BUSINESS LAW3 Essay Example
The essay aims at discussing and giving a position over the existence and effects of a fraudulent misrepresentation related to a case between Mr. Manfredi a business person and the director of HappyHippie Pty Ltd Mr. Elvis Eggplant. The issue of discussion will be for Mr. Manfredi in accordance with the relevant laws in Australia. The case at hand between the two parties aims illustration the aspect of fraudulent misrepresentation as a result of the conduct by Mr. Elvis Eggplant in trying to persuade Mr. Manfredi to enter into a deal of purchasing a café. It is evident that false information was given to Mr. Manfredi during the time the contract was being signed, and this was done intentionally by Elvis Eggplant and as a result, it led to Mr. Manfredi accepting to purchase the café and upon discovering the fraud, he suffered an economic loss later. In an attempt to advise Mr. Manfredi of the next course of action, the essay will discuss the possible remedies to the fraudulent misrepresentation.
A misrepresentation claim always arises whenever on the party to a given contract makes a false statement about the nature of the contract which influences the other party to enter into the contract. Misrepresentation claims are governed by both the common law and the misrepresentation Act of 1967. A misrepresentation from a false statement may be innocent, negligently or fraudulently made1.
For there to be a successful misrepresentation claim, the accusing party must have relied on the representation which was false regardless of whether the untrue statement that had been made was made innocently, carelessly or deliberately and fraudulently2. Lack of an honest belief in a given statement’s truth is what makes it fraudulent.
Whenever there is a misleading statement in the event of entering into a contract, the conduct is always regarded as unlawful since it tends to create a wrong impression to the other party. In this case, Mr. Elvis Eggplant clearly engaged in a deceptive conduct regarding the approach he took towards the selling of his property to Mr. Manfredi. During the pre-contractual negotiations, he did not provide a true statement on the economic position of the business. In the case of Edgington vs. Fitzmaurice (1885) 29 Ch 459, a circular issued by the directors to the plaintiff was discovered to have been framed in a way that led to the plaintiff to believe and so entered into a contract, the court then ruled that the statement of intention made by the directors was a statement of intent and amounted to misrepresentation3. According to this case, if the documents presented to Mr. Manfredi had been altered to lure him to the purchase of the business, he could not discover the truth at that moment hence, he had no obligation but to rely on the misleading information.
First, to prove fraudulent misrepresentation, it is necessary to demonstrate that a false misrepresentation of a given fact was made. Just like in this case, the representation needs to be put forward as a statement of fact and not an opinion from the seller of the property; this statement can be made orally, can be written or be made through conduct. In this case, the misrepresentation was made through fraudulent account documents that were presented to Mr. Manfredi. In the case of Redgrave vs. Hurd (1881) 20 Ch D 1, the court held that misrepresentation had been made through the financial statement in the contract which related to the annual income generated by the business. In relation to this case, the accounting statement made by Eddplant was to induce Manfredi into believing that the café generated the described amount of income which was less than the real revenue generated, this was to convince him to purchase the business.
Secondly, it needs to be established that the representation made by Eddplant was intended to and induced Manfredi into the contract. In this case, Mr. Manfredi seeks advice from Elvis Eggplant, the director of HappyHippie about the history of the performance of the café. To secure the safe, Eddie provides an exaggerated financial report of the business performance; this is to (or “intending to”) create a positive impression about the firm. Since Manfredi was presented to with documents showing the business progress, they were the only documents he could rely upon in evaluating the historical progress of the business and also predicting future trends. In the case of Attwood vs. Small (1838) 6 CI&F 232, the purchasers of the mine were told exaggerated statement concerning its earning capability by the vendors; the buyers, however, had the statements checked by their expert agents who wrongly reported them to be correct. When the plaintiff later found the statements presented to them to be inaccurate, they sort to rescind on the ground of misrepresentation. The House of Lords, however, ruled that there wasn’t any misrepresentation since the purchaser had not relied on the representation, in the case of Manfredi; he had relied on the representation presented to him by Eddplant to purchase the business that confirming that there was a misrepresentation4. According to the above case, an image cannot be termed to be false and fraudulent if the representee does not rely upon it in decision making.
Lastly, to prove false representation, it is important to understand whether the owner of the business had intentionally made a false representation with the knowledge that it was false at the time of the contract. An assumption can, however, be made that since Mr. Eddplant was the director of the business, he should be having factual information regarding the financial position and history of the business. Because Mr. Eddplant presented exaggerated statements to Mr. Manfredi confirms that he did it intentionally to lure Manfredi to the contract knowing very well that the information was false. The case of Edgington vs. Fitzmaurice where a statement of intent induced the plaintiff and through a mistaken belief, the plaintiff was able to claim damages since he admitted that had it not been for the mistaken belief he would not have entered into the contract5. This is because no mutual understating existed between the two parties.
As a result of misleading and deceptive conduct, Mr. Manfredi can claim civil remedies such as injunctions or damages. If he chooses to pursue legal action, rescission of the contract they had earlier stroke would be an option, Manfredi may, however, opt to stick to the agreement and claim the necessary damages. If it entails claiming damages, there will be some loss incurred, as a result of the discovered poor financial status of the café in the earlier after the purchase; he will have to incur more expenses to the business. While there is still limited time, Manfredi has an option to rescind the contract.
From the incident, it is clear that there was a fraudulent misrepresentation in the case between Mr. Manfredi and Mr. Eddplant. The conduct of Eddplant was misleading and deceptive and was aimed at inducing Mr. Manfredi into signing the contract. It was as a result of the fraudulent information that Manfredi entered agreed to the contract.
Cases Of Misrepresentation | Contract Law. (2016). Lawteacher.net. Retrieved 25 March 2016, from http://www.lawteacher.net/cases/contract-law/misrepresentation-cases.php
De Lacy, J. (2010). The reform of UK personal property security law. London: Routledge-Cavendish.
Latimer, P. (2010). Australian business law 2012. North Ryde, N.S.W.: CCH Australia.
MacIntyre, E. (2008). Business law. Harlow, England: Pearson Longman.
Miller, R. (2013). Study guide to accompany Fundamentals of business law. Mason, Ohio: South-Western Cengage Learning.
Misrepresentation. (2016). E-lawresources.co.uk. Retrieved 25 March 2016, from http://e-lawresources.co.uk/Misrepresentation.php
1Latimer, P. (2010). Australian business law 2012. North Ryde, N.S.W.: CCH Australia.
2Latimer, P. (2010). Australian business law 2012. North Ryde, N.S.W.: CCH Australia.
3MacIntyre, E. (2008). Business law. Harlow, England: Pearson Longman.
4Cases Of Misrepresentation | Contract Law. (2016). Lawteacher.net. Retrieved 25 March 2016, from http://www.lawteacher.net/cases/contract-law/misrepresentation-cases.php
5Misrepresentation. (2016). E-lawresources.co.uk. Retrieved 25 March 2016, from http://e-lawresources.co.uk/Misrepresentation.php
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