Law of Contract II Essay Example | Topics and Well Written Essays - 2000 words

Law of Contract II - Essay Example Whether CBL can claim for breach of contract against Ricky for non – payment of money for the work completed. Rule of Law A false statement of fact, during the formation of a contract, by one of the parties to the contract, constitutes misrepresentation. As per the provisions of the Misrepresentation Act 1967, the representor is liable for fraudulent misrepresentation, despite his not having made the statement fraudulently.1 The party to the contract that undergoes loss due to this misrepresentation can either revoke the contract or claim damages.2 Application Ricky’s contract with CBL involves the construction of a new conservatory. Lawretta, a director of CBL, assures him that they are the best in constructing conservatories and that he was at liberty to make relevant enquiries. Ricky believes her statement and agrees upon a cost of ?20,000 for constructing the conservatory. After the completion of half the work Ricky discovers that CBL had never constructed conservat ories. In addition, he comes to know that some of CBL’s former customers are claiming damages for defective and poor workmanship. Ricky refuses to pay CBL for the work completed and the latter decides to claim for breach of contract. ... ordships ruled that in such cases, it was sufficient if the plaintiff could establish that the defendant knew or was convinced that his statement was not factual.3 In Redgrave v Hurd, the plaintiff had made a statement regarding his firm’s income, while attempting to induce the defendant to become a partner, in his business. Hurd discovered that the statement was wrong and sought to rescind the contract. The lower court ruled in Redgrave’s favour, but the appellate court set aside this decision and held that Redgrave’s statement constituted innocent misrepresentation. Thereafter, it upheld the revocation of the contract by Hurd.4 A plaintiff is not liable for breach of contract if he had been unaware of the misrepresentation, at the time of the contract. This was the ruling in Horsfall v Thomas.5 Moreover, in Smith v Chadwick, the court ruled that there was no liability if the plaintiff had been aware of the misrepresentation and it was established that this know ledge could not have influenced his judgement.6 Finally, it was held in Peekay Internmark Ltd v Australia and New Zealand Banking Group Ltd that there had to be actual knowledge of the misrepresentation and that constructive knowledge was insufficient.7 It is essential for some relationship to exist between the misrepresentation and the inducement for the claimant to form the contract. Thus, in Attwood v Small, the defendant had relied upon his agents’ report regarding the productivity of the mines and steelworks offered to him by the plaintiff.8 As he had not relied on the plaintiff’s statement, he was not permitted to rescind the contract. Conclusion The fraudulent misrepresentation made by CBL induced Ricky to hire the former to construct a conservatory. CBL had misrepresented to Ricky about its