Application of Misrepresentation and Consumer Laws in Business Law

Running head: BUSINESS LAW
Business Law
Name of the student
Name of the university
Author note

1
BUSINESS LAW
Answer 1
Issue
Whether the agreement which had been formed between Rajeev and Vicky for the sale of the
café Best espresso valid or not
Rule
A contract is a document which is formed between two parties with mutual consent. A very
important requirement of the formation of a contract is that the contract has not been formed
between the parties with free consent.
The consent which is provided in relation to a contract can only be regarded as a free consent if it
does not have any element of undue influence, misrepresentation, unconscionable conduct,
coercion or duress involved in it.
The issue which has been identified above after analyzing the case study can be resolved through
the application of law relating to misrepresentation.
Misrepresentation has been defined as a false statement of law or fact which induces the other
person also known as the representee to get into the contract. In situation where a statement
which has been made during the negotiations between the parties is categorized as a
representation instead of a term of a contact and the statement has turned out to be untrue by an
auction of misrepresentation may be available.
When a misrepresentation is made the contract in context becomes voidable which means that
the representee may set aside the contract on his options. The remedy which is available to the
party in case of misrepresentation depends upon the kind of misrepresentation which has taken
place. However in general terms the remedy of recession and damages is only provided.
In the case of Bisset v Wilkinson [1927] AC 177 it had been stated by the court that
misrepresentation takes place where a false statement has been made in relation law or facts
rather than mere estimate of future events or opinion.
However it has been provided in the case of Smith v Hughes (1871) LR 6 QB 597 as well as the
case of Walters v Morgan (1861) 3 DF & J 718 that being silent in relation to a specific
situation cannot be considered enough to prove misrepresentation. On the other hand an
exception to this rule has been provided through the case of HIH Casualty and General
Insurance Ltd v Chase Manhattan Bank [2003] UKHL 6. In this case it had been stated by the
court that where it is the duty of the representor to disclose all the material facts in relation to the
contract if such facts are not disclosed it accounts to misrepresentation.
In addition it has been stated in the case of With v O'Flanagan [1936] Ch 575 that silence can
be considered as a misrepresentation when if the statement which has been made has become

2
BUSINESS LAW
untrue because of some latter circumstances and the representor does not notify the representee
in relation to such circumstances.
In the case of Horsfall v Thomas [1862] 1 H&C 90 it has been provided by the court that when
the person making the representation does not know that the representation which is being made
by him is false then the situation accounts to a fraudulent misrepresentation. In such situation the
party only has the right to rescind the contract. In case of negligence or fraudulent
misrepresentation the injured party may also claim consequential damages.
Application
In the given situation it has been provided through the facts of the case study that Rajeev
has entered into a contract with Nicky for purchasing his café. When he purchased the café he
saw that there were 6 chairs outside and 7 chairs inside which could incorporate total of 5
customers. In the given situation through the application of the above discussed case in relation
to misrepresentation it is clear that there has been misrepresentation in the case. This is because
Rajeev had relied in the sitting arrangement outside and inside to purchase the café and it was the
responsibility of Nicky to let him known that the outside sitting arrangement was illegal.
In addition it has been provided in the case of HIH Casualty and General Insurance Ltd v
Chase Manhattan Bank. In this case it had been stated by the court that where it is the duty of the
representor to disclose all the material facts in relation to the contract if such facts are not
disclosed it accounts to misrepresentation. Thus in this case the loss which has been incurred by
Rajeev due to the misrepresention of Nicky as the council has asked him to remove the chairs
from outside has to be compensated by Nicky and Rajeev can rescind the contract.
Conclusion
Although a contact has been formed between the parties it can be rescinded by Rajeev
because of misrepresentation.
Answer 2
Issue
The issue which has been identified is that can Rajeev use consumer laws in relation to the facts
provided by the scenario.
Rule