Running head: BUSINESS LAWBusiness LawName of the StudentName of the UniversityAuthor Note
1BUSINESS LAWAnswer 1IssueThe legal issue in the present factual scenario is whether there was an element ofmisrepresentation. The issue is whether Jessica has misrepresented the profits amount herbusiness is making to Angela. RuleMisrepresentation is a contract vitiating factor and the section deals with the fact that if there wasany misrepresentation or not. Kalabakas v Chubb Insurance Company of Australia Ltd [2015]VSC 705 is a landmark case dealing with the case of misrepresentation and the court in this casedefined the meaning of misrepresentation as a false statement given by one party to anotherinducing him to get into a contract. In the obiter dicta of the case, misrepresentation was definedto mean a false statement given by one party or an agent of the party. Again, in the case of Bissetv Wilkinson [1927] AC 177, the court gave out a crux definition of misrepresentation and laiddown three tests that constitute a contract within the definition of contract. The three elementsdefined by the court to mean that there was a misrepresentation by one party to another are asfollows: In cases when one party makes a statement of fact and not just an opinion, it willconstitute misrepresentation. The consideration of statement of facts to meanmisrepresentation was held in the case of Esso Petroleum v Mardon [1976] QB 801. There shall be no element of truth in the facts that the party makes to the other party andthe statements made by him need to be factually false.
2BUSINESS LAWOnce the party makes a false statement to the other party, he shall be induced intobelieving him and entering into the contract. In cases when the person to whom the opinion is expressed has means to find out thetruth, it shall not account to misrepresentation. In the case of Smith v Land & HouseProperty Corp (1884) 28 Ch D 7the claimant had purchased a hotel and the claimantinformed that one of the tenants was “most desirable” and the information came from theseller. The seller was aware of the financial condition of the tenant and knew that he wasalmost on the verge of bankruptcy. The Court held that this does not mean a statement offact under the definition of contract and it was merely an opinion expressed by the sellerwhich the claimant had opportunity to check. Again, in the case of Edgington vFitzmaurice (1885) 29 Ch D 459 the claimant had purchased shares from a company byrelying on the prospectus of the company which said that the shares shall be used for thepurpose of raising money (Taggart and Squire 2015). The company had made a falsestatement in the prospectus because in reality the money was going to be used for thepurpose of paying debts. The court in this case held that there was an actionable claim ofmisrepresentation because the company did not have any intention to use that money forexpanding purpose but was being used for recovering the financial condition of thecompany. Horsfall v Thomas [1862] 1 H&C 90 laid down the rule of truth and relianceand held that in cases when the party to whom the fact was conveyed had placed relianceon him and had entered into contract, it will be held to be misrepresentation. Australiafollows common law and is guided by the Misrepresentation Act 1972. Attwood v Small[1838] UKHL J60 held that if a person had the resources to find out the truth and had theopportunity to check the veracity of the statement, it cannot be said that he relied on the
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