Misrepresentation in Contract Law: Case of Dale, Bob and Marcy

This article discusses the case of Dale, Bob and Marcy and the issue of misrepresentation in contract law. It explains the types of misrepresentation and the remedies available for the innocent party. It also provides the application of law to the case and the conclusion based on the evidences.

Legal Case

Issue:
“Is Dale liable to compensate for damagessuffered by Bob and Marcy”
Law:
Misrepresentation
 Misrepresentation can be understood as the false statement made by one party to
another. In such case, if the other party has entered into the contract on the
grounds of misrepresentation then, such contract is considered as voidable.
 A contract is considered as voidable when the transaction is capable of being set
aside at the option of one of the party, usually the innocent party. Until this
happens,the contract is said to be legally binding on both the parties.
 The law of vitiating factors govern the setting aside of the contract for the
innocent party. These vitiating factors affect only those contracts that are genuine
in nature. Depending upon the type of misrepresentation, the party can claim for
damages or the contract may be set aside.
 Misrepresentations are of three types fraudulent, innocent and negligent
 Fraudulent misrepresentation takes place when the representor knows that the
statement being made by him is false and still, he is presenting it as true in order
to make the other party enter in to the contract. Because of this false statement,the
other party suffers damages. In such case,the other party that is the representee
can claim for damages from the represent.
 Innocent misrepresentation is undertaken when the representor does not intend to
tell lie to the representee or to deceive them. In the case of innocent
misrepresentation, the misrepresentation is made unintentionally. In case of

innocent misrepresentation, the parties affected cannot claim for damages, they
can only rescind the contract.
 Negligent misrepresentation takes place when the representor makes an honest but
false statement either negligently or carelessly. In this case of
misrepresentation,the representee can claim for damages.
 The remedies available for misrepresentation includerescission or compensation
for damages. Rescission is provided in the case of innocent misrepresentation,
whereas, compensation for damages are made in the case of fraudulent or
negligent misrepresentation.
 In this case, the innocent misrepresentation is valid as Dale has claimed that he
had no previous information related to the boat.
 Oscar Chess v Williams (1957) case can be referred for the judgement regarding
such case. In this case, the court ruled that the statements claimed by the
representor in his own knowledge can only be inferred to the contract (Law
Teacher, 2013).
Application
In the case Dale had claimed earlier that he knows the full history of boat and claimed that it
is in good condition and is a recent model whose valuation will increase in the coming year.
Whereas, this was not the case when Bob and Marcy purchased the boat and started to use it.
The boat breaks down within two months of purchase. From further investigation, it was
found that the information provided to Bob and Marcy was incomplete and the boat was used
for many years and was not in a proper condition to work further and add future valuation to
the boat. Also, the log books of the boat were falsely documented. But, after knowing this it
was claimed by Dale that he had no idea about who used the boat earlier and that the log

books were falsely documented. Also, he claimed that he honestly believed that the value of
the boat will increase in future.
On the basis of the case, it can be said that this is a case of misrepresentation in which false
information is given to one party before entering into a contract in order to make them enter
the contract. The false statement can be related to factual details related to the products, or a
fake promise, or a statement of opinion. Dale in his defence can argue that he was innocent,
as he himself did not knew about the right condition of the boat and he forwarded that
information only to Bob and Marcy which he believed was true. Therefore, in this case it can
be stated that this is the case of innocent misrepresentation as the representor did not intended
to deceive Bob and Marcy by making false claims. Innocent misrepresentation is governed by
the statutory norms mentioned under the Misrepresentation Act 1967. In order to save this
case from falling under negligent misrepresentation Dale can argue that, in negligent
misrepresentation, the representor knows the truth but negligently does not mention that to
the representor. As in this case Dale was unaware of the fact that this boat has been used for
many years and the log books were falsely documented and, therefore, it cannot be said that
this is a case of negligence. Hence, it can be said that when the negligent misrepresentation
fails innocent misrepresentation intervenes(Law Teacher, 2018).
The remedy available in front of Dale is that he can go for rescission. Rescission in simple
terms can be understood as the cancellation of the contract (Free Advice, 2018). As the loss
suffered by Bob and Marcy was not because of negligence on the part of Dale, Dale can go
ahead and say that he is not liable for any damages caused to the boat. Hence, he may not
need to pay money back to Bob and Marcy (Austlii, 2018). However, Bob and Marcy can
argue this as a case of fraudulent misrepresentation. This is because they have many
evidences that can prove that Dale deliberately provided wrong information. For instance,
Dale had fixed boat several times at his boat yard, so he was aware that boat was in poor

condition and not well maintained as claimed by him. Dale at time of selling the boat said
that boat was utilized recreationally, but in actuality it was used for racing and water stunt by
owner before selling to Martin. Having repaired boat many times, he must have been aware
of this fact, but he purposefully did not reveal this information to Bob and Marcy. Thus, Dale
to avoid paying money should prove that statements being made by him were true to his
sense and he believed them on reasonable grounds that these statements or facts were true
(Legal service Commission , 2018).
Conclusion
On the balance of probabilities, a court would most likely find Dale guilty and he will have to
pay the compensation to Bob and Marcy. This is because evidences suggest that Dale was
aware of condition and full history of the boat, but he only told partial truth to Bob and
Marcy.
References
Austlii. (2018). Sydney Law Review . Retrieved from Austlii.edu.au:
http://www.austlii.edu.au/au/journals/SydLawRw/1959/20.pdf
Free Advice. (2018). What is rescission? Retrieved from Law.freeadvice.com:
https://law.freeadvice.com/litigation/legal_remedies/what-is-rescission.htm
Law Teacher. (2013). Oscar Chess v Williams [1957] 1 WLR 370. Retrieved from
Lawteacher.net: https://www.lawteacher.net/cases/oscar-chess-v-williams.php
Law Teacher. (2018). 5.1.2 Misrepresentation Lecture. Retrieved from Lawteacher.net:
https://www.lawteacher.net/modules/contract-law/vitiating-factors/misrepresentation/
lecture.php

Legal service Commission . (2018). Misrepresentation. Retrieved from
Lawhandbook.sa.gov.au: https://www.lawhandbook.sa.gov.au/ch10s02s10.php