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Thomas Witter Ltd v TBP Industries Ltd [1996] 2 All ER 573

Contract law – Misrepresentation – Sale of a business

Facts

The defendant was a conglomerate organisation that negotiated to sell a carpet company to the plaintiff. During the negotiation of the sale of the company, the defendant made a negligent representation that there would be a one-off expense of £120,000 in accounts but that this spread the cost of producing the accounts over two years rather than writing the cost off completely. The contract of sale also included a clause which stated that the plaintiff acknowledged they had not entered into the agreement on the basis of any representation or warranty made by the defendant. The plaintiff claimed for negligent misrepresentation on the basis that the statement regarding the accounts that was made by the defendant was inaccurate and the defendant attempted to rely on the limitation clause in the agreement between the parties.

Issue

The issue for the court was to understand whether the defendant could rely on the limitation clause in the contract. If the defendant could rely on the clause, this would enable them to avoid liability for the representations that they had made during the negotiation of the sale.

Held

The court found in favour of the plaintiff. It did so because the clause regarding the representation could not have effect as per the Misrepresentation Act 1967, section 1 and the Misrepresentation Act 1967, section 3 as the clause attempted to exclude all forms of misrepresentation, including fraudulent misrepresentation, from the agreement. Moreover, the court found that the clause only applied to breaches of the contractual agreement and did not apply to inducing the plaintiff into the agreement.


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