Contractual Claims Misrepresentation
Consumer & Commercial Law Problem Question:
When Victoria was two months pregnant with her third child, she heard an advertisement on the local radio station about the 'Cruiser VO5' baby buggy. The advertisement was made by the manufacturer, and claimed that the buggy was extremely strong yet exceptionally light to carry. The following week, Victoria visited Becks Baby Boutique to buy a new baby buggy. She saw a number of different models and brands, but remembered the claims made in the radio advertisement and decided that the weight of the buggy was probably one of the clinching factors. She asked the assistant in the shop if the buggy could be opened with one hand, imagining holding a baby with the other. The assistant assured her that it was very easy to open and fold with one hand.
Victoria bought the buggy. Last week, Victoria took her new baby out in the Cruiser VO5 buggy for the first time. After a successful shopping expedition, Victoria gathered her two older children and pushed the baby in the buggy back to the car. It was the first time that she had to fold the buggy alone, having had help when she left home earlier in the day. She found it quite heavy to handle and impossible to fold with one hand. On her third attempt to collapse the buggy, the safety clip slipped, and caught Victoria's hand in a vice-like grip, snapping off all of her finger nails in the process. Fortunately a passer-by released her and called for help. Victoria broke her wrist which prevented her from working as a dinner lady at the local school for five weeks. Subsequently, the buggy was found to have a defective safety clip.
Victoria sought compensation from Becks Baby Boutique, but was informed by the manager that she was entitled to a refund on the price of the buggy only, because she had signed a sales agreement which included the following clause: 'We do not accept liability for loss, damage or injury caused by our products. However, in the unlikely event of loss or damage occurring, we will refund the full purchase price of the goods to our customers.'
Advise Victoria of any contractual claims she might have against Becks Baby Boutique.
Victoria has two potential contractual claims against Becks Baby Boutique (BBB), one for misrepresentation, and the other for breach of the statutory implied terms as to quality and description.
Misrepresentation
Victoria has relied on a statement made by BBB through the advertisement that was heard before she entered into the contract to buy the buggy, and also the statement made by the sales person at the time of the contract.
A misrepresentation is an untrue statement of fact made from one party to the other, which induces the other to enter a contract. This will not include a statement of opinion or of law, or future intent. There is no claim for a false promise to carry out an act, unless that promise forms a term of the contract.
The statement made in the advertisement is one as to the physical attributes of the buggy - stating that the buggy is strong and exceptionally light. However, this statement was made by the manufacturer, and not BBB.
The statement made by the shop assistant is that the buggy could be opened with one hand is clearly untrue. It is however important to distinguish between a statement of fact, and an honest statement of opinion. For example, in Bisset v Wilkinson the seller of land in New Zealand told a perspective buyer that in his judgment the land had the capacity to carry two thousand sheep. The land had not previously been used as a sheep farm. It was held that this was an honest statement of opinion as to the farm's capacity, and not a representation of a fact as to its actual capacity.
In Victoria's case however the statement is made by a person who regularly sells buggy's and who holds himself out as having specialist knowledge.
The question is whether the statement is merely res vendita - the age old device of a successful salesman. It was been held in Scott v Hanson that such statements as land being an uncommonly rich meadow was not a representation of fact. However, a statement supported by facts and figures will remain a representation. Even if the statement was only one of opinion, but was stated as a fact, that would still constitute a representation.
The statement is therefore a statement of fact.
The relevant test as to whether there is an actionable misrepsentation will be whether a reasonable man, possessing the sale agents knowledge, could have honestly held the opinion that the buggy could be opened with one hand. It is submitted that the sales person was in a position to know the true facts; he would know how easy it was to open and close each buggy, since this will be important to most buyers.
The sales person has therefore made a misrepresentation. That representation is material in that it induced Victoria to enter into the contract.
It was confirmed in Attwood v Small that the victim must place reliance on the misrepresentation. In that case, the seller of a mine accompanied his offer of sale with statements as to the mine's earning capacity. These statements were exaggerated and unreliable. However, the buyer appointed his own agents to investigate the matter. The agents visited the mine, and were given every facility to allow them to formulate their own judgement. The agents reported that the statements were true, and the contract then concluded. The House of Lords found that the claimant was not entitled to rescind the contract, since he did not rely on the seller's statements, but on his own investigations.
In this case however, Victoria relied on the representation, rather than her own judgement and investigations. It does not matter that Victoria had an opportunity to investigate and verify the representation, by trying the buggy in the shop. As Lord Dunedin said in Nocton v Lord Ashburton
No one is entitled to make a statement which on the face of it conveys a false impression and then excuse himself on the ground that the person to whom he has made it had available the means of correction.
It is submitted that the salesman has made a misrepresentation that has been relied on.
There are three types of misrepresentation; fraudulent, negligent and innocent. The type of misrepresentation will be relevant to the relief available.
Fraudulent misrepresentation as defined by Lord Herschell in Derry v Peek as a false statement made knowingly, without belief in its truth or recklessly, careless as to whether it be true or false.
Whether the statement by the sales representative is fraudulent will depend on whether it can be proven that he knew was untrue. Relief for fraudulent misrepresentation is rescission and damages in the tort of deceit.
The onus of proof would be on Victoria. It is often tactically difficult to prove, and therefore it might be preferable for Victoria to claim negligent misrepresentation. This only requires proof of a false statement made with no reasonable grounds for believing it to be true. If there is a special relationship between the parties, this may be claimed at common law under the principle of Hedley Byrne v Heller. None exists in this case.
Victoria would therefore rely on Section 2(1) Misrepresentation Act 1967. This provision removes the obligation to establish that a duty of care existed, and it also removes the burden of proof.
Once Victoria has proven that there has been a misrepresentation, it will be up to BBB (since they will be liable for the statement made by their agent) to prove that the sales representative had reasonable grounds to, and did in fact believe, that the statement was true. This burden is a difficult one to discharge, as was seen in the case of Howard Marine & Dredging Co v Ogden & Sons. The remedy available to Victoria would be those available in fraud, ie rescission and damages in the tort of deceit.
If BBB were able to prove that the misrepresentation was wholly innocent, and made with the honest belief that it was true, Victoria's claim would be in innocent misrepresentation. The remedy here would be limited to rescission with an indemnity or damages in lieu of rescission under Section 2(2) of the Misrepresentation Act 1967.
Rescission means setting aside the contract. This is an equitable remedy, and there are certain bars to a claim for rescission. These are affirmation of the contract, restitution in integrum impossible (ie restoration is impossible), where a third party acquires rights, or through lapse of time. It is the latter that may prevent Victoria from claiming rescission in this case. If it is found that she has not taken any action to rescind the contract within a reasonable period of time, the right to claim rescission will be lost.
If the representation was fraudulent, time will run from the time when the fraud was, or with reasonable diligence, could have been discovered. Victoria would then still be in a position to claim rescission, since she has only recently been in a position to discover the true position. In addition, Victoria would be entitled to claim damages in deceit, which are intended to restore the victim to the position occupied before the representation was made. All direct loss incurred as a result of the fraudulent misrepresentation may be recovered. This is not limited by the usual test of forseeability.
If however the misrepresentation is negligent at common law or innocent, time will run from the date of the contract, which appears to be approximately seven months ago. In Leaf v International Galleries it was held that a contract could not be rescinded on the ground of a non-fraudulent misrepresentation when five years had elapsed since sale and discovery of the truth.
In the case of non-fraudulent misrepresentation, it is submitted that the right to rescission would be lost, and the claim would be limited to damages. In this case, the test of forseeability would apply, because the damages are assessed in the tort of negligence, not deceit.
Implied term - Quality
The Sale of Goods Act 1979 provides at Section 14(2) that where goods are sold in the course of business, there is an implied term that the goods supplied are of a satisfactory quality. Section 2A defines satisfactory quality as being of a quality that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all other relevant circumstances. Section 2B provides that quality includes, inter alia, the safety and durability of the goods.
The buggy has a defective safety clip. This defect has caused Victoria to suffer an injury. It is submitted that the buggy is not of a satisfactory quality as a result of this defect. Victoria will therefore be entitled to recover damages arising out of her injuries. Damages will be based in the principle restitio in integrum, meaning that, so far as money can do it, be restored to the position the victim would be in had that particular damage not occurred. Damages will be limited to those which are not too remote. This will include an award for pain and suffering, and also her lost earnings. With regard to the buggy, Victoria would certainly be entitled to claim the cost of having the buggy repaired. If it was un-repairable, Victoria would be entitled to claim the cost of the buggy.
Implied term - description
The advertisement clearly states that the buggy is light and strong. Victoria has found that the goods do not match this description. The Trade Descriptions Act 1968 extends criminal liability for false descriptions. However, Section 35 of that act provides that a contract for the supply of goods will not be unenforceable as a result of the contravention of the Act.
The Sale of Goods Act 1979 will once again be of assistance, since Section 13 of the Act implies a term that goods will correspond to the description. The implied term is a condition of the contract.
The buggy clearly does not correspond to the advertised description of being light and strong. Victoria will be entitled to damages, which may include the cost of buying a replacement, suitable buggy.
Disclaimer
Section 8 of the Unfair Contract Terms Act 1977 provides that any contract term that seeks to exclude or restrict liability for misrepresentation or any remedy available by reason of such misrepresentation shall be of no effect except in so far as it satisfies the requirement of reasonableness as set out at Section 11 of that Act. Therefore, whether BBB are entitled to rely on their exclusion clause in relation to the misrepresentation will depend on whether it is found that it was reasonable to insert such a clause into the contract.
In any event, Section 2(1) of the Act provides that any term which seeks to exclude or restrict liability for personal injury or death will be ineffective. Therefore, it is submitted that the exclusion clause will provide no defence to BBB.
Bibliography
Furmston, M Cheshire Fifoot & Furmston's Law of Contract 14th Edition Butterworth's LexisNexis 2001
Misrepresentation Act 1967
Sale of Goods Act 1979
Trade Descriptions Act 1968
Unfair Contract Terms Act 1977
Attwood v Small (1838) 6 Cl & Fin 232
Bisset v Wilkinson [1927] AC 177
Derry v Peek (1889) 14 App Cas 337
Doyle v Olby (Ironmongers Ltd [1969] 2 QB 158
Hadley v Baxendale {1854) 9 Exch 341
Hedley Byrne v Heller (1964] AC 465
Howard Marine & Dredging Co v Ogden & Sons [1978] QB 574
Leaf v International Galleries [1950] 2 KB 86
Nocton v Lord Ashburton [1914] AC
Scott v Hanson (1829) 1 Russ & M 128
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