Contract law exam tips - terms, representations, breach and misrepresentation

Contract law exam questions can be very tricky. As with any exam question, half the battle is always knowing which area of law the examiner has in mind...it's not always as easy as you might hope! Two areas which can often cause difficulty, not least because they often come mixed up together, are breach of contract and misrepresentation. There are any number of variations on questions dealing with these topics, but here are a few tips for things to look out for:

Where statements are made pre-contract, these are representations and, if false, may give rise to a claim of misrepresentation. However, you may also need to consider whether they have become terms of the contract, in which case there may be an alternative action for breach of contract (remember that the claimant can choose which action he prefers). If you are lucky, the question will be broken down into sections and will ask specifically about misrepresentation and breach but, if not, then you will have to decide for yourself on the appropriate advice.

So, if you do need to decide whether representations are capable of amounting to a breach, apply the relevant considerations.

When discussing misrepresentation, you need to define what a misrepresentation is, you also need to go on to consider which type of misrepresentation it is - innocent, negligent or fraudulent.

Having decided whether you are dealing with a breach of contract, or misrepresentation or both, you will need to discuss remedies. It may well be that one action is more advantageous to the claimant than another. As noted above, questions can take many forms, but one thing to look out for is unforeseeable losses. Damages for breach of contract are dependent on the remoteness of damage rule set out in Hadley v Baxendale. If C unexpectedly loses a large sum of money as a result of D's breach, it is unlikely that this can be claimed in an action for breach. However, if there has also been a misrepresentation, the current state of the law is that all damages naturally flowing from the breach can be claimed - Royscot v Rogerson. Therefore an action in misrepresentation might be a significant advantage to the claimant in this situation.

Just one last tip on this issue. One of the remedies for misrepresentation is rescission - allowing the innocent party to set aside the contract. This looks like a very good remedy for the unfortunate claimant who has entered into a contract as a result of bad advice so, when you see a question like this, it's very tempting to jump right in there. Stop! Just take a moment to read the question....suppose it goes something like this:

"John wanted to buy a house which would be very peaceful and quiet because he hated noise and wanted absolute silence in which to practise his yoga. He found a property he liked very much and hired Sharky Surveyors to report on the property, in particular to advise whether noise would be a problem. Sharky Surveyors surveyed the property and reported that "the house is in a delightful quiet neighbourhood and free from noise disturbance". John is dismayed when he moves in and discovers that the house is under a very noisy flightpath where he is disturbed by the sound of aeroplanes day and night."

There is an obvious 'misrepresentation' here by Sharky Surveyors and it has persuaded John to enter into the contract to buy the house. Easy! Surely he can claim misrepresentation and rescind the contract and get rid of the nasty noisy house? No he can't! Why not? Because his contract to buy the house is with the seller of the house, not with Sharky Surveyors. Unless Sharky Surveyors are in some way connected to the seller of the house, their misrepresentation does not affect this contract at all, so this does not allow John to rescind the contract. He can, of course, sue Sharky Surveyors, but then you have to consider whether there is breach of any express terms in the contract between John and Sharky, and also explain that there is a clear breach of the implied term of 'reasonable care and skill' under s13  SOGAS 1982.

The misrepresentation issue is a complete red herring because the untrue statement of fact is made by Sharky Surveyors but the contract entered into is with the seller of the house - so there is no actionable misrepresentation at all, just a breach of contract by Sharky.

Sneaky isn't it........?

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