Corporation and Business Law

This document discusses legal issues and negligence in the context of corporation and business law. Part A examines the legal issue of misrepresentation, while Part B discusses negligence and the duty of care. The document provides relevant case law and applies it to the given situations. The subject, course code, course name, and college/university are not mentioned.

Running head: CORPORATION AND BUSINESS LAW
Corporation and Business Law
Name of the Student
Name of the University
Author Note

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Part A
Issue
Whether legal issue has been raised by the situation.
Rule
Misrepresentation implies a statement relating to law or a material fact that has an
influenced the consent of a party involved in the contract to enter into the contract, which is
false and misleading. In case the offer contains any representation forming part of the
contract and the same has been proved to be misleading or untrue, the same can be
considered to be a misrepresentation. Misrepresentation can be of three kinds namely,
innocent, fraudulent and negligent misrepresentation. The law relating to misrepresentation
has been discussed in the case of Seddon v The North Eastern Salt Co Ltd [1905] 1 Ch 326.
A contract obtained by way of misrepresentation may yield two options in favour of the
party whose consent was so obtained. The aggrieved party may either rescind the contract,
seek damages or ratify the contract.
Misrepresentation must include a false statement regarding a fact, which is material to the
contract and forms an essential part of the contract. The same can be illustrated with the case
of Bisset v Wilkinson [1927] AC 177. In this case, it was held that to bring an action against
misrepresentation, the aggrieved party must prove that the statement must be of a fact which
is essential to the contract and would not include a statement of a fact which is collateral to
the contract. An opinion related to the contract, which does not form the part of the contract
and is remote to the purpose of the contract will not be rendered to be a material fact relating
to a contract. A misstatement of the same will not amount to misrepresentation. The same can
be illustrated with the case of Esso Petroleum v Mardon [1976] QB 801. In this case a

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misstatement of a future sales projection was not considered to be a material fact. However,
misleading statement regarding a statement of law is not regarded as misrepresentation as
was decided in the case of Pankhania v Hackney [2002] EWHC 2441. In this case, it was
held that an action for misrepresentation cannot be brought for misstatement of a law.
However, mere silence towards a fact relating to the contract will not imply
misrepresentation. A person assuming a silence to be a statement of a fact would not incur a
right of misrepresentation based on the assumption. This rule has been applied in the case of
Smith v Hughes (1871) LR 6 QB 597. In this case, it was held that a silence regarding a fact
cannot be regarded as misrepresentation. Again, in case the contract requires one of the
parties to rely his consent upon the statements made by others, then the disclosure of all the
material facts needs to be made and failure of the same would amount to misrepresentation.
This can be explained by the case of HIH Casualty and General Insurance Ltd v Chase
Manhattan Bank [2003] UKHL 6. In case of contracts where one party requires to base his
consent to the contract upon another parties disclosed facts, then suppression of any material
fact will be considered to be misrepresentation.
Application
In the present situation, Sunnybank Pty Ltd entered into a contract with John Gravatt to
sell his restaurant to him. The contract was entered into by the parties based on the facts
provided by Sunnybank Pty Ltd. Therefore, it can be stated that if any statement has been
made by the Sunnybank Pty Ltd, which is false or untrue, then the same will amount to
misrepresentation and will provide John Gravatt with a right to bring an action for
misrepresentation. In such an event, John Gravatt will have an option of either rescinding the
contract or claim damages for the same. In case of his failure to take an action, the contract

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will be ratified. The same can explained with the rule as was established in the case of
Seddon v The North Eastern Salt Co Ltd [1905] 1 Ch 326.
In this case, Sunnybank Pty Ltd. has inspected the restaurant before entering into the
contract purchasing the same. He has counted twelve tables with four chairs inside the
restaurant and six tables with two chairs each outside the restaurant located on the footpath.
He assumed the tables included in the restaurant. And Sunnybank Pty Ltd has not made any
statement about the same. In this case, John Gravatt has not based his decision upon the
statements made by Sunnybank Pty Ltd. he had the chance of inspecting the same and he
availed the chance. John Gravatt has based his decision upon the inspection made by him.
Therefore, the requirement of misrepresentation, which requires the consent to the contract to
be based upon the misstatement was not present in the instant situation.
In this situation, the consent of John Gravatt accepting the contract was not depended upon
the disclosures made by the Sunnybank Pty Ltd regarding the restaurant. In addition to that,
an inspection of the same had been carried on by John Gravatt, which rules out the contention
regarding the dependency of consent on the statements made by the Sunnybank Pty Ltd.
Moreover, there was no element of misstatement present in the statements made by
Sunnybank Pty Ltd. Sunnybank Pty Ltd was silent about the tables and chairs on the footpath
to be unauthorised by the local council and the same needs to be removed. This amounts to
silence on the part of Sunnybank Pty Ltd and not misstatement of fact, as Sunnybank Pty Ltd
has never stated anything regarding the authorisation of those tables and chairs on the
footpath. They has just remained silent about the same. And applying the rule stated in Smith
v Hughes (1871) LR 6 QB 597, it can be stated that mere silence cannot be treated as a
misstatement and cannot be considered to be a misrepresentation. Again, as John Gravatt had
a chance to make inspection, he should also have inspected the authorisation of the local
authority. Therefore, this creates no legal issues.

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Conclusion
No legal issue has been raised by the situation.
Part B
Issue
Whether Henrietta has any claim against the firm for mental distress and upset.
Rule
Negligence implies a tort, which has been caused when a person have a duty of care fails
to exercise that care causing harm to another person. The concept of negligence has evolved
from the notion that a person must act in a careful way while exercising his duties. If a person
acts in a careless manner causing harm to another, the aggrieved person may bring a suit
against the other person for failing to exercise his duty of care.
The aggrieved person may claim damages from the person whose negligent act caused the
damage. The damage caused by the negligent act may be a loss of property, physical injury,
mental distress or economic loss. To bring an act under the purview of negligence the
following requirements needs to be present:
 There must be duty of care incurred by the person causing the negligent act. A duty
must have been imposed upon the person acting negligently. The same can be
illustrated with the case of Caparo Industries PLC v Dickman [1990] UKHL 2. In
this case a threefold test for determining the duty of care was introduced. The test
requires the harm to be probable, there must be a proximate relation between the
person actin negligently and the person suffering for such act and the imposition of
a duty is fair, reasonable and just in such a case.

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 The duty, thus, incurred must have been breached by the person who has the duty
to exercise care. When the person on whom the duty of care is imposed, exposes
another person to a loss and risk, he is said to have acted negligently. The same can
be explained with the case of McHale v Watson [1966] HCA 13. However, if the
probability of loss or risk has been foreseeable by a reasonable person, then the
same will not amount to negligence. The same can be illustrated with the case of
Bolton v. Stone, [1951] A.C. 850.
 The negligent act must be the reason for the loss or injury caused to the aggrieved.
A negligent act and loss or injury remotely related are not enough to bring an act
under the purview of negligence. The injury must have been caused by the
negligent act of the person acting negligently. In the case of Tubemakers of
Australia Ltd v Fernandez (1976) 10 ALR 303, it was held that the damages are a
direct result of the negligent acts of the defendant and is not remotely related to the
same.
 The person aggrieved for the loss caused to him must prove that he had suffered a
pecuniary loss. However, in case the plaintiff is not able to furnish any pecuniary
loss that has been caused he may still claim nominal damages. However, emotional
distress may also leads to an action under tort law. In some opinion emotional
injury is actionable only if the same is accompanied by a physical or pecuniary
injury. But in the case of Kavanagh v Akhtar [1998] NSWSC 779, it was held that
damages for negligent act can be claimed even if the injury caused is purely
emotional and does not accompany a pecuniary loss.
Application
In this present situation, Henrietta has engaged the firm to relieve her from the nuisance
caused to her by a former male friend by obtaining an injunction. This creates a duty for the

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firm to exercise due care regarding the person they are providing to help her. The firm has a
liability to act diligently while assigning an efficient solicitor to her. The firm by entering into
the agreement of providing the legal help owes a degree of care ensuring quality help to
Henrietta. Therefore, the first requirement of negligence that requires a duty of care is
present, which the firm needs to ensure while providing their services. The same can
explained applying the rule as has been laid down in the case of Caparo Industries Plc v
Dickman [1990].
The firm assigned an unqualified litigation clerk to Henrietta to help her with the
injunction. The clerk was known to be incompetent to the firm. Moreover, the clerk assigned
was not qualified enough. This was a breach of duty that the firm had committed while
assigning a clerk incompetent to assist Henrietta on the required matter. The firm had a duty
of care to ensure efficiency to Henrietta, which it had failed to ensure by assigning her with
an incompetent clerk. In addition, the clerk was inefficient that added to the breach. This can
be explained with the case of McHale v Watson [1966] HCA 13.
The firm’s failure to ensure a competent legal advisor to the Henrietta has caused a
tremendous agony to Henrietta. The clerk, they have provided has caused an embarrassment
to Henrietta for a period of eleven years. This can be pointed to the requirement of negligence
that needs the injury caused by the negligent act of one person. The proximity of the
negligent act and the injury is evident in this situation. This is owing to the reason that the
mental agony that has been caused is a direct result of the assigning of an incompetent clerk
to assist her. This can be explained with the rule laid down in the case of Tubemakers of
Australia Ltd v Fernandez (1976) 10 ALR 303.
The injury caused to Henrietta is a mental distress and upset. But to bring an act under the
purview of negligence the injury must be pecuniary, physical or emotional accompanied by

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physical or pecuniary one. This would rule out the possibility of negligent act, but by
applying the principle laid down in the case of Kavanagh v Akhtar [1998] NSWSC 779, it
can be concluded that an action against a negligent act can be brought based on emotional
distress. Hence, the present situation comes under the purview of negligence.
Conclusion
Henrietta has a claim against the firm for mental distress and upset.

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Reference
Bisset v Wilkinson [1927] AC 177
Bolton v. Stone, [1951] A.C. 850
Caparo Industries PLC v Dickman [1990] UKHL 2
Esso Petroleum v Mardon [1976] QB 801
HIH Casualty and General Insurance Ltd v Chase Manhattan Bank [2003] UKHL 6
Kavanagh v Akhtar [1998] NSWSC 779
McHale v Watson [1966] HCA 13
Pankhania v Hackney [2002] EWHC 2441
Seddon v The North Eastern Salt Co Ltd [1905] 1 Ch 326
Smith v Hughes (1871) LR 6 QB 597
Tubemakers of Australia Ltd v Fernandez (1976) 10 ALR 303