Introduction
This paper begins by establishing the gist or the main idea in the problem presented. This will be done by analyzing the facts as they are given. James and Percy are partners in a law firm. One day they walk into a garage of a second hand car dealer. They want a vehicle, a Rolls Royce Corniche make. They examine the vehicle in the presence of a salesman who assures them of the good quality and superb condition of the vehicle. The partners, believing in the statement of the salesman agree to buy the vehicle. Having bought the vehicle they leave the car dealer and walk into a Universal Computers, a firm that deals with hiring out of office computer systems.
They are offered a computer system for relatively low price and they decide to buy it. Later the vehicle develops a problem and so does the computer. However upon James and Percy lodging complaints with the two firms the both firms refer to the contracts the partners signed with the respective firms.
Main body
Looking generally at the facts of the case, we realize that there are several legal issues that arise in this context. Firstly, there is the issue of misrepresentation, caveat emptor, uberimae fidei, mistake and various contractual issues. Having established the issues arising within this context, this paper shall proceed and discuss each and every issue, show how it arose within the context and most importantly show the legal impact of the issue in this case.
In the law of contract, a representation is a pre-contractual statement made, with the main intention being to persuade someone to enter the contract. It then follows that a misrepresentation is a breach of a representation and consists of a set of untrue statement of facts, made by one person to another, intended to induce someone to enter a contract. Misrepresentation could either be express where it is made verbally through the word of mouth, or implied where it is made by way of conduct.
It is important to mention at this point that misrepresentation is one of the factors if found to exist can invalidate a contract. The court requires that for any party to claim misrepresentation, he must prove that the statement made to him was untrue, that the intention of the untrue statement was to induce the aggrieved party into entering the contract and that the injured party, relying on the untrue statement entered the contract. However, not all pre-contractual statements although untrue are classified as misrepresentation.
A statement of opinion though untrue does not amount to a misrepresentation. In Bisset Vs Wilkinson (1927 a statement by the seller of land that the land could support 2000 sheep but said that he had never used it for that purpose was held to be a statement of opinion and did not amount to a misrepresentation. Equally a statement of future intention cannot amount to misrepresentation. For instance, where one party to the contract asserts that he intends to do a particular thing in future, that cannot be held to amount to a misrepresentation. It has also been held by the court that extravagant advertisement and mere puffs also do not amount to misrepresentation.
Other principles are that silence does not constitute misrepresentation. There are however exceptions to this general rule. This is where a party to the contract is under obligation to disclose facts that he is aware of if when not asked. In Nottingham Patent Brick and Jile vs Butler,a solicitor told a prospective buyer that he was not aware of any restrictive covenants affecting the land he was selling, but did not go on to add that it was because he had not bothered to check.
This principle falls within this case of James and Percy. It could be concluded that the second hand car salesman’s statements that the vehicle was in good condition amounted to a misrepresentation. This is clearly seen because later the car which was thought to be in a good condition developed complications and even after the repairs the engine eventually died. The statement made by the car salesman at the time of transaction therefore was a misrepresentation as he said that the car was in an excellent condition but this turned out to be untrue.
This statement equally qualifies to be a misrepresentation as from the facts it can be drawn that this statement was solely intended to induce James and Percy into entering the contract. It also qualifies as a misrepresentation as the two partners relying on the statement and believing it to be true, entered the contract on the sole reliance of the statement.
Looking at the second scenario of Universal Computers, the offer that was made to the partners of 10% discount may also be seen as a misrepresentation. It is noteworthy to remember that a misrepresentation could be express or implied. In this case therefore the misrepresentation was implied through the reduced price offer as the computer system turned out to be faulty later.
Another major issue that brings itself out is the issue of caveat emptor. This principle requires that the buyer is under obligations to make necessary investigations and make relevant findings in regard to the product or item or even service that he intends to buy, prior to entering any contract or engaging in any transaction. The both dealers may therefore argue that the partners were under obligations to make necessary findings of the products that they were to buy.
The position of the law however is that a contracting party would rather remain silent since silence does not constitute a misrepresentation instead of giving half truth to the other party. In the first case, the first dealer may be held liable for having given half truth to the two partners regarding the vehicle that they were intending to buy.
Every untrue statement of fact in order to amount to a misrepresentation must be intended to induce the other party to enter the contract and must actually induce the other party into entering the contract. It is therefore not enough that the statement was intended to induce but that it actually induced the other party to enter the contract. For instance in Smith Vs Chadwick a statement that was made with the intention to induce but actually did not induce the other party was held not to constitute a misrepresentation.
Another issue that the dealers would raise is the issue of uberimae fidei or utmost good faith. They may claim that all the pre-contractual statements they made were actually not calculated to deceive the two partners but that were all made in good faith. This however may require proof and the court will require that the dealers proof beyond doubt that their statements were made in good faith.
Going back to the issue of caveat emptor, even though the buyer is usually under obligation to make necessary investigation regarding what he intends to buy, certain cases are exceptional to this general rule. In cases where one person is in a much better position than the other to know certain material facts, the law imposes an obligation on such a person to make known to the other party such facts. In this case therefore it is obvious that both the car dealer and the computer dealer having done that kind of business for some time must have been a better position to know about the products they were selling, better than the two partners. Consequently therefore, they were under a legal obligation to make known all the facts of the products they were selling to the two partners.
Revisiting the issue of misrepresentation, it is important to note that if an untrue statement is made to one of the parties but the other party does not rely on it, it does not amount to a misrepresentation. Again even when a false statement is made but the other party decides to verify the facts for himself, should he then make an error, this does not amount to misrepresentation as held in Attwood Vs Small. Misrepresentations can be classified into three major categories which are fraudulent misrepresentation, innocent misrepresentation and negligent misrepresentation.
A fraudulent misrepresentation is a statement made with the honest belief that it is untrue or a statement made recklessly without caring whether it’s true or not. In Friedman Vs Njoro Industries the injured party was able to show that the defendant had been fraudulent when he said that a rival had already offered a price for the shares.
An innocent misrepresentation on the other hand is a statement made with the honest belief that it is true. In Derry Vs Peek, it was held that a statement made with the honest belief that it was true did not amount to a misrepresentation. A negligent misrepresentation is actually a negligent misstatement. In Hedley Byren Co Ltd Vs Heller and partner’s ltd it was held that the statement made was negligent and therefore amounted to a negligent misrepresentation. In this case therefore, we can draw from the facts that the misrepresentation made to the two partners was fraudulent in nature as the makers must have known them to be untrue as people in their positions would have ordinarily known that these statements were untrue.
Another very significant issue in this case is the issue of exemption clauses. It is clear from the facts of the case that both contracts contained exemption or exclusion clauses. An exemption clause is a term in a contract which serves to exclude or restrict liability or legal duty which would otherwise arise. For instance, there may be a notice in a car park which states that, “the owners of this car park shall not be liable for any to cars parked herein”.
In this case therefore, both contracts contained an exemption clause which stated that ‘the goods delivered shall be deemed to be in all respects in accordance with the contract, unless the suppliers shall within 7 days after receiving of the goods receive a notice in writing of any faults. Such clause as already mentioned normally has the effect of restricting or excluding liability on the part of the seller. In deciding whether an exclusion clause has the intended effect, the court usually considers two major factors. The first factor that the court usually considers is whether the clause was part of the contract.
If a document or a contract is signed then the contents therein are always deemed to be part of the contract regardless of whether they were read and understood the parties the contract. In L’Estrange Vs Graucob (1934), the claimant bought a machine for her café and signed an agreement, which excluded all conditions and warranties. The machine then developed a fault and the court held that she was bound by the agreement, the effect of which was to prevent her from getting any remedy for the faulty machine.
Secondly, if the contract is unsigned then the exclusion clause will only be binding if it was brought to the attention of the other party prior to entering the contract. In Olley Vs Marlborough Court Hotel, it was held that an exclusion clause by the hotel management stating that the management would not be liable for articles lost unless handed in for safe custody did not have any effect as it was brought to the attention of the other party after he had already entered the contract, and was therefore not a part of the contract. Another very major consideration that the courts the courts will look at is whether the document in question is one that is reasonably expected to have contractual terms.
For instance, a bit of paper which looks like a receipt cannot be said to be binding on a contracting party. In Chapelton Vs Barry UDC, the claimant hired a deckchair from the defendant and was handed a ticket which he did not read. On the back of the ticket, it was stated that the council would not be liable for any damage arising from the use of the deckchair. The chair collapsed and the claimant was injured. The court held that the ticket could not be reasonably expected to contain contractual terms and so the claimant was not bound by the exclusion clause and could claim damages.
The law of contract also requires that any party to the contract who has put an exclusion clause in the contract and wishes to rely on it must take reasonable steps to bring to the attention of the other party to the contract the existence of the clause. In Parker Vs South Eastern Railways, the plaintiff deposited a bag in the defendant’s station cloakroom. He received a paper ticket which said on its face, “see back” and on the back were printed conditions including a condition limiting liability for any package to 10 pounds.
The plaintiff said that he did not read the conditions, although he admitted that he knew that there was some writings on the ticket. His bag worth more than 10 pounds was lost and on claiming compensation, it was held that the railway company had given a reasonable notice to the claimant and therefore they were not liable.
Sometimes an exclusion clause may be incorporated into a contract because parties have previously dealt with each other on those terms. In this case however, there is no evidence that both parties to the contract had previously dealt with each other on those terms. Having established whether the clause was part of the contract or not, the other major issue that the courts will usually look at is whether the exclusion is practically applicable. In determining this, the court will usually consider various circumstances of the case. First of all, if there is any ambiguity or uncertainty in the clause, the court will usually read and interpret it against the contracting party who wishes to rely on it.
This is known as the contraproferentum rule. Again, the clause will be strictly interpreted as in the case of Hollier Vs Rambler. Motors where the claimant’s car was damaged by fire in a defendant’s garage caused by negligence of the defendants. The exclusion clause stated that the company is not responsible for damage caused by fire to customer’s cars on the premises. The court held that it was not clear whether or not the exclusion clause related to fire caused negligently and because the clause was ambiguous it was read and interpreted against the company.
In this case, looking keenly at the case of Universal Computers, although there was an exclusion clause it was not clear whether the faults mentioned in the clause also included those caused by the negligence of the firm. From the facts it is clear that the computer system developed faults whereby the visual display unit failed to operate due to the negligence on the part of the firm while installing the circuit.
In this case therefore, the clause is uncertain and ambiguous and therefore the contraproferentum rule shall be applied and the clause interpreted against Universal computers. Equally, in the case of the car the exclusion clause was not certain as to which faults the clause referred to. This therefore means that the same rule of contraproferentum shall be applied and the clause interpreted against the car dealer.
Again, if the exclusion clause is a direct contradiction to the main purpose of the contract it shall have no effect whatsoever. In case of Pallock Vs Macrae (1992), the defendants entered into a contract to build and supply marine engines. The contract had an exclusion clause which was designed to protect them from liability for defective materials and workmanship. The engines supplied under the contract had so many defects that it would not be used. The court held that the exclusion clause was so extensive that it defeated the main purpose of the contract which was to build and supply workable engines.
Conclusion
In conclusion, therefore, it is clear that James and Percy have a case. From the discussion evidence indicates that there were very many vitiating factors in both contracts and thus the partners have a case.
Bibliography
Law of contract Act ,1990 Chapter 36.
Richard Pauls (2007). Law of Contracting. New York, Pearson Education Limited.