Issue

The legal issue which has been identified in relation the contract between Jessica and Angela is that whether the contract vitiating factor of Misrepresentation is present or not.

This section of the paper is discusses rules regarding Misrepresentation which is a contract vitiating factor.  In the case of Kalabakas v Chubb Insurance Company of Australia Ltd [2015] VSC 705 the court discussed the definition of the term misrepresentation. In the obiter dicta of this case stated that the giving of false information by a party or its agents to another party before the formation of contract, via the virtue of which the other party is induced to make the contract is termed as misrepresentation.

The case of Bisset v Wilkinson [1927] AC 177 had identified three elements which are required to constitute misrepresentation with respect to a contract. These elements are as follows

• There has to be a statement of factwhich has been made by the party not a mere puff or statement of opinion (Exceptions Apply). These provisions were also discussed in the case of Esso Petroleum v Mardon [1976] QB 801
• The statement or expression of Fact which has been made has to be false
• The party to whom such representation has been made has to be induced by itto make the contract

Smith v Land & House Property Corp (1884) 28 Ch D 7 is a case where the provisions in relation to a false statement of fact had been discussed by the court. The court in this case stated that a statement made by the plaintiff while selling his hotel that it was provided to “most desirable tenant” was a statement of facts rather than opinion as the representor knew the facts of the case. Thus the decision of the court implies that when the person making an opinion has knowledge about the truth of the matter than such opinion will account to an actionable misrepresentation.

In Edgington v Fitzmaurice (1885) 29 Ch D 459 it was clarified by the court that a statement in relation to future intention cannot be considered as  a misrepresentation of facts.  

Another important factor with respect to making a misrepresentation claim is that of inducement and reliance. The rule had been analyzed in the case of Horsfall v Thomas [1862] 1 H&C 90. In this case the court stated that once it has been indentified that a party has made a false statement of fact it is required to demonstrate that such statement had induced them to make the contract. No inducement of reliance can be established if the other party did not know about the facts.

In the landmark case of Attwood v Small [1838] UKHL J60 an exception to the rule of reliance had been provided by the court. In this case the court stated that a person who checks the validity of the statement is nit held to have relied in the statement. However in Redgrave v Hurd (1881) 20 Ch D 1 the court stated that where an opportunity was given to the other person to check a statement but he did not do so then also he can bring a misrepresentation claim by establishing reliance.  The rules of misrepresentation in South Australia are governed under the Misrepresentation Act 1972 (SA)

A Fraudulent misrepresentation is made when the representor knows the truth and a claim for damages and recession of contract can be made as per Derry v Peek (1889) 5 T.L.R. 625

Rule

Angela has entered into a contract with Jessica for the purchase of her restaurant. Prior to the contract being formed there were a few negotiations between the parties. In one of the negotiations it was provided by Jessica that the restaurant makes a profit of $10000 per year. However she had been given the opportunity to verify the account of the restaurant.  However she only checked the account for 2007. To establish misrepresentation it must be proved that there is a false statement of fact made by Jessica which has been relied by Angela to get into the contract.  As per the case of Smith v Land & House Property Corp a false statement when the person making an opinion has knowledge about the truth of the matter than such opinion will account to an actionable misrepresentation. Thus here as Jessica knew about the financial position of the restaurant being the owner the forecast of profit will be a statement of fact. It is also given that the profit was actually 2000 for the last five years. Thus the statement of fact is false. It was stated in the case of Attwood v Small that if a party had checked the statement than they are not induced. However it was also stated in Redgrave v Hurd that if the party has not used the opportunity to verify the statement they can bring a claim for misrepresentation. In this situation also an opportunity has been provided by Jessica to Angela to check the accounts but Angela has not checked the entire accounts. Thus she can establish reliance and a misrepresentation can be identified. As Jessica known about the position of the restaurant she has made fraudulent misrepresentation and a claim for damages and recession of contract can be made as per Derry v Peek.

Conclusions

Whether there is negligence done by the Cola Manufacturer and can a claim be made in relation to the recovery of losses incurred by Sandra Smith and her Husband.

Negligence is the branch of law which has been initiated for the purpose of compensating the parties who have been subjected to harm or injury because of an act or omission carried out by another person with whom no contractual relationship exists.

The claim for negligence can be made where the wrongdoing party owes a duty of care the party who has been hurt. Thus the duty of care is a primary element to establish negligence. In the case of Donoghue v Stevenson [1932] AC 562 rules to find out a duty of care had been stated by the court. In this case it had been stated by the court that a duty of care can be identified when the parties to the case are the neighbours of each other. This means that where a party can foresee that his action can hurt another person it results in a duty of care being present. In this case the person who had suffered an injury was consuming a beer in a cafe. The beer had a snail in the bottle and the person got sick. The claim was made by the person against the manufacturer. He claimed that there was no contract so no remedy is present. The court established that there was a duty of care which gives right to the party to make a claim for negligence and ruled in favour of the plaintiff.  The rule was also discussed in Grant v Australian Knitting Mills HCA 35 (1933) and recently in the case of D’Arcy v Corporation of the Synod of the Diocese of Brisbane [2017] QSC 103

Application

Another test for identifying the duty is the caparo test provided by the case of Caparo Industries pIc v Dickman [1990] 2 AC 605. The court provided a proximity test in this case whereby the party who are in close proximity have a duty of care in their relationship. The reasonable foreseeability test as implied in the case of Liverpool Catholic Club Ltd v Moor [2014] NSWCA 394 suggests that when injury can been foreseen reasonably by a party to another a duty of care is present.

The duty of care solely does not establish negligence and is required support by “breach of duty of care”.  The provisions of a breach of duty have been provided by the Civil Liability Act 2002 (NSW) and common law provisions.  At common law the objective test is best employed to indentify compliance with the duty of care provisions. The objective test or the reasonable person test is a test which is employed to analyze the standard of care which normal and reasonable man would observe in the situation where the duty is alleged to be breached. The court provided the test in Vaughan v Menlove (1837) 3 Bing. N.C. 467 and it was further applied in Corporation of the Synod of the Diocese of Brisbane v Greenway [2017] QCA 103. Provisions of section 5C of the CLA 2002 the standard of care to be taken depends upon the burden of taking precautions for avoiding the injury and the risk of harm associated with the injury.

Duty of care and breach does not in its self establish negligence and the element of causation are also needed. Causation means the stage where the party has been actually injured as such injury is results out of the breach of duty. Thus negligence can be claimed only and only when the breach of duty results in the loss. For analyzing the principles the “but for” test at common law is also popular as given by the case of Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428 and applied in Stokes v House With No Steps [2016] QSC 79.

A damage to be recovered depends upon their foreseeability of damages. Damages which cannot be foreseen and are “too remote” are irrecoverable in negligence as given in The Wagon Mound no 1 [1961] AC 388. The court in this case nullified the provisions which existed before the case that all damages which have been caused are to be compensated. 

It has been stated in the situation that Sandra has purchased a carton of cola from her local corner store. The cola had been consumed by her husband and as soon as he consumed the cola he became ill. Due to the illness large medical expenses have been borne by the family and Sandra and her husband have not been able to work. In this case it is further stated that the corner store has gone out of business due to bankruptcy. As per the case of Donoghue v Stevenson which had similar facts even where there is no contract a claim for compensation can be made for negligence. The claim will be successful if there is a duty of care, breach of the duty of care and causation of injury. The damages can be recovered if they are not very remote.  Duty of care can be analyzed by applying the neighbour principle, the caparo test and the foreseeability test. The best applicable test in this case would be the neighbour principle as the Donoghue v Stevenson has similar facts in the case. The manufacture in this case also will have the duty of care as it was found with the manufacturer in the Donoghue case as he could foresee that a defective drink can harm anyone who consumes it. The breach of duty can be analyzed by section 5C of CLA and the objective test. Here any reasonable person would not leave a cockroach in a consumable drink. In addition there was a significant risk of injury to any person where they consume a drink having a cockroach in it. Thus the duty of care is also breached by the Acne. The injury to the husband would have not been caused as per the facts if the cockroach was not present due to the breach of duty. Thus negligence is established in this situation and a claim can be made against Acne by Sandra and her husband for the damages.

Damages which cannot be foreseen and are “too remote” are irrecoverable in negligence as given in The Wagon Mound no 1. Here a reasonable person can foresee that a cockroach in the drink can cause medical condition related expenses and loss of employment. Thus the family have the right to recover the damages caused to them.

Conclusion

Damages can be claimed by the family against Acne Cola.

References

Attwood v Small [1838] UKHL J60   

Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428

Bisset v Wilkinson [1927] AC 177

Caparo Industries pIc v Dickman [1990] 2 AC 605

Civil Liability Act 2002 (NSW)

D’Arcy v Corporation of the Synod of the Diocese of Brisbane [2017] QSC 103

Derry v Peek (1889) 5 T.L.R. 625

Donoghue v Stevenson [1932] AC 562

Edgington v Fitzmaurice (1885) 29 Ch D 459

Esso Petroleum v Mardon [1976] QB 801

Grant v Australian Knitting Mills HCA 35 (1933)

Horsfall v Thomas [1862] 1 H&C 90

Kalabakas v Chubb Insurance Company of Australia Ltd [2015] VSC 705

Liverpool Catholic Club Ltd v Moor [2014] NSWCA 394

Misrepresentation Act 1972 (SA)

Redgrave v Hurd (1881) 20 Ch D 1

Smith v Land & House Property Corp (1884) 28 Ch D 7

Stokes v House With No Steps [2016] QSC 79.

Synod of the Diocese of Brisbane v Greenway [2017] QCA 103

Vaughan v Menlove (1837) 3 Bing. N.C. 467

Wagon Mound no 1 [1961] AC 388