Business Law: Misrepresentation and Negligence Cases

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

1BUSINESS LAW
Answer 1
Issue
The issue pertinent to the fact scenario is if there is a case of misrepresentation by Jessica
to Angela regarding the amount of profits made by her restaurant.
Rule:
The question important in the relation between Jessica and Angela is if there existed a case of
misrepresentation or not. The case that dealt with misrepresentation was Kalabakas v Chubb
Insurance Company of Australia Ltd [2015] VSC 705 which held that misrepresentation is a
false statement made by one party to the other thereby inducing him to enter an agreement. It is a
landmark case dealing with misrepresentation where the court for the first time defined the scope
and ambit of misrepresentation. The obiter dicta of the case held that misrepresentation shall
mean any statement given by one party to another which is essentially a false statement. Bisset v
Wilkinson [1927] AC 177 was another landmark judgment that held that to constitute
misrepresentation, it is important to lay down three tests and the party has to abide by those tests
to make a case of misrepresentation. The three elements of misrepresentation are as follows:
 Opinions do not constitute misrepresentation. To constitute misrepresentation, the party
has to give a fact and not an opinion. The case of Esso Petroleum v Mardon [1976] QB
801 held that opinions do not constitute misrepresentation and only facts constitute
misrepresentation.
 The statements made by the party to another party, inducing him to enter into the contract
have to be factually false and there shall be no truth in the statement made by the party.

2BUSINESS LAW
 It is important to prove that the party entering into the contract was induced into entering
into the agreement by the false statements made by the party. The party has to show that
he was induced into believing in the truthfulness of the statements.
The important thing to consider while accusing someone of misrepresentation is that the
person to whom the statements were made should have the means to check the factual
truthfulness of the statements. It can be shown that the party had the means to find out
about the facts before entering into the contract then it shall not be held to be
misrepresentation. This principle was held in the case of Smith v Land & House
Property Corp (1884) 28 Ch D 7 where there was a statement made by the owner of a
hotel that a tenant was most desirable and the seller made the statement which was
further verified by the claimant. The court held that in this case, the claimant had the
means to find out the truth about the tenant and therefore the court held that the statement
made by the seller was not misrepresentation. Edgington v Fitzmaurice (1885) 29 Ch D
459 this case dealt with a company trying to raise money by illegal means, wherein the
court held that the company was liable for misrepresentation as the purpose of receiving
money was not for expanding business but was for the purpose of recovering the financial
condition of the company. The company made false and deceptive statements on the
prospectus. Horsfall v Thomas [1862] 1 H&C 90 is an important case for the factual
scenario because court held that to claim a case of misrepresentation, the party has to
prove that there was reliance on the statement made by the other party. That is, the party
has to prove that he relied on the statements made by the party and thereafter entered into
the contract. The Misrepresentation Act 1972 deals with the cases of misrepresentation in
Australia.