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According to the Scenario

Info: 2445 words (10 pages) Essay
Published: 8th Aug 2019

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Jurisdiction / Tag(s): UK LawNew Zealand Law

To CT manager:

The first problem area of contract law will be representations and terms. A mere representation is a statement which may encourage one party to made a contract but not itself part of a contract and a term is a promise undertaking that is part of a contract. If a representation proved to be untrue that can give a rise to an action for misrepresentation. If the statement is a term, this can give rise to an action or breach of a contract.

There are few tests to determine whether the statement is a term or representation. Firstly, how important the statement was? (Bannerman v White 1861) [1] . Despite the fact that the plaintiff is well-known, a musician’s performance in a show is very important which could affect the entire career life. He might not choose the venue with the best facilities but at least a fine one, so the statement of the manager, who is seen as the representative of the venue, that ‘the acoustics are suitable’, is very important. The audience allowance is also inevitable which it could reflect the popularity of the performance, 4000 people is far less representative if the performance has potential of having 5000 people.

Secondly, when was the statement made? In Routledge v McKay 1954 [2] , two weeks passed between the statements was made and the bought of the bike, the court therefore held that the statement was merely a representation, not a term. In the scenario, the time has been specified by the words ‘during negotiations’, though not very obvious. A reasonable man would think that ‘during negotiations’ is going to take quite a time to finish, for example, one week, two weeks or even more. Therefore we could assume that the contract was signed after a period which is a representation.

Thirdly, the knowledge or expertise of the parties which falls into two parts, from expert to non-expert in Dick Bentley Prodns v Harold Smith Motors 1965 [3] where the court held that was a term; and from non-expert to expert in Oscar Chess v Williams 1957 [4] where the court held that was merely a representation. In the scenario, it is an expert to non-expert situation because even the plaintiff is good at musical instrument; he is probably new to the venue (CT) as well the acoustics quality in there. And therefore the plaintiff is likely to believe the manager’s statement. However, under the analysis above, the contract was not signed at the time of the statement made; therefore the statement was not a term of the contract but a mere representation. (Routledge v McKay 1954) [5]

The manager had not assured or promised anything with the plaintiff and therefore it was not a contract condition (Couchman v Hill 1947) [6] ; and would not amount to a collateral contract because the manager had not offered any inducement to plaintiff to enter a contract by expressly or impliedly promising that if the plaintiff enters the main contract he will gain some extra benefit. (City and Westminster Properties v Mudd 1959) [7]

Under the above analysis, the statement is likely to be a representation; however, it is untrue because ‘only 4,000 are admitted’ to the theatre and the acoustics were not ‘suitable’ for the performance because they were ‘so bad’. It then goes to another area of contract law, misrepresentations.

An operative misrepresentation is one where there must firstly involve a false statement (either paper or oral).

In the scenario, the manager had made a clear statement orally that ‘the theatre will hold 5000 people and the acoustics are suitable’ which is not an opinion like Bisset v. Wilkinson 1927 [8] but a representation of fact like Smith v. Land and House Property Corpn. 1884 [9] because in a high position like manager, he knew that how many people is allowed to be in the theatre. The wording ‘suitable’ is also untrue because the acoustics were so bad and made many of the audience asked for a refund. Therefore it is a misstatement of fact which opposed to promise of future action.

If false statement had no effect upon the mind of the person to whom made (representee) he will have no remedy (Horsfall v. Thomas 1862) [10] . In the scenario, the plaintiff was likely to rely on the statement before making his decision while he had negotiated with the manager; and as a reasonable person, probably no one would make any decision to something without knowing anything on it. Therefore the manager’s statement had effect on the plaintiff’s mind.

There are three types of misrepresentations. The first one is fraudulent misrepresentation which means a false statement “made knowingly, or without belief in its truth, or recklessly, careless whether it be true or false.” (Derry v. Peek 1880) [11] In the scenario, the only fraudulent part is the acoustics performance because the manager was likely to know whether the acoustics were ‘suitable’ or not and did not tell the plaintiff the truth. However, the allowance of people’s entry was likely a negligent misstatement.

In Hedley Byrne & Co v. Heller & Partners (1963) [12] , the court held there were circumstances in which an action would be for negligent misstatement in which occasioned loss. In the scenario, the capacity of the theatre was 5000 people according to the manager’s statement, however, because of the public safety reason, only 4000 people were admitted. In other words, the manager did not know whether it was true or not and should have checked before making the statement (Esso Petroleum v. Mardon 1976) [13] . Thus it was a negligent misstatement.

The burden of proof reversed, means that the representor has to disprove negligence otherwise he is liable under the Misrepresentation Act 1967 S2 (1), where person enters into a contract after misrepresentation made to him and he has suffered loss; person would be liable if misrepresentation had been fraudulent; person will be liable unless he proves (i) he had reasonable grounds for believing; and (ii) did believe up to time contract made, that the facts represented were true which means the innocent misrepresentation (Hedley Byrne v. Heller) [14] .

The above analysis has shown that there was a misrepresentation in both negligently and fraudulently. There are two types of remedies which are rescission and damages.

Rescission aims to set the contract aside and put the parties back in the position they were in, before the contract was made. A decision to rescind must be made within a reasonable time and communicated to representor (Car and Universal Finance Co v. Caldwell 1964) [15] . However, it is not an option if one of the limits satisfied. They are: when the injured party affirm the contract to continue; lapse of time where it has been too long to claim the rescission (Leaf & International Galleries 1950) [16] ; restitutio in integrum impossible (Vigers v Pike 1842) [17] ; and injury to third party where if an innocent party suffer a loss. In the scenario, the performance of the plaintiff had already finished and his reputation, which is not possible to change it back, has already been harmed. Therefore in this situation, rescission could not be an option (restitutio in integrum impossible).

The plaintiff will be able to sue for damages if the company could not exempt the liability by exemption clauses, for fraudulent misrepresentation (Doyle v. Oldby (Ironmongers) 1969) [18] and (Smith New Court Securities Ltd v. Scrimgeour Vickers 1994) [19] that the defendant is liable for all damage as a result of relying on fraudulent statement which was the refund for the audience. And damages for negligent misrepresentation which the plaintiff could recover the foreseeably loss which was the 1000 tickets refund (all tickets sold out, but only 4000 were admitted, the rest were likely to grant a refund because they have not actually allowed to be in there).

Exemption clauses are terms in a contract or notices which purport to exempt a party’s liability for breach of contract or negligence. There are two types of them; exclusion clauses which seek to totally exclude liability and limitation clauses which limit a party’s liability to a specified sum or for a specified period of time.

The effectiveness of such clauses depends on the compliance with Common Law Rules; Unfair Contract Terms Act 1977 (UCTA) and Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR). To test the effectiveness of an exemption clause the courts will ask firstly is the clause an integral part of the contract?

The common law rules are that if the party signed the contract, than it means that the party have read and agreed to the terms of the contract and is bound by that. The scenario had told us that the plaintiff (Izzy) had signed the contract (L’Estrange v Graucob 1934) [20] . Unless an over-riding oral representation is made by the other party (Curtis v Chemical Cleaning & Dyeing Co 1951) [21] which is not the case here because the clauses were only made in the contract.

The unusual or onerous terms must be drawn to the attention of the affected party. It is illustrated in (Interfoto Picture Library Ltd. v Stiletto Visual Programmes 1989) [22] where Lord Denning gave an opinion that ‘some clauses which I have seen will need to be printed in red ink, in the front of the document with a hand pointing to it, before the notice considered to be sufficient.’ In the scenario, the clause of the right to restrict the capacity of theatre should be told to the plaintiff otherwise the plaintiff was likely to fully rely on the manager’s statement about the capacity of theatre. If CT had given a sufficient notice of that, then it was an integral part of the contract, otherwise, it was not and plaintiff would not be bound by it.

Secondly, on a question of construction, does the clause cover the eventuality that has arisen? The clause must cover the loss in question; any ambiguity in the clause will be interpreted contra-proferentem to against the party who is seeking to rely on it. The clauses of reserve right to restrict the capacity had not cover the loss in question which was the possibility of the refund for 1000 people; however, it covered the loss that they do not accept liability of the statement made by the staff about the facilities quality and was no any ambiguous terms so the contra-proferentem rule would not apply nor the negligence liability as there was not any either (White v John Warwick & Co Ltd 1953) [23] .

And thirdly, does the clause comply with the requirements of UCTA 1977 and the UTCCR 1999? Under the Misrepresentation Act 1977, the liability of misrepresentation could be excluded if the reasonable test in S11 of the UCTA 1977 is satisfied. However, the Act only provided the guidance of reasonableness which is based on common law, for example (George Mitchell (Chesterhall) Ltd. v Finney Lock Seeds Ltd. 1983) [24] and (Smith v Eric Bush 1990) [25] . Nevertheless, the clauses seemed to be unreasonable unfair under UTCCR 1999 Reg 5(1) because the plaintiff decision was relied on the manager’s statement, but it then stated that they would not accept the liability made from the staff was a detriment to the plaintiff.

In conclusion, according to the analysis above, the CT manager had committed both fraudulent and negligence misrepresentations. Izzy was likely to success for the damages on both of them or at least the possibility refund for the people who were affected by the instruction of police even though CT was seeking to exclude the liability.


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