MULUNGUSHI UNIVERSITY

SCHOOL OF BUSINESS STUDIES

DEPARTMENT OF LAW, LABOUR AND HUMAN RESOURCE MANAGEMENT

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NAMES: KANDONGWE CHOOLWE

STUDENT ID: 202205685

COURSE: CONTRACT LAW II

COURSE CODE: BLL 212

ASSIGNMENT #:

LECTURER: Ms JOSEPHINE

DUE DATE: 12/03/ 2024

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The current essay examines the case of John General ( potential claimant-C) who
bought a painting of less value as he anticipated from Edward (potential Defendant-D).
The major question is: would the contract be void based on mistake and
misrepresentation. It will be concluded that the contract is voidable.
The following are the issues;
1. Was there any mistake in the contract between John General and Edward
2. Was there misrepresentation?
3. Can the contract be declared void?
1. Mistake as to quality of the subject matter.
Mary1 argues that where the subject matter of the contract lacks some quality which
it is believed to have, the first question is whether the quality forms part of the
contractual description of the thing. If it does and the article does not answer the
description of that which is sold, the contract is valid and the party who gave the
description is in breach. John General was advised to venture into paintings and
antiques. He was interested in paintings from the French Impressionists. Taking the
painting to be done by Renoir, buys it at K850, 000. Upon being valued by insurance
company, it was found that the painting was not done by Renoir but nevertheless an
important picture worth K200, 000. this means there was mistake as to quality.
According to Kennedy v Panama2 mistake as to quality of the subject matter is not
operative of nullifying consent. In other words consent is not negatived by a mere
mistake as to quality. The contract remains binding and valid. An erroneous opinion
as to the value of the thing which forms the subject matter of the agreement is not to
be deemed a mistake to a matter of fact.
Plaintiff in Kennedy v Panama3 had applied for shares in the defendant company on
the faith of a prospectus, which represented falsely but innocently that the company
had a binding contract with the government of New Zealand for the damage of mails.
Upon discovery of true facts, an action was brought for the recovery of the sums that
he had paid on calls. The defendant brought a cross-action for further calls. The
plaintiff failed because the shares allocated to him were not different in substance to
those shares the plaintiff applied for and the defendant company had contracted to
deliver. In the present case the facts state that John General still bought a painting but

1
Mary Charman [2007] Contract Law 4th ed Willan Publishing Canada
2
Kennedy v Panama New Zealand and Australian Royal Mail co [1869] LR 2 QB 580
3
ibid

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only that it was of low quality as compared to the one desired. Had that been a
mistake as to the subject, it should have been in the substance, as the claimant would
not have the painting at all but the statement was quite accurate and he got the
painting. It is also stated in facts that the motive for the claimant was to invest and
enable him make profits. The acquired painting was described as “ nevertheless an
important picture”. On implication, the contract is binding as was ruled in the case of
Smith v Hughes. The claimant actually got the painting from the same source despite
change of supplier in which he had applied and that Edward informs ( by way of
inducement) John General that the ‘’ French impressionists continue to rocket in
price and that these type of lake scenes by artists such Renoir are particularly in
vogue”.
Though the painting was not by Renoir it was nevertheless an important picture (way
far from being of no value) with a difference of K650, 000. It must therefore be
taken that it would be a misapprehension as to that which is a material part of the
motive inducing the John General to buy the painting but not preventing the painting
from being in substance to that intended for.
In the case of Smith v Hudges4 there was no sufficient finding that the mistake was
mutual. The defendants wanted old oats. However, the plaintiff sold to him new oats
which were useless for the purpose of which the defendant bought them. The court
held that even if both parties believed that the oats were old, the contract would be
binding. Cock Burn C. J5 - the General rule, both of law and equity, in respect to
concealment is that mere silence with regard to a material fact, which there is no legal
obligation to divulge will not a void a contract.
2. Was there misrepresentation
Based of the presented facts, there was fraudulent misrepresentation. House of lords
in the case of Derry & Ors v Peek6 defined fraudulent misrepresentation as “false
representation made; (1) knowingly or (2) without belief in the truth, (3) recklessly,
carelessly whether it be true or false. Fraudulent misrepresentation includes any of
the following acts committed by a party to contract or with his connivance or by his
agent with intent to deceive another party there to or his agent to induce him to enter
into a contract;

4
Smith v Hughes [1871] LR 6QB 597
5
Ibid
6
Derry v Peek [1889] 14 App Cas 337

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1. Suggestion as to a fact of that which is not true by one who does not believe it to
be true
2. Active concealment of a fact by one having knowledge or belief of fact
3. A promise made without any intention of performing it
4. A any fact fitted to deceive
5. Any such act or omission as to the law especially declares to be fraudulent.
Of the above acts of fraudulent misrepresentation, the first, second, and fourth are
applicable to the case of John General. James, the financial consultant stated in the
facts that the art dealers of Masala District “ have always given sound advise to his
clients in the past”. Also, Edward in trying to induce John General into the contract
informed him that “ the French impressionist continue to rocket in prices and these
type of lake scenes by artists such as Renoir are particular in vogue”. The two
statements later on turned out to be false after the paining was valued for insurance
and was found to be of another painter and less value.
Mary7 adds that a fraudulent misrepresentation occurs where there is an absence of
honest belief in the truth of the statement made. More precisely, the decision in Derry
v Peek was referred to in Double Acres Sdn Bhd v Tiarasetia Sdn Bhd8 where Abdul
Malik stated “ wherever a person causes another to act on a false representation which
the maker himself does not believe to be true, the maker is said to have committed a
fraud”. Similarly this was applied by the Federal Court in Kheng Chwee Lian v
Wang Tak Thong9. It was found that the respondent was being induced to sign
another agreement in which he will give up the bigger portion of land in return for a
smaller area of land. The court ruled that it must be active concealment and not mere
situations of silence.
On the other hand, it can be thought that there was silence of the part of Edward in
failing to disclose that the painting was not the one done by Renoir. Silence does not
amount to fraud. A contract induced by fraud is voidable and not void (s. 19 of
Contracts Act as applied in Derry v Peek10).

7
Mary Charman [2007] Contract Law 4th ed Willan Publishing Canada
8
Double Acres Sdn Bhd v Tiarasetia Sdn Bhd [2001 1 AMR111
9
Kheng Chwee Lian v Wang Tak Thong [1883]
10
Derry v Peek [1889] 14 App Cas 337

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In the case of Tay Tho Bok & Anor v Segor oil11, the defendant had concealed the
material facts that the transmission lines and pipelines are within the land concerned
in regards to S & P. The high court held that the acts of the defendant amounted to
fraud within the meaning of s. 17 of contracts acts12. It was found as a fact that the
defendant knew the existence of transmission lines and pipelines on the said land
prior to the signing of the sale and purchase agreement.
Silence does not amount to fraud13. A’s silenc though he has information on the
change of prices that is likely to affect B’s willingness to enter into the contract is not
fraud. This is referred to as the rule of caveat emptor ( let the buyer be aware) that a
seller does not have to inform a buyer the condition of the goods he is selling. It is on
the buyer to satisfy himself before making a purchase.
But silence can amount to fraud if there exists a duty for the person to speak. John
General heavily relied on James. James was a financial consultant. There was a
fiduciary relationship. Where a fiduciary relationship is found to exist undue
influence is presumed to have arisen. However, in the case of John General, this can
be rebutted. This is because there was free exercise of free will. In Re Brocklehurst14 ,
Lord Hailsham L.C ruled that free exercise of independent will can be shown by
proving that; independent advice had been sought. If an independent advice is heeded
this is likely to override the influence of the other party. In the case of John General,
consideration given was adequate. He had hired the services of the financial
consultant and also by himself studied the soaring prices fetched at auction by the
French impressionists. This goes to say that John General had no undue influence.
Consideration need only be sufficient, so if a party goes out of the way to ensure that
it is adequate, for example that it was good value for money, then again this is
evidence of good intention.
4. Can the contract be declared void?
In the case of Philips v Brooks , it was determined as to whether philips could rely on
mistake to identify a void contract and seek possession. There was no mistake to
identity due to the fact that this contract was made face-to-face. While fraudulent
statements were made, the identity of the fraudster could not be considered a mistake.

11
Tay Tho Bok & Anor v Segar oil palm estate Sdn Bhd [1996] 3 MLJ 181
12
Contract Acts Malaysia
13
Mary Charman [2007] Contract Law 4th ed Willan Publishing Canada

14
Re Brocklehurst [1978] Ch 14

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In the like manner, John General purchased the painting by face -to-face interaction.
Therefore as it has been already discussed in the foregoing sections a fraudulent
contract is voidable. Not only that Mary15 argues that the seller who begins the
negotiations assumes the responsibility for the risks involved.
Courts take the view that merely being mistaken over the quality or value of goods is
not fundamental enough to avoid the contract. This was as argued in Smith v Hughes.
In conclusion, John General’s contract is voidable. There would be no damages
because the standard of proof for fraudulent misrepresentation that of beyond
reasonable doubt.

15
Mary Charman [2007] Contract Law 4th ed Willan Publishing Canada