Katharine's Misrepresentation Claim Against Northeby

This assignment involves a scenario where Katharine purchases two paintings labeled as 'original Renoir' from Northeby, only to discover they are worth $200,000, not the initial price of $400,000. The seller's misrepresentation and Katharine's reliance on it lead to a dispute over contract validity and liability. This assignment requires applying case laws such as Derry v Peek, L'Estrange V Graucob, and Thornton v shoe lane parking ltd to determine the outcome, including whether Katharine can rescind the contract and return the paintings at the purchase price.

Running head: BUSINESS LAWS
Business Laws
Name of the student
Name of the university
Author note

1
BUSINESS LAWS
Answer 1
Issue
The issue which has been determined by reviewing the facts of the case study is that
whether Sam has the right to set aside the contract which he has got into with Patrick for the sale
of his business.
Rule
There are various situations which have been provided by contract law through which the
party has the right to set aside an existing contract. The term “set aside” a contract means the
bringing of a contract to an end. The ways in which a contract can be set aside include the
situation of a contractual mistake, duress and under influence.
According to McKendrick (2014) the situation of undue influence takes place when a
dominate parry influences the mind of a weaker party to a degree that the weaker party is not
able to indulge in the process of making a decision in an independent manner. Thus a party who
has entered into a contract which has the element of undue influence to it has the right to make
the contract voidable at his or her option. The victim has the right to set aside the contract only in
a situation where he acts in a prompt manner where he has realized that he was subjected to
undue influence. In situation where the party is found to have delayed or accepted the situation
then the court may refuse to set aside the contract.
The issue of undue influence comes to light only in situation where the parties to the
contract are in a special relationship. One of the parties to the contract who is the dominant party
possesses a special knowledge, position or skill which makes the weaker party to place his trust
and confidence on the dominant party. Few examples of such relationship is that of doctor and
patient or lawyer and client.

2
BUSINESS LAWS
The party who has made a claim in relation to undue influence has to make it clear before
the court that in the given situation there was scope for domination by the other party. Undue
influence is easy to provide in situation where a special relationship exists between the parties. It
is presumed by the law that in contract which is favorable with respect to the dominant party
undue influence has taken place. Where there is no special relationship undue influence can also
be provided if the weaker party is able to show some desperate situation he was in when the
contract was formed such as desperate need to keep friendship.
In situation where it has been shown by the party the element of undue influence may be
present than it is the duty of the dominant party to show that no pressure had been exerted.
In the case of Barclays Bank plc v. O’Brien , [1993] 4 All E.R. 417 it was held by the
court that the bank is not able to claim the house which was provided a guarantee for loan in
situation where the property was jointly owned by the spouse of the creditor and she signed the
mortgage document without explanation or legal advice.
On the other hand in the case of Bank of Montreal v. Duguid (2000), 185 D.L.R. (4th)
458 where there was no history of confidence and trust placed by the wife on the husband while
decision making element of undue influence was not satisfied.
Application
In the given situation it has been provided that there was a string trust and confidence
which Sam had on Patrick in form of both a manager and a friend. However the relationship
cannot be treated as a special relationship. However a claim from undue influence can be made
where there is no special relationship present between the parties.

3
BUSINESS LAWS
This happens where the weaker party had been subjected to a desperate situation.
According to the fact of the case Sam was in a desperate situation as he wanted to ensure the his
friendship with Patrick is not hampered and his business would not be able to run without Patrick
who threatened to resign if the contract was not formed. In addition the contract which has been
formed is in favor of Patrick who is the dominant party and thus the element of undue influence
may exist. Through the application of the above discussed cases it is clear that an undue
influence claim can be brought where the weaker party actually had placed trust and confidence
on the dominant party. In this situation there was clear history of Sam placing trust and
confidence on Patrick.
Conclusion
Thus the contract may be sent aside upon making a claim for undue influence.
Answer 2
Issue
The issue in this case is that whether Katharine can make a successful claim for
misrepresentation against Northeby (seller) and what are the remedies she may have in relation
to the claim
Rule
The concept of misrepresentation takes place where one of the party to the contract relied
upon the untruthful or misleading representation made by the other party to get into a contract.
The concept of misrepresentation is dealt under both tort and contract law. When an untrue
statement has been made in a negligent and intentional manner they can be processed under torts
and where the element of innocence is present the law of contract is applied.
The party is provided the right to rescind the contract where material misrepresentation in
relation to the terms whether the misrepresentation is negligent, innocent or fraudulent in nature
as provided through the case of Museprime Properties v Adhill Properties [1990] 36 EG 114.

4
BUSINESS LAWS
In the case of Bisset v. Wilkinson (1927) AC 177 it had been ruled that a claim of
misrepresentation can only be sustained where the party had actually put its reliance on the
material representation made by the other party to get into the contract.
In the case of Nottingham Brick & Tile Co. v Butler (1889) 16 QBD 778 it had been
ruled by the court that the a party to the contract is not allowed to only reveal partial truth in
relation to a material fact. Therefore a statement in which the party has failed to reveal the entire
truth to the other party is considered as a misrepresentation.
In case of Derry v Peek (1889) 14 App Cas 337 the court had provided a judgment where
it was signified that where the party has committed misrepresentation in an intentional and
fraudulent manner the other party has the right to set aside the contract as well as claim damages
for any loss which has been incurred by them due to getting into the contract.
In the case of L'Estrange V Graucob [1934] 2 KB 394 it had been held by the court that
where a term of the contract has been incorporated through signature the term is actually binding
on the parties irrespective of their awareness in relation to the term.
On the other hand it has been stated in the case of Thornton v shoe lane parking ltd
(1971) 2 QB 163 that where a party has attempted to incorporate a term which is unusual such as
a limitation of liability term it has the duty to ensure that the other party must have been made
aware about such terms unless the term is incorporated by few other exception to this rule such
as industrial customs. Where the party has failed made the other party aware of the term the
exclusion clause is held not be incorporated into the contract in a legal manner.

5
BUSINESS LAWS
As per the case of Addis v Gramaphone Company (1909) damages are provided to the
parties to the contract to restore the position of the party which it was in before the contract was
created.
Application
In the given situation it has been provided that Katharine has purchased 2 painting which
had been labeled as original “Renoir” at a price of $400000. It was provided that the paintings
are worth $600000 prior to the auction by the seller. However upon inspection it had been found
that the paintings were worth $200000 as they had not been entirely made by Renoir. In this case
it is clear that the seller has made a material misrepresentation. Katharine had relied on the
representation to get into the contract. Further as per the case of Nottingham Brick & Tile Co. v
Butler as entire truth had not been revealed the seller is still liable for misrepresentation. As the
misrepresentation was not fraudulent Katherine only has the right to set aside the contract.
There was an exclusion clause in the contract which provided that the seller according to
which the buyer is not entitled to make any other claims other then returning the items within 15
days for a refund. In addition they do not guarantee the authenticity of the paintings. The clause
was present behind the ticket which Katherine had brought to take part in the auction. Applying
the principles of the Thornton v shoe lane parking ltd case it can be stated that as the clause
was not brought to the attention of Katherine it has not been incorporated in a proper manner.
Thus the clause is invalid and not effective.
Conclusion
Katherine has the right to rescind the contract and return the paintings at the purchase
price to Northeby due to their misrepresentation. The exclusion clause is not validly
incorporated.

6
BUSINESS LAWS
References
Addis v Gramaphone Company (1909)
Bank of Montreal v. Duguid (2000), 185 D.L.R. (4th) 458
Barclays Bank plc v. O’Brien , [1993] 4 All E.R. 417
Bisset v. Wilkinson (1927) AC 177
Derry v Peek (1889) 14 App Cas 337
L'Estrange V Graucob [1934] 2 KB 394
McKendrick, Ewan (2014). Contract law: text, cases, and materials. Oxford University Press
(UK),.
Museprime Properties v Adhill Properties [1990] 36 EG 114
Nottingham Brick & Tile Co. v Butler (1889) 16 QBD 778
Thornton v shoe lane parking ltd (1971) 2 QB 163