Legally binding contracts
require an offer, consideration, and acceptance. However, even if these
requirements are met, there may still be vitiating factors, such as
misrepresentation or breach of contract, deeming the contract invalid. The
assignment will explore the case of Shahida
v Benjamin’s Looking Glass, involving
a commercial contract for purchasing a painting by Hilda des Ste Croix, the
implications of possible misrepresentation or breach of contract leading to the
sale of a painting by Hilda’s apprentice. This assignment explores and applies
to this case, misrepresentation, breach of contract, express terms, and implied
terms; the key tests required for express terms, and the relevant terms implied
by the sale of goods act 1979 (SGA1979). It will explore the remedies
available, concluding on how they may apply.

 

Contracts can be formed either
written, oral, through a course of conduct, or a combination thereof. Express
terms of contracts are those which are intended by both parties to give rise to
legal obligations. If a party does not fulfil their duties under these terms,
there can be legal expiation for breach of contract. There are a number of
remedies available, depending on the type of express term that was breached.
Knowing ab initio how each term is
classified, allows the parties credence in their contractual obligations. There
are six types of express terms, and seven tests as to how these terms are
incorporated into a contract.

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In this case, the defendant,
Benjamin’s Looking Glass, is an art gallery, indicating specialist knowledge in
the field in question. One of the seven tests covers factors affecting
bargaining strength, detailing that where one party has a specialist knowledge
of the subject matter, the courts are more willing to accept that statements
made by that party are incorporated as express terms in the contract. This is
demonstrated in Dick Bentley Productions
Ltd v Harold Smith (Motors) Ltd 1965 1 WLR 623 where the plaintiff
relied upon the specialist knowledge of the motor dealer (Westlaw UK, 2018a).

 

 

Shahida expressly tells Reegan
that she would like to purchase a picture by Hilda des Ste Croix, indicating
that this is essential to her and that it be included as a condition of
contract, therefore as an express term. One of the tests for incorporating express
terms is the request for specific detail; that Shahida has specifically
requested this artist indicates that it is of importance to her. In Bannerman v White (1861) 10 CBNS
844 the stipulation was preliminary to the contract and therefore judged as incorporated
into it (Westlaw UK, 2018b). In this case, it can be argued that Shahida’s
preliminary statement should be incorporated into their contract.

 

The test of bargaining
strength can also be applied to Reagan’s statement of opinion to Shahida, as being
an employee of an art gallery, and the artist is local to that gallery, it can
be said that he has specialist knowledge of the subject. However, as the
picture was mislabelled by the owner, Benjamin, and that Reegan is just a sales
assistant, he may not have the specialist knowledge, but he himself may have
been relying on the label. In Oscar Chess
Ltd v Williams 1957 1 WLR 370, the statement made by the defendant was
ruled as an innocent misrepresentation as opposed to an express term, as they had
no specialist knowledge, but were purely relying upon the documents (Westlaw
UK, 2018c).

 

Implied terms are those which
have been left unstated in the express terms of the contract, but give rise to
specific legal obligations of the parties to the contract. There are three
categories of implied terms, however, only one seems relevant to this case;
terms implied by statute. The sales of goods act 1979 (SGA 1979) applies to the
sale of goods in non-consumer contracts. In SGA 1979 section 13 (1) it states
that “…the goods will correspond with
the description…”, implying that the picture should be the same as it was
represented to be by Reegan’s statement and Benjamin’s label. The fact that the
picture is not a Hilda des Ste Croix as explained by Reegan or as advertised by
Benjamin, suggests that this term implied by statute has not been satisfied.
SGA 1979 sections 14 (2) states that “…the
goods supplied under the contract are if satisfactory quality…”, section 14
(2A) clarifies this as “…taking into account
any description of the goods…”, again giving strength to the suggestion
that as the picture was described as by Hilda des Ste Croix, and that it was in
fact not, the contract again does not satisfy terms implied by statute. SGA
1979 section 13 (1A) states that section 13 (1) should be treated as a
condition, which if the contract was found to be in breach could lead to
repudiation and/or damages, whereas section 11 (2) states “Where a contract of sale is subject to a condition to be fulfilled by
the seller, the buyer may waive the condition, or may elect to treat the breach
of the condition as a breach of warranty and not as a ground for treating the
contract as repudiated.”, although given the time lapse and that this is a
work of art, may give rise to section 11 (3), that it cannot be rejected, or
returned, but can only be treated as a breach of warranty, allowing only for a
claim in damages.

Based upon the three tests for
incorporation, it is likely that a court will find that through specialist knowledge,
bargaining power, and the specific request, that the requirement for the
purchase of a picture by Hilda des Ste Croix is an express term of the
contract. Furthermore, SGA 1979 does suggest implied terms upon Benjamin’s
Looking Glass for Reegan’s statement and Benjamin’s label, and that these
implied terms have not been satisfied.

An actionable misrepresentation
is a false statement of fact “…which is
addressed to the party misled and which induces that party to enter into a
contract” (McKendrick, 2014, p.576). Inducement is generally split into
four categories; the statement must be material, it must be known to the
representee, it must be intended to be acted upon, and it must have been acted
upon. A false statement can be both a term and a misrepresentation, but only if
the statement became a term of the contract, not if the statement was always a
term of the contract. If that statement is made at the time of the contract,
then it is considered as a term, and it is more likely to be held as to be true
by the party and is a breach of contract. A false statement made prior to the
formation of the contract in order to induce them into contact, it is a
misrepresentation. In Avon Insurance
plc v Swire Fraser Ltd 2000 1 All ER (Comm) 573, Mr Justice Rix stated,
“A representation could be true even if
it was not entirely correct, so long as the difference between what was
represented and what was correct was not, alone, responsible for inducing the
claimant to enter into the contract.” (Westlaw UK, 2018d). For a statement to amount to a
misrepresentation rather than merely a representation, it must be both false
and unambiguous. Lord Denning states in Curtis
v Chemical Cleaning & Dyeing Co Ltd 1951 1 KB “Any behaviour, by words or conduct, is
sufficient to be a misrepresentation if it is such as to mislead the other … If
it conveys a false impression, that is enough.”, showing that a statement
of fact can be made by conduct alone. Statement by conduct can also be seen in Gordon v Selico Ltd (1986) 18 HLR
219 and Spice Girls Ltd v Aprilia World
Service BV 2002 EWCA Civ 15, 2002 EMLR 27 (Westlaw UK, 2018e),
(Westlaw UK, 2018f). Following the enactment of the Misrepresentation Act 1967
(MA 1967), there are now four types of misrepresentation, each with their own
remedies; fraudulent, innocent, negligent misstatement, and negligent
misrepresentation.

 

In this case, there are two
statements which need to be addressed, that given verbally by Reegan, and that
given through conduct by Benjamin. Whilst statements of opinion or belief do
not generally amount to statements of fact, as seen in Smith v Land and House Property Corp (1884) 28 Ch D 7 if they
are given by someone in the best position to know the material facts, they are
(Westlaw UK, 2018g). Reegan’s position as a sales assistant does cast doubt as
to whether he is in the best position, but his working for the art gallery does
suggest that he would be. Insofar as Benjamin is concerned, the picture was
labelled as by Hilda des Ste Croix. As the owner of the gallery, Benjamin is in
the best position, and so his statement by conduct, labelling the picture, does
put him in the best position to know the material facts. As seen in Smith v Chadwick (1884) 9 App Cas 187,
the statement was material insofar as it would induce anyone to enter into a
contract should they be wishing to purchase this artist’s work (Westlaw UK,
2018h). The statement was made to Shahida, and so the representation was known
to the represented. The label on the picture and the statement given by Reegan
are clearly intended to be acted upon by any prospective buyer, and Shahida did
act upon this. Therefore, the misrepresentation, in this case, does amount to
inducement. Not unlike breach of contract, misrepresentation does not treat a
statement of fact as a misrepresentation unless it is made by someone of
special knowledge, however, Benjamin does have specialist knowledge and Reegan
can be argued either way. Therefore, it can be argued that the Benjamin’s
Looking Glass did indeed present a false statement of fact intended to induce a
prospective buyer into a contract.

 

The case of Derry v Peek (1889) LR 14 App Cas 337
considers fraudulent misrepresentation (Westlaw UK, 2018i). In this case, it
was deemed that honest belief, or lack thereof, was the core factors of fraud. Akerhielm v De Mare 1959 AC 789
highlights that the motive is irrelevant, so long as a fraudulent
misrepresentation has occurred (Westlaw UK, 2018j). Whilst it is impossible to
be certain, in this case, it can be argued that neither Benjamin nor Reegan
intended in any way to mislead Shahida as to the identity of the artist. Reegan
seems to have genuinely believed this was the case, and Benjamin could simply
have made a reckless mistake. The case of Thomas
Witter Ltd v TBP Industries Ltd 1996 2 All ER 573 shows that recklessness
does not in itself establish fraud unless it is a blatant disregard for the
truth (Westlaw UK, 2018k). Under the MA 1967 statute, a contract would need to
have been formed in this case, and the burden of proof would be upon Benjamin’s
Looking Glass to prove that the misrepresentation was not fraudulent. If
fraudulent misrepresentation can be proven, then Shahida could make a claim
under equity for either rescission, terminating the contract ab initio, and/or damages.

 

False statements made under
the genuine belief of its truth, whether carelessly or otherwise, prior to the
enactment of MA 1967, was known as an innocent misrepresentation. Following the
developments of Hedley Byrne & Co Ltd
v Heller & Partners Ltd 1963 2 All ER 575, and the introduction of MA
1967, it was held that innocent misrepresentation is narrowly deemed as one
made without fault i.e. neither fraudulently nor negligently, but under the
genuine belief of its accuracy, by a person who has genuine reason to believe
in its truth (Westlaw UK, 2018l). Under innocent misrepresentation, the
plaintiff can claim either rescission or damages. It can be argued that Reegan
genuinely believed in his statement, however, the misrepresentation by conduct
by Benjamin cannot fall under this category due to his specialist knowledge,
thus removing Benjamin’s Looking Glass from this category.

 

Depending on the type of
negligence involved, a misrepresentation that is not innocent or fraudulent can
give rise to action either under common law or statute. Under Hedley the House of Lords held obiter that negligent statements could
attract liability under the common law of tort, for a misrepresentation which
causes economic loss to the plaintiff, allowing for damages to be recovered. This
is called a negligent misstatement. Under negligent misstatement, liability
arises if it is reasonable to assume that the plaintiff would rely upon the
statement given and if there is a special relationship, which does not have to
be contractual, between the two parties. As seen in Harris v Wyre Forest District Council 1988 AC 831, Benjamin’s
Looking Glass does have a special relationship with Shahida insofar as they
have specialist knowledge in the field of art, and thus have a duty of care to
give correct information to a purchaser (Westlaw UK, 2018m). It can reasonably
be assumed that, as illustrated in Chaudhry
v Prabhakar 1988 All ER 718, that Shahida would rely upon that statement
and be induced into a contract (Westlaw UK, 2018n). As seen in Smith v Eric S. Bush the defendant must
be aware that the plaintiff would rely upon their statements, which in this
case can be reasonably assumed. However, being under common law, the burden of
proof for the existence and breach of duty of care are imposed upon the
plaintiff. Under negligent misstatement, Shahida could make a claim for
rescission and/or damages. However, as Benjamin’s Looking Glass possesses
special skill and knowledge in the field of art, an action can also be brought
for negligent misrepresentation under the statutory basis of MA 1967. It is
under statutory law that the burden of proof will then be upon the defendant to
prove that the misstatement was genuinely believed to be true up until the
contract was made, and not a fraudulent misrepresentation. The remedies under
this statute are the same as if it were brought under common law.

 

Based upon the four types of misrepresentation,
it is likely that a court will find that Shahida has suffered economic loss
insofar as the picture she was sold, that Benjamin’s Looking Glass did have a
duty of care imposed, and that Shahida did rely upon the statements. It would
be a stronger case under negligent misrepresentation, as it would be the
defendant who has the burden of proof.

 

In conclusion, Shahida could
claim for breach of, claiming unliquidated damages of £20,000, minus the
current value of the current picture at £2,500, giving £17,500 unliquidated
damages. Restoration costs are irrelevant as they would be needed regardless. As
a common law remedy, the burden of proof would be upon Shahida, making it a
more difficult claim, considering, as it was not mentioned, there was no
written contract and that the event was five years ago, casting doubt on what
was said or done.  Under statute, Shahida
could bring a strong action of inducement under negligent misrepresentation,
claiming rescission, to return the painting for her money back, less £500
restoration costs, plus damages at the court’s discretion. 

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