Learner Resource 6

Vitiating factors: working through a misrepresentation scenario questions exercise

Sara has been the owner of the ‘Cake and Coffee Cafe’ for 30 years. She has decided to sell the café and move to Spain. Carlos is a fan of cake baking and sees the sale of the café advertised in the local estate agents. He visits the café and notices in the window a Food Hygiene Notice with a very good grading of 5. Carlos is very impressed.

Carlos is concerned about competition from other cafes and asks Sara if there are any other cafes nearby. Sara says no. She fails to mention that planning permissions has been granted to turn a shop across the road into a café.

Carlos asks Sara to show him the accounts for last year. The accounts suggest the business is very healthy. Just to make sure, Carlos asks his friend Lucas, an accountant, to look over the accounts. Lucas agrees the Cake and Coffee Café is a very profitable looking business. Carlos decides to buy the café.

Between Carlos agreeing to buy the café and the contracts being finalised, the new café opens across the road and is very popular. Sara’s café is given a one star Food Hygiene Grading. The number of customers visiting the Cake and Coffee Cafe has dropped considerably.

Consider whether Carlos will be successful in an action for misrepresentation.

Version 1 1 © OCR 2017Law of contract

What was said? Authority (where appropriate)

Who are the parties

Briefly what has been said or shown

1.2.3.4.

Is there an untrue statement of fact or mere opinion?

Was there silence about an important issue?

Was Carlos induced or did he rely on the word of another?

Have circumstances changed?

Were the statements made before or at the time of the contract?

Has there been a misrepresentation?

Explain fraudulent misrepresentation

Innocent misrepresentation

Negligent misrepresentation at common law

Negligent misrepresentation under statute

Version 1 2 © OCR 2017Law of contract

What was said? Authority (where appropriate)

Apply the most appropriate to the scenario

Decide on remedies

Any reason why rescission may not be available?

Third party rights.

Affirmation.

Lapse of time.

Impossibility of restitution (restitution in integrum).

Version 1 3 © OCR 2017Law of contract