• the statement must have been made by one party to the
contract to the other, and not by a third party;
• the statement must have been addressed to the person
claiming to have been misled;
• the person claiming to have been misled must have been
aware of the statement; and
• the person claiming to have been misled must have
relied on the statement.
In Horsfall v Thomas Horsfall made and sold a gun to Thomas. He
concealed a fault in it by means of a metal plug, and Thomas did not examine
the gun. After short usage, the gun blew apart. Thomas claimed that he had been
misled, by the presence of the plug, into buying the gun. It was held that the
plug could not have misled him, as he had not examined the gun at the time of
purchase. In Attwood v Small a false
statement as to the profitability of a mine was not a misrepresentation as the purchaser
did not rely on it; he commissioned an independent survey of the mine. On the
other hand, in Redgrave v Hurd where the purchaser of a business declined to
examine the accounts which would have revealed the falsity of a statement as to
the business’s profitability, there was a misrepresentation. Because he
declined to examine the accounts, he clearly relied on what was said to him
about profitability; he was not under a duty to check the truth of the
statement.
Whether
the reliance was reasonable or not is not material once the party claiming misrepresentation
shows that they did, in fact, rely on the statement. See Museprime Properties
Ltd v Adhill Properties Ltd in which an inaccurate statement contained in
auction particulars, and repeated by the auctioneer, was held to constitute a misrepresentation,
in spite of the claims that it should have been unreasonable foranyone to allow
themselves to be influenced by the statement. This view was confirmed in Indigo
International Holdings Ltd & Another v The Owners and/or Demise Charterers
of the Vessel ‘Brave Challenger’; Ronastone Ltd & Another v Indigo
International Holdings Ltd & Another However, it should be noted that in
Barton v County Natwest Bank the court indicated that an objective test would
be applied to determine reliance. If, objectively, there was reliance, this was
a presumption which was rebuttable.
UNDUE INFLUENCE
Transactions, either under
contract or as gifts, may be avoided where they have been entered into as a
consequence of the undue influence of the person benefiting from them. The
effect of undue influence is to make a contract voidable, but delay may bar the
right to avoid the agreement. There are two possible situations relating to
undue influence.
CONTRACTS AND PUBLIC POLICY
It is evident that some agreements
will tend to be contrary to public policy. The fact that some are considered to
be more serious than others is reflected in the distinction drawn between those
which are said to be illegal and those which are simply void.
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