be doing well, as she drove a new BMW with a personalised number plate.

When Zelda came to look around the shop in June, Sabrina told her that there were many students in the area as the main ‘Hogworth University’ campus was very close and that it was well known that lots of young people changed their mobile phones frequently. She added that there were no other mobile phone shops in the area.

Zelda bought the business in August, and immediately found that the shop made little profit. Nevertheless she decided to completely refit the shop and expand the business to include MP3 players. However, in September she was perturbed to discover that the Salem Mobile Phone Company had just opened a shop in the same street. She also heard from a friend that Sabrina was aware of the potential development in May, when an article featuring the opening of a new branch in Magic Street appeared in the local newspaper.

When the students returned to campus in October, Zelda finds little improvement in the way of sales. This she discovers is mainly due the Hogworth University student union shop selling mobile phones at discount prices, a practice which they have done for the past two years.

Advise Zelda

Zelda would like to rescind her contract with Sabrina for the misrepresentation.

This question requires the discussion of misrepresentation, and, what, if any, remedies, may be provided to Zelda.

Statements made during the negotiations of the contract may be incorporated as a term or, forms the basis of a collateral contract, or as in this situation, a mere representation. Thus where Sabrina states that the phone shop is making a good profit, and that there are no other mobile phone shops may be conceived as an actionable misrepresentation

Actionable misrepresentation may be defined as an untrue false statement of fact, past or exiting, made by one party to the other, which, whilst not being a term of the contract induces the representee to enter the contract.

The first requirement to constitute misrepresentation is for the statement to be one of facts, and not a ‘mere puff’ or vague boasts, which are not intended to be taken seriously.

In the case of Dimmock v. Hallett (1866) LR 2 Ch App 21, Turner LJ said that representation that land was ‘fertile and improveable’ would not, be considered misrepresentation other than in extreme cases. It seems the more specific the statement is, the more likely it is to be viewed as a misrepresentation, rather than a mere puff.

This was demonstrated in the case of Carlilll v carbolic smoke company Ca, (1893). The defendants advertised that they would pay ₤100 to anyone who contracted influenza after using their product for a specified period. The claimant contracted the flu, and sought action. The defendants argued that this statement was a mere puff. Claimant succeeded.

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Where false statement of opinion has occurred this will not construe a misrepresentation of facts. This was highlighted in, Bisset v. Wilkinson [1927] AC 177. During negotiations, the owner of a farm stated to the prospective purchaser, that he believed that it could hold 2000 sheep. The purchaser was aware of the fact that the land had never been used for this purpose. The Privy Council held that the farm owner’s estimation was purely an opinion; therefore the purchases did not have the right to rescind the contract.

Sabrina told Zelda the second time she came to look ...

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