Contract Law: Negligent Misstatement and Frustration of Contract

Running head: CONTRACT LAW
Contract law
Name of the Student
Name of the university
Author Note

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Part A
ISSUE
Alexia, who is a developer, owns a large tract of land between Ipswich and Toowomba.
She wants to develop a township by the name Torrensvillle and therefore submits a development
application to the local council. Alexia is concerned that her land should not be used for the
freeway which shall pass her land and clearly mentions that in her development application. The
council clerk advices that the freeway will not be resumed. Alexia takes his words seriously and
believes him. Later, she gets her development application approved from the council but the
verbal statement of the clerk finds no mention in the signed agreement. The written statement has
no mention of the resumption. After the work progresses and building commences, the inspector
comes to the site and says that there will be a resumption of the 24 blocks of land bordering on
the road. By the resumption, Alexia is afraid she will incur huge loss and as a result contemplates
suing the council.
RELEVANT LAW/RULE
The parties are governed by tort law. The parties are governed by tort law, more
specifically negligent misstatement arising out of the misinformed advice of the clerk. As has
been held in the Shaddock v Parramatta case, there lies a case of negligent misstatement, which
is a special kind of tort (Roberts 2017). Byrne & Co. Ltd. V Heller & Partners Ltd and Mutual
Life and Citizens’ Assurance Co. Ltd. V Evatt, it was decided that there lies a case of liability in
case of any financial loss that occurs due to any misstatement.
Tort is a civil wrong committed by one party on the other resulting as a result of an omission or
failure to perform a promise (Kysar 2017). Tort is a wrongful act giving rise to a remedy to claim

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damages. Misstatement is a false statement which has been made without taking proper
consideration of facts. A misstatement is a negligent statement not made carefully and which has
the capability to mislead anyone. Misstatement can be in the nature of fraudulent misstatement
and non fraudulent misstatement. Negligent misstatement is given by a party who seemingly has
more knowledge or expertise on a party to a party who doesn’t possess any knowledge in that
regard (Barker 2015). A person in legal terms has a duty of care to the other party because based
on his words; the other party takes an action only to face loss in the future.
Legal duty of care: Any person giving any advice to another party owes a duty of care to impart
any information which any prudent man would give (Goldberg, Sebok and Zipursky 2016).
Legal advice is owed to the plaintiff and he has to prove that based on someone’s knowledge and
skill, any decision was taken which resulted in the loss. Negligent misstatement is only
actionable in court if it can be proved that there has been a breach of the legal duty of care which
gave rise to damage (Best, Barnes and Kahn-Fogel 2018).
Damage: The person committing the tort is called the tortfeasor. The tortfeasor has to have a
legal duty of care and by abiding by those advices; the plaintiff has to show that he has suffered
economic loss. Based on the person’s advice, if the plaintiff can prove that he entered into a
contract that made him liable or suffer loss, there can be a case of negligent misstatement
(Ferrara et al. 2016).
Reasonable foreseeability: The principle of reasonable foreseeability helps infixing liability. It
needs to be proved that the wrongdoer had an intention to cause harm and had made the
statements negligently. The alleged wrongdoer has to prove that he did not foresee the alleged

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harm (McDonald 2015). The plaintiff has to show that he took the decision based on the
wrongdoer’s statements and did not have any knowledge of the loss he could have incurred.
APPLICATION
Shaddock v Parramatta City Council (1980-81) 150 CLR 225 is a landmark Australian
court judgment which discusses the liability in case of negligent misstatement. The landmark
judgment deals with duty of care and negligent misstatement and lays the principle of liability
(Thyagarajan 2014). In simple words, the judgment says that whenever a person is trusted with
some information or advice, he should give the advice to the best of his knowledge. Whenever
the speaker gives any information knowing that the other party will act on act, he is duty bound
to give information to the best if his skill and shall not give any false or misleading information.
Byrne & Co. Ltd. V Heller & Partners Ltd. held that any financial loss arising out of any
misstatement makes the informer liable for the loss even though there was no contractual relation
between them (Campbell 2016).
Applying the above mentioned principle as laid down by the landmark Australian case, it
can be said that the clerk of the council owed a duty of care and gave Alexia information
knowing very well that it will be taken into consideration by Alexia. Alexis trusted the clerk
because of the position he holds and believed that due to the position he holds in the council’s
office, he will have the knowledge and therefore trusted him. Alexia trusted the clerk with the
information and therefore carried on with the construction. Based on the advice of the clerk,
Alexia commenced construction and did not anticipate that there will be a resumption of 24