Kabulonga Supermarket displayed K100 on the shelves and on the actual bottle for Pinot

Grigio there was no price. When Gregory Nkunika wanted to know the price the shop
attendant could not know the exact price, till she inquired from the shop supervisor. When the
cashier scanned the bottle it reflected K150 and Nkunika rejected it. As the shop attendant
was taking the bottle it injured and damaged the Kunika in the eye. He threatened to sue the
supermarket and the supermarket insisted that there was a contract and he has to pay. It is
against this background that this essay provides a legal advice on the matter to both parties.

Dealing with the possibility of an action for breach of contract, it may be that the statements
made about the wine amount to terms of a contract as opposed to mere representations.

A court is more willing to regard a statement as amounting to a term of the contract where a
representor has some special knowledge or skill that places them in a stronger position of
discovering the truth of the matter: Birch v Paramount Estates Ltd (1956); Schawel v Read
(1913). The application of the special knowledge or skill criterion by the courts can be seen
in the cases of Oscar Chess Ltd v Williams (1957) and Dick Bentley Productions Ltd v
Harold Smith (Motors) Ltd (1965).

Misrepresentation in English law is an area of English contract law, which allows a person to
escape a contractual obligation or claim compensation for losses. If one person can show that
she entered an agreement because of another person's false assurances, then the other person
will be unable to enforce the agreement against her, and may have to pay her damages. A
misrepresentation can be an outright lie (fraud), an unintentional but careless falsehood
(negligence), or an innocent slip of the tongue.

Misrepresentations generally do not render a contract void, as does the contractual doctrine
of common mistake or frustration. It merely means that a contract will be voidable at the
option of the misrepresentee. This is because not all contracts entered into on the strength of
misrepresentations will always be bad, and it is thought more just to give the wronged party
the choice about how to proceed.

Remedies are partly regulated by the Misrepresentation Act 1967. English law generally
allows a contract to be rescinded, so that both parties are put back into the position before the
agreement was made. It may be that the misrepresentation was incorporated into the contract
as a term, so as an alternative one can claim the contract should subsist and claim for a loss in
expectations. In this case the misrepresentee can equally sue for damages as if the

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misrepresentation had been true. A misrepresentee may also sue for any losses which resulted
from her relying on the misrepresentation

Not every statement spoken without the utmost truth is a misrepresentation. It is generally
said that the statement must be one asserting something as a fact, rather than as an opinion,
and that the statements of intention do not count as statements of fact. However, opinions and
intentions can overlap with facts. Perhaps controversially English law does not see anything
wrong when a person simply stays silent and lets somebody make a mistake.

A misrepresentation is a false statement of fact made by one party to the contract to the other
that induces that person to enter into the contract. The statement must not be statement of
opinion or intention. The statement as to the condition of the car is likely this is a statement
of opinion: Bisset v Wilkinson (1927). The opinion must be an honest one: Smith v Land and
House Property Corporation (1884). There does not appear to be an issue with the condition
of the vehicle however statements as regards the number of previous owners and the mileage
of the vehicle may amount to misrepresentations.

To succeed Gregory Nkunika must prove the statements induced him into the contract. To
prove this three factors must be satisfied. Firstly, Gregory Nkunika must have been aware of
the misrepresentation at the time of contracting: Attwood v Small (1838). It should be noted
that Gregory Nkunika is not precluded from claiming misrepresentation merely because he
relied on other factors as well as the false statements: Edgington v Fitzmaurice (1885).

Secondly, Gregory Nkunika would have to show that he relied on the misrepresentation, and
that this was a material factor influencing his decision to purchase the wine because he saw
the price as K100. Presumably this would occur in Gregory Nkunika' case since whilst there
are no indications that the statements actually induced him into the contract they would have
influenced his decision to view the wine as affordable and influence him in making the
purchase. The test here is an objective one: Downs v Chappell (1996) - would the reasonable
person have been induced to enter the contract by the representations made to him? It is
suggested that a court agree here.

Finally Gregory would have to show that he was unaware of the untruth of the statement. The
onus is on the supermarket to prove that Gregory was aware of the untruth. The fact that
Gregory had an opportunity to inspect the wine bottle would not affect his right to relief since
the inspection would be based on the condition of the wine bottle. The fact that Gregory has

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been given the opportunity to pick the wine bottle inspection is of no significance since a
representee is under no obligation to check the accuracy of the statements: Redgrave v Hurd
(1881).

Statements of opinion:

Though a statement of opinion is generally not actionable as a misrepresentation, by

giving one's opinion one may be held to have represented that they had better
knowledge about certain facts. For instance in:

Smith v Land and House Property Corporation] Bowen LJ held that Mr Smith could not
enforce a contract against LHP to buy his property, because he had advertised that the current
tenant, Mr Fleck, was "most desirable". In fact, as Mr Smith knew, Mr Fleck had been
missing his rent payments and was then declared bankrupt. So even though "most
desirable" is an evaluative statement it is still a misrepresentation because it warrants
the statement maker has good knowledge of certain facts.

The cases seem to show that the divide between "fact" and "opinion" is partly affected by the
balance of knowledge and expertise between the parties.

Bisset v Wilkinson Mr Bisset said his land in New Zealand could support 2000 sheep. Both he
and Mr Wilkinson knew sheep had not been farmed before. Mr Wilkinson tried to pull out
after the contract was signed, but the Privy Council advised that the statement was only one
of opinion, not fact given that there was no dishonesty, and considering the "knowledge of
the parties respectively, and their relative positions".

Rescission

The first possible remedy for misrepresentation is that the misrepresentee may be entitled to
rescind the contract.

Bars to rescission

The right to rescission may in four circumstances expire. Rescission is often a drastic
solution, just as the right to terminate for a contractual "condition" can be an oppressive right
when exercised. So as an equitable remedy, the courts developed principles which would take
away the right if it seemed unfair on the defendant, some third party, or too rich for the
claimant:

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 1) Counter restitution impossible

With a somewhat technical sounding name, this is the most important bar to rescission in
practice. "Counter restitution" simply means "putting the parties back" to their
positions before the contract was consummated. For example, if our contract was a pen
for £1, counter restitution would mean you giving back the pound and me giving up the
pen. The aim is to ensure that a claimant is not unjustly enriched as a result of
rescission.

2) Affirmation

If a claimant through conduct has subsequently affirmed a contract despite some prior
misrepresentation, she will be estopped from changing her mind. For instance, in the
slightly harsh case of Long v Lloyd Mr Long bought from Mr Lloyd a lorry advertised as
being in ‘exceptional condition,’ said to do 40 mph and 11 miles to the gallon. When it broke
down after two days and was doing 5 miles to the gallon, Mr Long complained. Mr Lloyd
said he would repair it for half the price of a reconstructed dynamo. Because Mr Long
accepted this, when it broke down again, Pearce LJ held the contract had been affirmed. It
was too late to escape for misrepresentation. A more lenient approach may now exist. As
Slade LJ pointed out in Peyman v Lanjani, actual knowledge of the right to choose to
affirm a contract or rescind is essential before one can be said to have "affirmed" a
contract.

3) Third party rights

A clear bar to rescission is where unwinding a contractual exchange may cause injustice
to an innocent third party. This will particularly be the case where an item has changed
hands and then been sold on to a third person.

4) Lapse of time

The fourth potential bar to rescission is that the right will be lost if a claimant takes too
long to bring an action in court. The old term for lapse of time is "laches" (pronounced
lay-cheese). The amount of time that needs to pass is not specified, and a judge will
decide that on a case by case basis according to what he thinks is fair. The leading
example is Leaf v International Galleries where Mr Leaf was told he had bought the
painting 'Salisbury Cathedral' by John Constable. It was in fact a copy. Mr Leaf was told this

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five years later at an auction. However, Denning LJ held that by this time it was far too late to
rescind, even though the painter's identity was clearly a condition that went to the root of the
contract.

Damages

Whether a claimant can seek damages depends on whether the misrepresentation was
innocent, negligent or fraudulent. The damages available will reflect losses, not a person's
expectations, unless the misrepresentation was a promise incorporated as a term into the
contract. Provided no double recovery results it is entirely possible to rescind and claim
damages (again, though, not expectation damages as if the contract were still in existence).
There are four categories of damages claim, which are a combination of common law and
the Misrepresentation Act 1967:

1) Fraud or deceit

Deceit is telling lies. The aim of damages for deceit is to put the claimant in the position as if
the tort had not been committed. The leading case, Derry v Peek defines deceit, although it
was not actually held in this case that deceit took place. Mr Derry had bought shares in a tram
company which advertised new trams it was building had the right to use steam power. Sadly
the Board of Trade would only let the company use horse powered trams and the company
was wound up. When Mr Derry sued the company's directors (including Mr Peek), Lord
Herschell found that this was not deceit since the directors honestly believed in their
statements at the time and thought steam power permission was a mere formality. He noted,

‘The ground upon which an alleged belief was founded is a most important test of its
reality… if I thought that a person making a false statement had shut his eyes to the facts, or
purposely abstained from inquiring into them, I should hold that honest belief was absent…’

So Fraud means a false representation made (a) knowingly, (b) without belief in its
truth, or (c) recklessly. Note that an action for negligent misrepresentation was
unavailable at the time (see below) and that just because a belief is unreasonable does
not mean a statement is fraudulent. It may however be evidence of dishonesty.
Conversely good motives (e.g. defrauding a bank to help starving children) do not
change the fact of deceit.

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 In practice, because an action for negligent misrepresentation has now been developed
through Hedley Byrne , it is often not beneficial to sue for deceit. The only certain
difference is that the defence of contributory negligence is unavailable in a deceit action.
But deceit is harder to prove, since evidence of a person's state of mind is needed. A
large difference which is subject to debate is that the causation and remoteness rules are more
generous for deceit. Certainly this is true when comparing negligence and deceit.

2) Negligence

the leading case, Hedley Byrne & Co Ltd v Heller & Partners Ltd, where Heller & Partners
Ltd (a bank) warranted to Hedley Byrne & Co Ltd (an advertising company) that its
prospective client, Easipower Ltd, was ‘creditworthy’. When Easipower Ltd could not in fact
pay for the advertising services, Hedley Byrne sued the bank for misrepresentation. Readers
should note, this is a tort action, so the question did not actually involve a claim for
misrepresentation inducing a contract. But the principle was the same. Could one sue for
losses after being told negligent, rather than fraudulent, statements? The House of
Lords answered "yes" if there was a special relationship between the parties showing
that one had "assumed responsibility" to the other. In the instant case this would have
worked, except that Heller & Partners had said in their warrant that they disclaimed
any responsibility for their statement's accuracy. They had an exclusion clause (see
below, and MA 1967 s 3). So in absence of the exclusion clause, Heller & Partners would
have been liable for negligent misstatement.

3) Misrepresentation Act 1967 (MA 1967) s 2(1)

The Misrepresentation Act 1967 is more claimant friendly on three grounds:

1) there is no need to prove the problematic Hedley Byrne special relationship.

2) there is no remoteness cap on the damages which may be claimed under s 2(1).

3) the burden of proof is on the defendant to show he has not been negligent (i.e. had
reasonable grounds to believe her representation was true). The text of section 2(1)
reads as follows.it is likely that a company's own standards and practices will be
relevant to what constitutes reasonable grounds for a belief.

However, it will not always be possible to sue under s 2(1), If there is no contract, for
instance if an agreement was void ab initio on the ground of non est factum, then it will be

6
necessary to sue under Hedley Byrne. Also, the misrepresentation must precede the contract,
and is not actionable under s 2(1) even if it is found in the contract subsequently. Lastly, it
has been suggested by McKendrick that if s 2(1)'s application leads to draconian
consequences, a court may not be willing to enforce it.

4) Innocent misrepresentation (Innocence, MA 1967 s 2(2))

Innocent statement with reasonable grounds of belief in it.

Innocent MR gave the party the remedy of recission (as long as none of the bars of it
applied). But now, Section 2(2) gives the court discretion about whether it will allow
rescission of a contract, or substitute an appropriate award of damages in lieu (instead).
In William Sindall plc v Cambridgeshire CC William Sindall plc claimed rescission of a
land purchase from Cambridgeshire County Council on the ground that the council falsely
(but innocently) stated there were no sewage pipes on the property. This would have cost
£18,000 to remove, and the land had been bought for £5m. The real reason that William
Sindall wanted to escape from the contract was that land prices had just crashed. The court
held that in fact the contract had made the buyer assume any risk of such representations and
there was no right to rescind. But if there had been, it would have exercised its discretion
under s 2(2) to award a small sum of damages.

Although it has been suggested otherwise, it is important to note that the right of the
court to award damages in lieu of rescission only exists if the right to rescission exists.

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 References

Ewan McKendrick (2005). Contract Law - Text, Cases and Materials. Oxford University
Press

Atiyah (2009). The Rise and Fall of Freedom of Contract. Chicago: Clarendon Press

Randy E. Barnett(2003). Contracts. New York: Aspen Publishers

Scott Fruehwald (2009). "Reciprocal Altruism as the Basis for Contract," 47 University of
Louisville Law Review 489.