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Contracts

This document summarizes three court cases related to mistakes of fact and misrepresentation in contracts: 1) Edgington v Fitzmaurice - The court ruled that a mistake about the purpose of a loan was material to the agreement, even if unintended, as the purpose influenced the investors' decision to invest. 2) Esso Petroleum v Mardon - The court found that failing to disclose a change in planning permission that significantly reduced projected profits amounted to misrepresentation, as it influenced the investors' decision. 3) With v O'Flanagan - When the value of a medical practice fell after sale due to the seller's illness, the court ruled this was a misrepresentation, as

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19 views4 pages

Contracts

This document summarizes three court cases related to mistakes of fact and misrepresentation in contracts: 1) Edgington v Fitzmaurice - The court ruled that a mistake about the purpose of a loan was material to the agreement, even if unintended, as the purpose influenced the investors' decision to invest. 2) Esso Petroleum v Mardon - The court found that failing to disclose a change in planning permission that significantly reduced projected profits amounted to misrepresentation, as it influenced the investors' decision. 3) With v O'Flanagan - When the value of a medical practice fell after sale due to the seller's illness, the court ruled this was a misrepresentation, as

Uploaded by

undisclosedlocation666
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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CONTRACTS

Edgington v/s Fitzmaurice

Purpose of taking loan was misstated.


When the investors found out the real purpose behind the loan, they wanted to
back out. They said their consensus was taken by misrepresentation. Yet, it was
actually a mistake. Is mistake of fact same as mistake of purpose?

Contention was that it was merely a state of mind.


A mistake that attracts the consensus, something which is very essential to the
contract, would be misrepresentation. If misrepresentation doesn’t lead to
consensus, then its not misrepresentationfor the purpose of this act.

Court said, this purpose is the reason for why the investors are investing the
money. Maybe it was a state of mind, yet it is material to the agreement.
State of mind is as material is as material as a persons state of digestion.

Agreement to contr

ESSO Petroleum v/s Mardon 1976 2AllER 5

The petroleum company was going to acquire a land where it was going to build
its facility. The planning authority didn’t give permission on the desired plot.
An alternative permission was given to setup the plant in a more interior
location. This would however not give as much profit as the company would’ve
got if it was on a location where more vehicles would come. The investors were
not aware of this (not communicated) and paid. The investors later found it and
said it was misrepreantion of vital facts.
Question- change of facts, does it amount to mistake of facts?
Court said yes, facts which are critical to furnishing of consensus should not b
mistaken. The projections, the profit and all came down. It was an important
consideration to invest some amount of money. Location was quintessential.
Duty was to communicate it to the investors.

With v/s O’ Flanagan 1936 1AllER 727


Estimatef balue of medical practice was 2000 pounds per annum. It was based
on the estimate of the last 3 years. The clinic was sold to plaintiff. The sale was
to be executed after 5 months. Later, the defendant fell ill and could not attend
to his patients. The value of the clinic fell along. Plaintiff found rhat it was far
below the valuation. Plaintiff said it was voidable due to misrepresentation.

Court said it was to be communicated. The plaintiff had in mind that this was
the amount of prodit he was to earn. Yet the value fell. The reason for why the
consensus was given is no longer hjere. The defendant should have
communicated, if the plaintiff still wanted to go on then its fine. There has been
a drastic change of circumstance.

2 grounds are there exceptions tp misrepresentation

1) Misrepresenation is not the vause of oncern. Even though there was


mistake, there was no bearing on the agreement or consensus. Whatevr
you said, he or she did not listen and later if found that it did have an
implication, there is no remedy.
2) The party had the means to discover the truth with ordinary diligence.
Although misrep might’ve been there, if the party was diligent then the
party was diligent.
Earlier it was caveat emptor, now more onus is on the seller. Whether the
defect is latent or patent.
The diligence required is not 100%.
Whatif the buyer found out but relies on the expertise of the seller. Then
the seller is still liable. S.17
Mere silence is not enough but when coupled with the duty to
communicate.

Statement of principle
Red Grave v/s Hurd

In india use of diligence is not important unlike UK

Case- if a man is induced to enter into a contract rhgough false rep, its not
sufficient answer to say “if you’d used due diligence youd have found out
that the report was untrue. You chose not to avail the means afforded to
you to discover tis falsity.”
- George Jessel (567 BC)
Court said that if youd used, youd have found out. Whether the man
wants to use the means, its upto him. But in India, if you had the
means to use it, that alone is sufficient. Not whether you acrtually
used it or not.

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