The scenario raises the
question of whether Shahida has entered into a valid contract with Benjamin’s
Looking Glass. For a contract to come into existence, a valid offer must be
made by one person, which is then accepted by another person. An offer must be
firm and capable of acceptance and must imply that the person making it intends
to be bound if that offer is accepted, whereas an acceptance must accept the
terms of the offer unconditionally1, and then be communicated
to the person making that offer2. If both an offer and
acceptance are found to exist then the contract will be complete and both
parties will be bound to fulfil their respective promises.
Shahida will argue that she
entered a contract with Benjamin’s Looking Glass after she purchased the painting
after the sales assistant gave his opinion on the painting being one of those
done by Hilda des Ste Croix. However, Reegan,
the sales assistant will argue that the painting actually stated that it was by
Hilda des Ste Croix, as it was unknown to him that Benjamin placed the wrong
label on the painting.
In law; a contract will contain
provisions describing the duties and obligations that each party assumes under
their agreements. Written contracts usually consist of a series of numbered
paragraphs – usually called ‘clauses’ or ‘provisions’ each paragraph would
normally be regarded as a term of contract. Although it may be made clear that
a valid contract has been made, it is still necessary to determine the extent
of the obligations it creates. The courts will usually look first at any
written document which appears to contain the agreement between parties. But it
may be that there is no written document. Alternatively, the written document
may not in fact contain all the terms of the contract.
The courts make a
distinction between statements which amount to actual terms of the contract –
which are legally binding – and mere ‘representations’ – which are not legally
binding. The claimants remedy will depend on how the statement is classified.
A representation is a
statement of fact made by one party which may induce the other to enter in to a
contract. If it turns out to be incorrect the innocent party may sue for
A term is a promise made by
one of the parties to the contract. Breach of a term of the contract entitles
the injured party to claim for damages and, if he has been deprived
substantially what he bargained for, he will also be able to repudiate the
Thus, whether the sale of
the painting was made based on representation or a term depends on an
examination of its wording and whether the sales assistant intended, by the
words he used, to influence the sale.
There are a number of
factors which the courts take into account when deciding if a statement made
before a contract is entered into should be regarded as a term or a mere
The courts will consider the
lapse of time between the making of the statement and the contracts conclusion:
if the interval is short, the statement is more likely to be a term.
The court will also consider
the important of the statement as a pivotal factor in finalising the contract.
The statement may be of such importance that if it had not been made, the
injured party would not have entered into the contract at all. For example the
case of Bannerman v White.3
The court will consider
whether the statement was omitted in a later, formal contract in writing. If
the written contract does not incorporate the statement, this would suggest
that the parties did not intend the statement to be a contractual term. In Birch v Paramount Estates4
the Court of Appeal regarded the statement as a contractual term – oral
contract was collateral with the written contract, also the defendant had
In Dick Bentley productions Ltd v Harold Smith (Motors) Ltd5
The Court of Appeal held that the claimant had no special area of expertise
so would not have been regarded as a term of the contract, however the claimant
would have relied upon the special knowledge of the defendant.
Therefore the court will
consider whether the maker of the statement had specialist knowledge or was in
a better position than the other party to verify the statements accuracy.
Many contracts are made in
express and implied terms.
Express terms are a term in
which it has been specifically negotiated by the parties in making their
agreement. If it is purely oral terms – then a question of proof i.e. evidence
as what the parties said need to be distinguished by the court to discover the
intention of the parties.
The parole evidence rule can
be exempt if it is possible to establish that the written contract is not the
whole contract. As in the Couchman v Hill6
case. The Court of Appeal held that
the plaintiff was entitled to recover damages for breach of contract. The
documents in the case, in their opinion formed not the whole but only part of
the contract, and the oral assurance could be laid side by side with them so as
to constitute a single and binding transaction.
However, if the court can
prove that the contract is not legally binding e.g. because of mistake or
misrepresentation they will not apply the rule.
It has been generally
thought that the courts implied terms in some cases to fill gaps in the express
terms, however Lord Hoffmann’s clarification of principle in Attorney-General of Belize v Belize Telecom
has explained that the implication of terms was only ever an exercise of
construction of the facts to seek the parties’ intentions.
It is only possible to imply
such a custom, if the contract is silent. If an express term of the contract
contradicts the custom, it will prevail.
Terms can also be implied by
operation of law. For example, many statutes require the courts to read certain
types of term into a contract if the parties have left it out and even in some
cases, if they specifically tried to exclude it.
Certain terms are implied in
contracts for the sale of goods under Sections 12-15 of Sale of Good Act 1979.
Most specifically, for
Shahida, section 13 of the SGA 1979 implies a term into a contract for the sale
of goods by description that the good will correspond with that description.
This term is implies whether the seller is operating a business or is an
In Harlingdon & Leinster Enterprises Ltd v Christopher Hull Fine Art
the Court of Appeal held that the sale of a painting as a ‘Gabriele Munter’ was
not a sale by description. For a sale to be by description that decription has
to be influential in the sale so that it became a contractual term of the
contract where the party had not shown that it had relied on that description.
In this case, the buyer was the specialist dealer and had inspected the painter
However, in Beale v Taylor9
demonstrates when a buyer has reasonably relied on a description, there will be
a sale by description despite that the fact that the buyer has inspected the
The courts can examine the
contract at the time of making and from that can infer the probable intentions
of the parties to distinguish the different types of terms. They may also
concentrate on the effects of the breach rather than the nature of the term
broken. If the breach of such term will substantially deprive the innocent
party of the whole benefit they were intended to derive they may terminate the
Thus, based on Shahidas
case, the courts would look at the details of the intent of sale and see that
she bought the painting merely on the representation of the sales assistant. Therefore
her claim to sue under misrepresentation would be considered.
Misrepresentation can occur
when someone has entered into a contract based on misleading information. It
can lead to a contract being set aside by the courts.
Misrepresentation is mainly
concerned with things people did or said before they made their agreement. The
parties to a contract will often say many things to one another in the course
of the negotiations. Not all of those statements will form part of their
agreement. But they may still be important because they were instrumental in
persuading one of the parties to enter in to the contract in the first place.
Not all statements made
before a contract is made will be actionable misrepresentations. The courts
require numerous conditions to be met before the injured party can sue to maker
of the statement.
The statement must be of
fact, not opinion; it must be false, but unknown to the injured party; and; it
must have induced the contract.
Often it is possible for
injured parties to prove the first two conditions but not the last. It is
therefore a very significant limitation on the extent to which parties can be
sued for misrepresentation.
For the purpose of
misrepresentation the statement can consist of words (spoken or written
statements which give a misleading impression) or using actions which give a
It is possible for a
misrepresentation to occur where someone makes a statement but leaves out an
important piece of information, which significantly changes the overall
In order to be an actionable
misrepresentation, a statement must be a statement of fact, not opinion. The
courts will generally look at whether the seller is presenting the opinion as
one which can be relied upon and which has some basis in fact.
They therefore will focus
on; whether the sell has knowledge or experience which would enable him to give
an opinion which can be relied up and whether the opinion is based on facts. In
situations where the seller clearly has no idea what he is talking about the
buyer does the statement will be regarded as opinion and will not be
The statement must be false
and the injured party must be unaware of its untruth. For example Esso Petroleum v Mardon.10
The court held that Esso had significant skill and experience in determing
the income from petrol stations and should have been able to produce more
realistic figures for Mardon to understand.
If a person has made a
statement during the negotiations but a change of circumstances later occurs,
which means that the statement is no longer true, then that person is under
obligation to disclose the change. If he fails to do so, then his originally
accurate statement will become a false statement – and could therefore be an
A misrepresentation will not
be actionable unless the injured party can show that it induced them to enter
into a contract. Therefore the statement must be something which acted on the
mind of the injured party at the time they were thinking about entering in to
the contract. If they were unaware of the statement, or if they would have
entered into the contract anyway, regardless of the misrepresentation, then
they cannot sue the maker of the statement.
However like JFB Fasteners v Marks Bloom & Co11
found out, the burden of proof lies with the injured party. Therefore it is up
to the injured party to show that the statement induced them into the contract.
However the courts will be
sceptical of claims that false statements relatively led a person to enter in
to a contract.
In this case, the defendant
could claim innocent misrepresentation as section 2(2) Misrepresentation Act
1967 states that ‘the person responsible for the misrepresentation genuinely
believed that the statement was true and had responsible grounds for doing so’.
However, when the person
responsible for the misrepresentation has not set out to deceive the other
person, but has negligently failed to exercise the required degree of care and
skill in making it, there are two ways to claim. Either under common law or
Under common law, success
depends upon the proof a special relationship existing between the parties,
where the person making the negligent statement owed a duty to the other party
to ensure that the statement was accurately made. Such duty can rise in a
commercial relationship where the representative has some special
representative will, and in fact does rely on the representation. There must be
sufficient proximity between the two parties that it is reasonable to rely on
Under section 2(1)
Misrepresentation Act 1967, the provision does not require the representee to
establish a duty of care and reverses the burden of proof. Once a party has
proved that there has been a misrepresentation, which induced him to enter into
the contract, the person making the misrepresentation will be liable in damages
unless he proves he had reasonable grounds to believe and did believe that the
facts represented were true.
The main remedies for
misrepresentation are rescission of the contract and/or damages.
Rescission is available for
all types of misrepresentation.
misrepresentation are based on the tort of deceit. This allows all losses to be
recovered, which occurred as a direct result of the misrepresentation,
regardless of whether they were foreseeable or not.
Until the introduction of
the Misrepresentation Act 1967, rescission was always possible for all types of
misrepresentation. But damages could only be claimed for a misrepresentation
which induced a contract where fraud was involved. However Section 2(1) of
Misrepresentation Act 1967 states that ‘damages
may be claimed for any misrepresentation as if the misrepresentation had been made
fraudulently – except where the person responsible for the misrepresentation can
prove that he had reasonable grounds for believing that the misrepresentation was
If the person who made the representation
can prove that he had reasonable grounds for believing the truth of what he said
then Section 2(2) of the Misrepresentation Act 1967 says that damages may still
be awarded if the court is not prepared to all rescission.
Based on the above information,
it is believed that Shahida could be awarded damages for her claim for negligent
misrepresentation. Although the sales assistant can counterclaim that his statement
was on his grounds believed to be true, he could have taken further measures to
ensure that the information he was giving was correct. Thus, Section 2(2) of the
Misrepresentation Act 1967 can be quoted due to the fact that there is no contract
to rescission, just the claim for the damages lost due to the painting not being
the full worth that Shahida paid for.
Hyde v Wrench (1840) 3 Beav 334.
Entores v Far Eastern Miles Corp 1955 2 QB 327.
(1861) 10 CB (NS) 844
(1956) 16 EG 396
1965 1 WLR 623
1947 1 All ER 103
Attorney-General of Belize v Belize Telecom Ltd 2009 UKPC 10
1992 1 QB 564
1967 1 WLR 1193
1976 2 All ER 5
1983 1 All ER 583