QUESTION 1

MISREPRESENTATION

A contract maybe well formed, containing all the necessary elements to make it
valid, but could still be unfair because of something in its formation. What if, for
example, a person was encouraged into a contract because of someone lied before
it was made? A person who has been misled by this may well have bought items
which are not satisfactory, just as they would have done had there been a
misleading term within the contract, so a remedy for this situation may be just as
important to the injured party as a remedy for breach of contract.

REPRESENTATION AND TERMS

This is very instructive when dealing with incorporation of terms, that statements
made prior to or during contractual negotiations are representations. Some of these
may later become terms of the contract, whilst others remain mere representations.
There are obviously remedies available for breach of a term, but this piece will
examine the situation where someone has been misled into making a contract by
representations.

Where representations of fact prove to be untrue, and mislead a person into

entering into a contract, there may be a situation of misrepresentation.

A misrepresentation therefore, may be defined as an untrue statement of fact,

made by one party to a contract to another, which is not a term of the contract, has
an inducing effect on it.

In the Sierra Leonean case of Xingwong Business Limited v Kingho Investment

Company (2016), the Hon. Mr. Justice Sengu M. Koroma also gave the definition
of misrepresentation as he stated that a misrepresentation has been defined as an
unambiguous false statement of fact which is addressed to the party misled and
which induced that party to enter into the contract. The Learned judge also went
further to state that there are three various elements of misrepresentation, and these
elements are stated below:

a. The misrepresentation must be ambiguous

b. The representation must be false. A statement which is true obviously cannot
give rise to a claim for misrepresentation.
c. There must be a statement. The requirement that the misrepresentation take
form of a ‘statement’ draws attention to the fact that there must be some
positive conduct on the part of the representor. A mere failure to disclose
information will not, as a general rule, give to an action for
misrepresentation.

An untrue statement of fact

To be actionable, a misrepresentation must be a mis-statement of an existing fact.

It must not be:

 A mere commendation
 A statement of opinion
 A statement of future intentions
 A statement of law

Mere commendation

It may be difficult to distinguish between permissible commendation of an

advertising nature and an actionable false statement. Obviously there is a
difference between an advertisements stating, for instance, that ‘Camay soap will
make you a little lovelier everyday’ and one stating that if a product does not
perform as specified, money will be refunded.
In Dimmock v Hallett (1866), an estate agent’s description of land as ‘fertile and
improvable’ was held to be a mere commendation and not actionable.

Statement of opinion

A statement may at first sight appear to be more factual that a mere commendation,
but yet be hedged around with qualifications, such as ‘I think’ or ‘I believe’.
Generally, such a view or opinion on a matter, which is unable to be proved,
cannot result in an action for misrepresentation. Therefore, opinion is NOT a
misrepresentation.

In Bisset v Wilkinson (1927), a seller of a sheep farm in New Zealand was said to
be able to support about 200 sheep. This was found to be untrue, but held not to be
a misrepresentation because the buyer knew that the seller had never farmed sheep
in New Zealand, and was only voicing an opinion.

So usually, a statement of opinion will not give rise to a claim in

misrepresentation. However, what seems to be a statement of fact; for example, a
person may represent that he holds an opinion when it is found as a fact that he did
not believe what he said. Obviously this will depend on reasonable evidence being
available.

A statement of opinion may be regarded as a statement of fact in a situation where

one party possesses greater skill or knowledge than the other, and represents by
implication that he knows facts which support or justify the opinion.

In Smith v Land & House Property (1884), a seller described the occupier of the
property as ‘a most desirable tenant’. It was subsequently found that he had only
paid rent erratically and under pressure. This was held to be a misrepresentation
because the seller was the only person who could have known this information, so
he had an extra duty to take care over his statements as his opinion would be
regarded as authoritative.

A more recent illustration of this point came in the interesting case of Esso v
Mardon (1976). In that case, the defendant was thinking of opening a petrol
station, and sought the advice of a specialist from Esso as to what would be the
likely throughput of petrol (and therefore the likely profit). On the basis of these
figures the defendant decided to go ahead with purchase of the business. Between
the initial negotiations and the eventual purchase the local authority insisted on the
resisting of the petrol pumps, to the back of the site, with access off a side road.
This meant that the trade was not as expected, and the throughput and takings were
about half of those expected. The defendant decided that he could no longer carry
on, and when Esso sued for repossession of the property, he made a counterclaim
for misrepresentation. It was held that there was a misrepresentation by Esso for
several reasons:

 the Esso expert possessed greater skill, and therefore responsibility, than the
defendant, and was in possession of more material facts.
 there was a relationship between the two where the Esso expert owed a duty
to take greater care than the average person over his statements.
 there was a change in circumstances (of which Esso were aware) which
meant that Esso should have revised the forecast throughput of petrol before
the purchase of the business took place.

In the case of Interpreneur v Holland (2000), a wrong statement of the takings of a

pub was held to be misrepresentation because it was made by a person who, it was
felt, should know the accurate takings. This is moving a long way from the usual
principles of contract law where the court looks for external evidence rather than
trying to ‘read the minds of the parties’.
Also, in the case of British Gas v Nelson (2002), British Gas made forecasts of
sales to Nelson before forming a contract under which Nelson would install
appliances on the basis of the esteemed number of clients. The figures were badly
inaccurate and Nelson sued British Gas for misrepresentation as they did not have
the quantity of work envisaged. British Gas were seen to be the party who held the
accurate knowledge (or should have done) and were led liable.

Furthermore, in the case of Skyes v Taylor-Rose (2004), it contrasts with those

above. It was held that the sellers of a house did not have a duty to tell the buyers
that the house had once been setting for a murder. Even though this meant that, as
a consequence, the buyers then resold the house at a loss of £25,000.

Statements of future intention

These are not generally actionable as misrepresentations. However, if it can be

proved that the representor never intended to do the promised act at the time of
making the statement, then the claim may be regarded as a statement of fact, that is
to say a mis-statement of the state of the representor’s mind. Again, this raises
problems of evidence, but if sufficient proof is available, then there is no reason
why this should not be actionable.

In Edgington v Fitzmaurice (1885), shares in business ventures were sold, the

publicity stating that the aim was to expand and improve the business. However, in
letters to other people there was written evidence that the company planned to use
the money raised by shares to pay off existing debts. These statements of future
intentions were held to be misrepresentations. In such circumstances, where there
is clear proof of what a person intends to do, Bowen LJ said ‘the state of a man’s
mind is as much a fact as the state of his digestion’.

Statement of law
These have been traditionally not been actionable, as they are not regarded as
statements of fact. Also, people are generally taken to be as equals before the law
and to have equal access to it (although this is obviously an ideal, rather than
reality). However, some points should be noted.

 A lawyer (or similar person) mis-stating the law will not be absolved from
liability for breach of professional expertise.
 A wilful misrepresentation of law may be actionable as a statement of
opinion not actually held.

Difficulties may arise in deciding whether a statement is one of law or fact, and it
may be a mixture of the two. For example, a statement that the Sale of Goods Act
1979 s.13 requires goods sold to correspond with their description is clearly one of
law. If a shopper complains to a friend that the packet of biscuits she bought as
custard creams were found inside to be ginger snaps, she is obviously making a
statement of fact. However, if her friend then advises her that the item should be
exchanged because the biscuit inside did not correspond to the description on the
packet, this is a mixture of fact and law.

More recently, there has been some move away from the traditional position
regarding wrong statements of law, as seen in the following case.

Pankhania v Hackney London Borough Council (2002). This case concerned a £4

million purchase of commercial property and the wrong statement concerned
whether was legally subject to a license or a tenancy. The decision heralds a
change in stance in this area of law. There is now liability for a mistake over the
law (Kleinworth Benson v Lincoln City Council), and in the case of Pankhania v
Hackney the High Court judge held that a similar shift in attitude should apply to
misrepresentation. He said that to maintain the traditional position would be ‘no
more than a quixotic anachronism’.

SILENCE AND MISREPRESENTATION

The general rule is that silence does not amount to misrepresentation. There is no
liability for failing to disclose relevant fact to the other party, even if those facts
might have influenced the other party, and even if it is obvious that the other party
has a wrong impression that could be remedied by disclosure. In this situation, the
initial presumption, at least, is that the principle of caveat emptor applies.
Translated literally this means ‘let the buyer beware’, or, in other words, do not
rely on the statement of the seller, but use your own judgment. The following case
is the usual authority for this.

In Fletcher v Krell (1873), a governess was appointed to a post, and when it was
later found that she had previously been married, a claim of misrepresentation was
made against her for not disclosing this (it was desirable at the time to have a
governess who was married, let alone separated). However, it was held that merely
keeping quiet about something which no question had been asked was not a
misrepresentation, and the claim failed.

Misrepresentation, then, does not arise normally out of mere silence. This was
stated by Lord Campbell in Walters v Morgan (1861), when he said that ‘simple
reticence does not amount to legal fraud, however it may be viewed by moralist’.
However, he went on to point out that there were circumstances where this general
rule does not apply.

 Conduct may amount to misrepresentation. Lord Campbell said that this

may be in the form of ‘a nod’, a wink, a shake of the head or a smile’, but is
not difficult to imagine other situations where a prospective buyer, for
 example, may be misled by the conduct of the seller. Equally a photograph
or image may mislead, as in the following recent case.

In St Marylebone Property v Payne (1994), a misleading photograph of land which

was for sale by auction gave sale. This was held to be a misrepresentation,
overriding an exemption clause concerning errors, and resulting in the bidders
rescinding the contact and obtaining the return of their deposit.

In the case of Spice v Aprilia World Service (2000), the Spice Girls group all took
part in filming an advertisement for Aprilia’s motor scooters. This action was held
to be a misrepresentation of the fact that they knew they would not be remaining
together as a complete group, even though nothing was actually said about this.

 If a seller of goods does some positive act to deliberately conceal defects in

goods, this may amount to misrepresentation. In Schneider v Health (1813) a
boat which was being sold was partly submerged by the seller to conceal a
rotten hold.
 A half-true statement which is accurate as far as it goes, but which conveys a
misleading impression by being incomplete may give rise to
misrepresentation. In Dimmock v Hallet (1866) a seller of land stated that all
the farms on an estate were let to tenants, but omitted to say that the tenants
had all given notice to leave.
 Changed circumstances may imply a duty to disclose facts, which would not
be misrepresentations at all if nothing had been said originally about the
matter. If a representor knows of a change in circumstances, and thereby
knows that his true statement is now false, this may amount to a
misrepresentation. This arose in With v O’Flanagan (1936) when a doctor
wanted to sell his practice. He told a prospective buyer the current income,
and then became ill. By the time the sale eventually took place, many of the
 clients had transferred to another practice, and the income was much less
than originally stated. As the doctor did not revise his original statement it
was held to be a misrepresentation. A similar situation arise in Esso v
Mardon, where the Esso representative did not revise his sales forecasts in
light of the new siting of the petrol pumps.
 A fiduciary relationship may indicate that there is a duty to disclose facts.
All of the situations above involve people meeting on relatively equal terms.
In these situations there is only a duty to tell the truth, but there is no general
duty to disclose. So if something is said, it must be true, but there is no
general duty to say anything at all. If a person sells a stereo system to
another, they can simply make no claims at all about it, letting the buyer
form their own opinion of whether it is good value. In some circumstances,
however, where one party is in a position of responsibility towards the other,
the law may consider there to be a fiduciary relationship between the two.
Some examples are: parent and child. Solicitor and client, trustee and
beneficiary. In these situations there is a greater duty to disclose relevant
facts than in ordinary relationships between average people. A failure to
disclose relevant facts in these circumstances may lead to misrepresentation.
An example of a fiduciary relationship is found in the following case, which,
although it failed on a technicality, shows how a misrepresentation could
arise. You may remember that in Esso v Mardon, the court found that the
Esso expert owed a duty of care to Mr. Mardon, therefore finding that there
had been a negligent misrepresentation.

In Hedley Byrne and Co v Heller & Partners Ltd (1964), Heller bankers gave
assurances of creditworthiness to Hedley Byrne concerning a mutual client,
Easipower. The bank were the only people who held this information, so they were
deemed to be in a position of trust. When Easipower defaulted on payments a
claim of misrepresentation was made against Heller. This would have succeeded,
because of the relationship, had it not been for a technical clause in the letter of
assurance (it was given ‘without responsibility’). So the principle of law from
Hedley Byrne is obiter (not technically binding), but is respected as the current
legal position.

 Contracts uberrimae fidei (of utmost good faith) go a step beyond fiduciary
relationships, and impose an absolute duty to disclose all material facts to
the other party. In certain contracts, where only one party possesses full
knowledge of all the material, or relevant, facts, the law requires that party
to show uberrima fides (utmost good faith). The main example of this is in
contact of insurance, especially now when the contract is often made over
telephone, and the insurer has no idea whether the customer is telling the
truth. Material facts (those which must be disclosed) were said in the Marine
Insurance Act 1906 to be those likely to influence the prudent insurer in
setting the premium (the payment) or in deciding whether to take the risk at
all. This applies to all forms of insurance (motor, life, fire, theft, accident,
etc). The penalty for non-disclosure is usually that the insurance company
will claim that the contact is rescinded (ended), and they can either decide
not to pay at all when a claim is made, or they may decide to make a reduced
payment as a gesture of goodwill. The following case is an early example of
non-disclosure.

In Seaman v Fonereau (1743), a ship was sited in difficulties when out at sea, but
it recovered from them. When it was later captured by Spaniards, the insurers
refused to pay for it, since the previous difficulties had not been reported. It was
held that they were entitled to do so, as this was a contract of uberrima fides which
imposed a duty to report all material facts, and the ship being in difficulties was
one such fact.

In Bufe v Turner (1815), an insurance company refused to pay when a house owner
did not the circumstance of a fire in an adjoining property. In Lambert v Co-
operative Insurance Society (1975), a lady was not entitled to recover the cost of
her stolen jewellery because she had not informed the insurers of her husband’s
conviction for conspiracy to steal.

MISREPRESENTATION PASSED ON VIA A THIRD PARTY

Once an untrue statement has been made from one party to another, it is usually
considered ‘spent’, so it is no longer a misrepresentation if the second party passes
it no to a third. However, if the first party knows that the wrong information is
likely to be passed on, then an actionable misrepresentation may arise. This was so
in Pilmore v Hood (1838) when the seller of a pub wrongly stated the takings,
knowing that the information was likely to be passed on to another person who
bought the business.

Inducement

In the definition of misrepresentation, we saw that the untrue statement must have
induced the representee to contract. If the other party had not read or heard the
representation, or had not placed any reliance on it at all, then they have no claim
against the representor. In Attwood v Small (1838), the buyers of a mine claimed
misrepresentation when the amount of minerals in it were found to be less than that
stated by the seller. However, it was held that they had relied on the results of their
own private survey rather the statement of the seller (of course, the buyer may have
had a claim in negligence against the surveyor, had the case arisen more recently).

So, if a person with reasonable skill makes enquires of their own (for example, if a
mechanic examines a car thoroughly), it is likely that they will be held to have
relied on those enquires rather than the ones made by the seller. If the representee
tests for accuracy, but fails to discover the truth, the case of Redgrave v Hurd
(1881) suggests that they may still be regarded as having relied on the
representator’s untrue statement.

The case of Barton v County NatWest (2002) found that there is a rebuttable
presumption that a claimant relied on an inducing statement if a reasonable person
would have done so.

Remedies

Where a misrepresentation if found to exist, the innocent party will need a remedy.
Two main remedies exist: rescission and damages. Rescission is where the parties
are stored to their original position by handing back whatever they have acquired
under the contract. So if a contract had been made to buy a car, rescission would
mean that the buyer hands back the car and the seller hands back the money paid.
Damages is the award of money compensation for the misrepresentation, and is
often the amount needed to put right a defect, plus an amount of convenience.
These remedies are both explained in more detail below.

The innocent party makes a decision as to which is appropriate, and today has a
genuine choice, although that was not always the situation, as the remedy at one
time depended greatly on the type of misrepresentation which had occurred. As it
is often difficult to prove fraud, a party who has suffered from a misrepresentation
often now sues as if the misrepresentation had not been fraudulent, just to make the
process simpler. However, the choice of action is still available in theory, as will
be seen.

The distinction between those misrepresentations which are fraudulent and those
which are not is therefore less important that it was once, but is still significant in
making claim. Obviously the difference depends on the state of mind of the
representor (like the requirement of mens rea in many crimes).

FRAUDULENT MISREPRESENTATION

The classic definition of fraudulent misrepresentation comes from the House of

Lords case, Derry v Peek (1889), in which it was said that a fraudulent
misrepresentation was a false statement made ‘knowing, without belief in its truth,
or recklessly as to whether it be true or false’. Really a fraudulent statement could
be summed up as one which the maker does not honestly believe to be true.

The courts regard fraud seriously, and will therefore look for more than mere
negligence or carelessness, and since the proof concerns a state of mind, fraud is
very difficult to prove in most cases. In fact it was confirmed in the case of Ahmed
v Addy (2004), that the standard of proof should be the criminal standard (beyond
reasonable doubt). If fraudulent misrepresentation is proved, two remedies are
available:

 The plaintiff may claim damages. Damages for fraud are based on tort of
deceit, rather than on strictly contractual remedy, and are therefore
calculated in a slightly different way given for breach of contract. Whereas
 damages in contract aim to put the plaintiff in the position that he would
have been in if the contract had been fully performed, the damages in tort try
to restore the plaintiff to the position in which he would have found himself
if the tort (here, the fraud) had not been practiced. The plaintiff may also
apply for an order to have any property handed over to be restored to him.
 The contract may be rescinded. This means handing back any property
(including money) passed over during the contract, and going back to the
original position. As the remedy of rescission is an equitable one, in certain
circumstances where unfairness would arise it is not allowed. Note that a
fraudulent misrepresentation can be used as a defense if the innocent party is
sued for rescission. They can refuse to hand over goods or benefits obtained
throught the contract. This may arise, for instance, where a party has
obtained insurance cover by fraudulent misrepresentations (remember these
contract are uberrimae fidei). If the contract is rescinded, the insurance
company is entitled to keep any premiums paid.

NON-FRAUDULENT MISREPRESENTATION

Before 1964 there was only a remedy of rescission for non-fraudulent

misrepresentation, and damages were not available unless fraud was proved. Any
non-fraudulent misrepresentations were regarded as ‘innocent’, and therefore
without a monetary remedy.

In 1963, the House of Lords changed this position by stating, obiter, that in certain
circumstances, where a negligent mis-statement resulted in financial loss, damages
may be recovered in tort. For this liability to arise, there had to be a duty of care,
arising from a special relationship between the parties. In the case of Hedley Byrne
Co Ltd v Heller and Partners Ltd (1964), the banker, Heller, was seen to have been
negligent, rather than deliberately fraudulent. Had it not been for a technical
matter, the court would have been willing to make an award of damages, even
though fraud was not proved. Another example is seen in Esso v Mardon, which
despite going to court in 1976 actually took place before the Misrepresentation Act
was passed in 1967.

Although it is not certain exactly what the term ‘special relationship’ means, some
guidelines do exist. Firstly, the principle of liability is based on the duty of care in
tort.

In Donoghue v Stevenson (1932), when a partly decomposed snail was found in a

bottle of ginger beer, it was held that the manufacturer of the drink owed a duty of
care to the eventual consumer, and was therefore liable for her inconvenience and
illness. This is known as the ‘neighbor’ principle (where it is foreseeable that a
person will be affected by actions, then a duty of care is owed to that person.

Secondly, from Esso v Mardon, it is likely that such a relationship will be

considered to exist where representor possesses relevant knowledge or skill, and
would expect the other party to rely on this.

Negligent Misrepresentation involves a false statement made carelessly or

without sufficient grounds for believing its truth as discussed above. This
representation fails to exercise reasonable care or skill, leading to a breach of duty
of care. This was seen in the Sierra Leonean case of First International Bank SL.
Ltd v Tarrick Jaward ( 2020) and was constituted of the following coram:

Hon. Justice Desmond Babatunde Edwards CJ

Hon. Justice Allan Bhammie Halloway JSC

Hon. Justice Reginald Sydney Fynn JA.

In this case, Mr. Jaward a businessman who also operates an account as the First
International Bank had issued a cheque for the sum of Le 44, 410,000. This cheque
was made in favor of Mr. Jaward’s suppliers and with whom he was also involved
in a joint venture. When the cheque was presented to the First International Bank
on the 7th April 2014 the bank did not honor it, instead marked it ‘returned to
drawer’. This meant that Mr. Jaward had insufficient funds in his account to enable
to bank honor the cheque and pay his debts to his suppliers, but Mr. Jaward argued
otherwise, stating that he had enough balance in his account to cater for such a
cheque. He argues further that had it not been that the bank had negligently double
debited his account in respect of another cheque, his account would have been
healthy enough to accommodate the cheque which had returned. The bank denied
the claim made by Mr. Jaward.

Mr. Jaward therefore sued the bank for the following: (i) damages for negligent
misrepresentation (ii) special damages (iii) costs.

His claim was successful and the court found in his favor and ordered the bank to
pay Le 35,000,000 bi- monthly until final payment, damages for negligent
misrepresentation assessed at Le 50,000,000 and costs. It was against this
judgment that the bank to the court higher in hierarchy, but the appeal was
dismissed by the Presiding Judge.

Innocent misrepresentation on the other hand, arises when a false statement is

made by one party who genuinely believes it to be true and has taken reasonable
steps to verify its accuracy. Unlike negligent of fraudulent misrepresentation, the
representor does not breach any duty of care or act recklessly.

For innocent representation to arise, the following elements are to be present:

 No intent to deceive: the representor acts honestly and reasonably

 False Statement: despite the honesty, the statement turns to be untrue.
 Inducement: the misrepresentation must have influenced the representee’s
decision to enter the contract.

Innocent misrepresentation has been recognized under common law principles,

though its remedies are more limited compared to negligent or fraudulent
misrepresentation.

In the case of Oscar Chess v Williams (1975), the defendant sold a car to a dealer,
innocently stating the car was a 1948 model based on incorrect information from
the previous owner. The court held that the misrepresentation was innocent, as the
defendant honestly believed the statement was true. The court did not award
damages but upheld the principle of rescission if the buyer had acted promptly.

Furthermore, s2(2) of the Misrepresentation Act 1967 gives courts the discretion to
award damages in lieu of rescission if it is equitable to do so. In Redgrave v Hurd
(1881), the court ruled that the repreentee is entitled to rescission even if they had
the opportunity to verify the truth of the statement but chose not to.

Also, in Leaf v International Galleries (1950), the misrepresentation about painting

being a genuine Constable was incorrect, but the court denied rescission due to the
lapse of time.
It is worthy to note that the Misrepresentation Act 1967 gives the court the power
to grant damages on rescission where such is equitable, but however, this statute is
not applicable in Sierra Leone’s jurisdiction.

THE MISREPRESENTATION ACT 1967

The misrepresentation Act 1967 provided for the first time, a remedy of damages
for non-fraudulent misrepresentations. The remedy is available where the person
would have a remedy, if the misrepresentation had been fraudulent. This provision
is found in s.2(1), and is as follows:

Where a person has entered into a contract after misrepresentation has been
made to him by another party thereto and as a result thereof he has suffered loss,
then, if the person making the misrepresentation would be liable to damages in
respect thereof had the misrepresentation been made fraudulently, that person shall
be so liable notwithstanding that the misrepresentation was not made fraudulently,
unless he proves that he had reasonable ground to believe and did believe up to the
time the contract was made that the facts represented were true.

This section of the Act places a burden on the defendant to prove that it was both
reasonable to believe, and that he did in fact believe, in the truth of his statements.
Note that in this way, unlike the common law requirement to prove liability, the
burden of proof shifts to the maker of the statement in to disprove negligence, one
misrepresentation has been alleged. This burden is a heavy one to discharge, as
seen in the following case.
Howard Marine v Ogden (1978). The hirer of some barges were told their carrying
capacity by the owners, who looked up the information in Lloyds register (the
established authority on this issue). In fact, on this occasion (and very usually) the
register was wrong, and the hirers were given wrong information, causing them
inconvenience. On investigation the correct information was found on the owner’s
records at their main office. The owners had done what most people would have
regarded as a reasonable practice, but since they owned the information, and made
false statement, what they said was held to be a misrepresentation, albeit not a
deliberately deceitful one. This shows that the burden of disproving
misrepresentation is a very heavy one indeed.

Once it is decided that damages should be awarded, then the issue arises as to the
basis on which they should be assessed. Traditionally they are assessed in contract
on an expectation basis, that is what the party would have expected to receive had
the contract been carried out correctly. This would, of course, take into account
lost of profit. On the other hand, in tort, damages are assessed on a reliance basis,
this is where the aim is to put parties back to the position at the outset, which they
would have been in before the wrong happened. So, in the case of sale, it takes
parties back to the starting-point, but does not replace loss of profit. Because in
fraud damages are assessed on a tort basis, it has been decided, in the case of
Royscott v Rogerson (1991), that damages under the Misrepresentation Act 1967
should also be awarded on this basis. However, this has been taken a step further
by the case of East v Maurer (1991), where it was said that in certain
circumstances lost of profits may also be recovered. However it is important to
reiterate that this act is not applicable in Sierra Leone, thus the common law’s
position is still binding.
INDEMNITY

In its aim to restore the parties to their original position, the court may order an
indemnity to accompany an order of rescission. This is a money payment in respect
of obligation necessarily created by the contract, and should be distinguished from
damages. The difference can be seen clearly in the following case.

In Whittington v Seale-Hayne (1900), the buyer of a farm enquired particularly

about the water supply, drains and sewage system, and was told that they were all
in order. He subsequently bought the farm and installed his prize poultry.
However, the water system and drain were found not to be satisfactory, the
manager becoming ill and many of the poultry dying as a result. The court allowed
rescission, but as the misrepresentation was not fraudulent, and this was before the
misrepresentation Act 1967, damages were not payable. This took the buyer to the
original position as far as the farm went, and an indemnity was ordered which
repaid the costs necessarily incurred in buying the farm, such as rates and other
legal requirements. However, it did not replace the cost of the poultry, as it was
said that the buyer did not have to put those on the farm, but chose to do so.

The position may have been different if the case had arisen today, as damages may
have been recoverable instead of indemnity. An indemnity may still be awarded,
even since the Misrepresentation Act 1967, but will not apply where damages are
given. However, it is a useful remedy where a contract is rescinded for a wholly
innocent misrepresentation.

RESCISSION
To rescind is to set the contract aside. The aim is to put back into the position that
they were in before the contract existed (i.e. to terminate it ab initio, or from the
outset). A contract may be rescinded whether the misrepresentation is fraudulent or
nom-fraudulent, even if wholly innocent.

When a misrepresentation occurs, the contract is voidable rather than void. This
means that it remains in force unless the person to whom the misrepresentation has
been made chooses to set it aside. The injured party must indicate his intention to
rescind either:

 by notifying the other party directly, or

 by some other act which clearly shows that he does not intend to be bound
by the contract.

An example of the second situation arose in the Court of Appeal case of Car and
Universal Finance Co Ltd v Caldwell (1965), where it was held that notifying the
police and other appropriate authorities would be evidence of wish to rescind.

Bars to rescission

It is clear that there is a general right to rescind where misrepresentation is proved.

However, as rescission is based in equity it means that the contract is voidable,
rather than void, and on some occasions ending the contract may be deemed by the
court to be unfair, and therefore barred. The following are circumstances when this
arises.

1. Statutory Bar
Under the Misrepresentation Act 1967 s.2(2) provides that the court has the right to
award damages in lieu with rescission. This arose in the recent case of Zanzibar v
British Aerospace (2000).

2. Lapse of time

If a person discovers a misrepresentation but waits too long before making a claim,
the right thing to do so may be barred. This arose in Leaf v International Galleries
(1950) where a painting thought to be a Constable was found to be a copy five
years after the sale, but it was too late to rescind. It should be noted that lapse of
time is slightly according to whether the misrepresentation if fraudulent on non-
fraudulent.

For fraudulent misrepresentation the time in which a claim can be made begins at
the point of discovery of the misrepresentation, so lapse of time is rarely an issue.

For non-fraudulent misrepresentation the time is measured from the point of

contact, as in Leaf v international Galleries, so it is very important that
misrepresentation is discovered quickly.

3. Affirmation

Affirmation is indication that the misrepresentee is willing to continue with the

contract (and possibly claim damages). This arose in Long v Lloyd (1958) where a
lorry-driver bought a lorry about which the seller had made claims. When these
were found to be untrue and the lorry developed problems, the buyer telephoned
the seller and agreed to share the cost of repair. The buyer took the lorry on another
journey and it again broke down. He then tried to claim rescission, but it was held
that his willingness to share cost and use the lorry indicated and he had barred the
right to rescind.

4. Restitution impossible

When claiming rescission, items must be handed back in their original condition.
The court recognize that absolute restitution is not always possible, since some
things must be used for the misrepresentation to be discovered. However, it should
be as near to complete as possible. In Vigers v Pike (1842), restitution of a mine
was not possible because considerable extraction had taken place.

In conclusion, misrepresentation is a critical concept in contract law that ensures

fairness by addressing instances where one party is misled into a contract based on
false information. Ultimately, misrepresentation serves as a reminder of the need
for honesty and transparency in contractual negotiations. By offering tailored
remedies, the law not only deters misleading conduct but also promotes equitable
outcomes, ensuring that contract remain tools of mutual benefit rather than
instruments of deceit.

QUESTION 2
The issues in the the given scenario have to do with misrepresentation and Mistake
in the context of the contract entered into by Buba and Krafty. A misrepresentation
can be considered to be a false statement of fact which prompts an individual to
enter into a contract on the basis of that false statement. Whilst mistake on the
other hand refers to a situation where one or both parties to a contract are mistaken
about a material fact at the time of the contract’s formation, depending on the
nature of the breach, the contract can be render void or voidable. The mistake in
this given scenario arised from the fraudulent misrepresentation made by Krafty
when purchasing the 1960 Bedford truck model that was advertised in the
Ariyogbo Newspaper.

The misrepresentation in the scenario under review occurs when Buba Sayoh
intending to sell the 1970 Bedford truck model to a private car-dealer but in the
course of selling the car due to printing error, Buba Sayoh advertised in the
Ayirogbo Newspaper listing it the 1960 Bedford truck model instead of 1970. This
type of misrepresentation is considered as innocent misrepresentation and the only
remedy that will be available in this circumstance for an innocent
misrepresentation will usually be rescission of the contract. When a person is
induced to enter into contractual agreement as a result of innocent
misrepresentation by another party as it happens in this case, the contract does still
confer contractual obligations on the contracting parties, but the contract will be
voidable. The contract in this instance can be voidable by using the equitable
remedy of rescission. The aim of this remedy is to put the parties back into the
position they were before the start of the contract. In the case of REDGRAVE v
HURD (1881) 20 ChD 1 it was held in this case that contract can be rescinded
based on innocent misrepresentation.
The false information provided by the third-party which in this case is Krafty's
friend that Buba Sayoh was selling the 1950 Bedford truck model, such incorrect
statement equally amount to innocent misrepresentation by the third-party see the
case of PEYMAN v LANJANI (1985) 2 WLR 154 where the defendant, who
spoke no English, arranged with another man to impersonate him a lease from the
landlord. When he wished to assign the lease to the claimant he again sent the
other man to impersonate him to get the landlord's permission for the assignment.
The claimant found out when he had paid £ 10, 000 for the assignment and
successfully sough rescission. The court held that the impersonation of the
legitimacy of the lease, which in fact had never been agreed between the defendant
and the landlord. It was held by court in this case that when a third party
misrepresents a material fact to induce someone to enter into a contract, the
contract is voidable. This means that Krafty who was misled by his friend as to
correct model of the truck in question can choose to rescind the contract, which
would return both parties to the position they were in before the contract was
made.

Krafty's action by entering the contract and subsequently purchasing the car under
false identity as " Johnny be Good " amount to mistake and fraudulent
misrepresentation. When someone enters into a contract under a false identity like
what Krafty did in this case, the contract is typically void for mistake or voidable
for fraud. This is because the other party was deceived into believing they were
bargaining with someone else.

In the celebrated case of SHOGUN FINANCE LTD v HUDSON ( 2003) UKHL

62 where a rogue gave false name ( as Patel ) and address when completing hire-
purchase forms to buy a car and showed a false driving license to confirm his
identity. The car dealer faxed a copy to the finance company, which checked the
credit rating of the real Patel and agreed to finance the purchase. The rogue paid 10
% in cash and the rest by cheque, took the car, then sold it to the defendant.

KEY LAW APPLIED: The court applied NEMO DAT QUOD NON HABET (a
seller in this case cannot pass a title that he doesnot have). It considered 'face-to-
face transaction case but decided that they did not apply. The finance offer was
made to the real Patel , not the rogue. The rogue gained no title that he could pass
on, and so the innocent purchaser had to bear the loss. On appeal Sedley LJ has
this to say " certainly a person selling to a rogue is better placed to check his
honesty than one who buys from him and the law should protect the more innocent
third party" .

Simple put, the court stipulated in this case that for a party to claim that the
identity of the other party is material to the making of the contract, he must have
taken adequate steps to ensure the true identity of the other party. Although Buba
Sayoh did not take adequate steps to know the identity of the person he was
contracting with, the contract can still be voidable on ground of fraud
misrepresentation . But this case he can subsequently decide to set aside the
contract or sue Krafty in tort for deceit and subsequently seeks compensation for
damages against Krafty. On the ground of mistake in this circumstance the
contract can be render void.

Krafty cannot claim specific performance on the part of Buba Sayoh because the
court will not grant specific performance in this case since the contract has been
seriously tainted by fraudulent misrepresentation and mistake as to the true identity
of the purchaser of the car
Specific performance is an equitable remedy, and would not be just, equitable or
fair to enforce the this contract against Buba Sayoh under the given circumference
where there is a serious issue of fraudulent misrepresentation and mistaken identity
of the purchaser. The court will likely declare the contract voidable on the ground
of fraudulent misrepresentation made by Krafty.

Buba Sayoh is also entitled to rescind the contract or where there is compromise,
both parties in question can agree to rescind the contract.The aim of rescinding the
contract in question is to put the parties back into the position they were before the
contract was entered into.

krafty must also bear in mind that Bubba Sayoh can sue him in Tort for deceit and
seeks compensation for damages against him.

Conclusively, one of the most feasible advise to Krafty in this case for his claim
for the enforcement of the contract in question is that his claim has been seriously
weakened by both his fraudulent misrepresentation and mistake regarding his
identity. Once it can be established in competent Court of law by Buba Sayoh that
indeed Krafty fraudulently misrepresented himself by contracting under false
identity, he might not be able to enforce the contract successfully.

Another practical advise to Krafty in this give circumstance is to undertake an

alternative dispute resolution mechanism to settle their differences away from
court litigant, as this will be less expensive and speedy in nature and most
importantly it will be in his best interest to settle the matter out of court. Krafty
should consider approaching Buba Sayoh, and properly explaining the
misunderstanding regarding the truck model and his identity.

MISTAKE IN CONTRACT:
Mistake in contract refers to a situation where one or both parties to a contract are
mistaken about a material fact at the time of the contract’s formation.In contract
law, mistakes, whether common mistake, mutual, unilateral mistake or mistake as
to identity can also affect the validity of an agreement. Parties must ensure that
there is a " consensus ad idem" ( meet of mind) to prevent claims of mistake,
which can render a contract void or voidable.

TYPES OF MISTAKES IN CONTRACT:

During contractual negotiate and formation there are several mistake that may avail
in a contract. The various types of mistakes that may avail in a contract are as
follows:

1. COMMON MISTAKE: Here both parties make the same mistake.There are
three different types of common mistake:

(a) RES EXTINCTA: Res extincta refers to a mistake as to the existence of the
subject matter of the contract, on this aspect see the case of COURTURIER v.
HASTIE (1856) 5 HL Cas 673. The case concerns the existence of the subject
matter of the contract.
BRIEF FACT:

This contract was for the sale of a cargo of Indian corn in transit. Both parties
believed that the corn existed at the time of the contract. In fact, during the voyage,
the cargo became overheated and fermented such that it was unfit to be carried
further. The captain of the ship sold the cargo. This was customary practice. The
claimant claimed on the basis that the defendant accepted the risk and should pay
for the corn.

DECISION:

The court declared the contract void. Although there was no specific mention of
mistake the court considered that common sense dictated that if the subject matter
of the contract did not exist at formation, then the contract did not exist either.

(b) RES SUA :Res sua refers to a shared mistake as to the ownership of the subject
matter of theb contract see the case of COOPER v. PHIBBS (1867) LR 2 HL 149,
the case concerns common mistake; res sua
BRIEF FACT:

An uncle mistakenly told his nephew that he (the uncle) was entitled to a fishery.
After the uncle had died, the nephew, acting in reliance on his late uncle’s
statement, entered into an agreement to rent the fishery from the uncle’s daughters.
However, the fishery actually belonged to the nephew himself.

DECISION:

The House of Lords held that the contract was void at common law.

(c) MISTAKE AS TO QUALITY: A common mistake as to the quality of the

subject matter of the contract is not sufficiently fundamental to be an operative
mistake at common law. In the landmark case LEAF v. INTERNATIONAL
GALLERIES (1950), a gallery sold a painting. Both the gallery and the purchaser
believed that it was a Constable. Five years later, while trying to resell the painting,
the purchaser found out that it was not a Constable and therefore worth
considerably less. The court held that, in the absence of actionable
misrepresentation or assumption of risk, the contract was valid.

2. MUTUAL MISTAKE: The parties are at cross purpose. In this case the court
will try and find a common intention. If the promises are entirely contradictory
then the mistake is operative and contract is void see the case RAFFLE v WICHEL
HAUS.

But if the mistake in such circumstance is not operative which in such case only
one party is mistakeb and performance of the contract is still possible the contract
is not voided see the case of SCRIVEN BROS & Co v HINDLEY & CO ( 1913)

4. UNILATERAL MISTAKE: One party is mistaken about the material fact of

the contract and the other party knows of the mistake but takes advantage of it.
Such mistake may arise as result of following

(a) The identity of one of contracting parties.

(b) The terms of the contract

(b) The nature of a signed document (non est factum).

MISTAKE AS TO IDENTITY : A party is mistaken about the identity of the other

party involved in the contract. Note in face-to-face contracting a party negotiating
a contract in person is deemed to be contracting with the actual person in front of
him/her, whatever the identity assumed by the other party, so that person's credit
worthiness is not material and cannot be the basis of an operative mistake, on this
see the cases of PHILLIPS v BROOKS LTD ( 1919) , LEWIS v AVERY (1972)
and Lord Denning's position in the case of INGRAM v LITTLE (1960)
REMEDIES AVAILABLE TO PARTIES FOR MISTAKE
If the mistake is operative the contract will be render void. That is void abnitio,
that is the contract will be treated as never to have come into existence in the first
place. But on the other hand If a mistake is not operative, then the following
equitable remedies will be available

1. Rescission: Rescission will be available where it appears unconscionable to

allow one party to take advantage of the mistake. However, it is not available for
common mistake.

2. Rectification: In some cases the court can order to rectify documents to conform
to the real agreement between the parties if there is clear evidence that show the
contract does not reflect the true nature of the agreement reached by the
contracting parties.

3. Refusal to make order of specific performance. Since specific performance is an

equitable remedies being at the discretion of the court, specific performance may
be refused in the case of a mistake made by one party if it appears to be unfair,
unjust or inequitable to compel that party to perform their contractual obligations;
or the other party knew and took advantage of that mistake see the case of
WEBSTER v CECIL(1861) or where the mistake resulted from misrepresentation
by the other party as it happens in the given case under review between Buba
Sayoh and Krafty. However, the court will not withhold an order of specific
performance to save the mistaken party from a bad bargain as it was held in the
case of TAMPLIN v. JAMES (1916)).

To sum up, Common mistake may make performance of the contract impossible,
mutual mistake and unilateral may have no "consensus ad idem.
 QUESTION 3

In the given scenario, the Marine Biology Unit (MBU) entered a six-month charter
agreement with China Trawlers & Co. (CTC) to conduct pollution testing under a
government grant. The contract’s performance was disrupted when a fire at CTC’s
dry dock damaged the designated trawler.

The doctrine of frustration in contract law excuses parties from fulfilling their
contractual obligations when an unforeseen event, occurring, renders performance
impossible or radically different from what was agreed.

The doctrine of frustration applies when an unforeseen event occurs, rendering

contractual obligations impossible to perform or fundamentally altering the nature
of the contract. Under common law, frustration automatically discharges the
parties from further obligations.
The doctrine of frustration does not apply to the contract with CTC and that CTC
remains bound to fulfill their obligations, failing which they are in breach of
contract.

A frustrating event must meet specific legal thresholds. These include being
unforeseen, beyond the control of both parties, and rendering performance
impossible. The fire at the dry dock, while unforeseen, affects only the specific
trawler originally allocated and does not make the entire contract impossible to
perform.

In the case of Taylor v Calddwell (1863) the destruction of the music hall rendered
performance physically impossible, leading to frustration. However, the
distinguishing factor in MBU’s case is that the fire did not destroy all CTC’s
trawlers but only one. CTC retains the capacity to perform its obligations using
substitute vessels. In Hirji Mulji v Cheong Yue SS Co. (1926), the Privy Council
held that frustration does not apply where alternative performance is possible. The
fire did not destroy CTC’s entire fleet, making substitute performance.

The principle of frustration is inapplicable where one party contributes to the

frustrating event. In this scenario, CTC’s failure to maintain multiple trawlers for
emergencies or substitute use exacerbates the impact of the fire.

In the case of Maritime National Fish Ltd v Ocean Trawlers Ltd (1935), the court
held that frustration cannot be claimed if the frustrating event is self-induced. Here,
CTC’s decision to fully utilize their fleet without reserving capacity for
contingencies amounts to self-induced frustration.

Furthermore, in Joseph Constantine Steamship Line Ltd v Imperial Smelting Corp

Ltd (1942), the burden of proving that the event was truly beyond their control lies
with the party claiming frustration. Therefore, CTC failed to prove they could not
reallocate another trawlers, particularly since they have a fleet of five.

For frustration to discharge a contract, the event must destroy the purpose of the
agreement. In this case, the fundament purpose of the contract was to provide a
vessel for MBU’s pollution testing. The availability of other trawlers means this
purpose remains achievable.

In the Sierra Leonean case of Mendekia v Beresford-Cole (1973), the appellant

brought an action against the respondent in the High Court for damages in respect
of losses arising from the respondent’s failure to complete a building contract. The
respondent counterclaimed for expenses incurred by him over and above the
agreed contracts price paid to him by the appellant. The respondent argued that his
failure to complete the building work was in any case due to the rising costs of
labor and materials and the court considered whether in these circumstances the
contract could be said to have been frustrated, with the consequence of releasing
the respondent from his undertakings. For procedural reasons, the respondent’s
appeal against the dismissal of his counterclaim was held not to be properly before
the court. The appellant’s appeal was allowed and the respondent ordered to pay
damages for breach of contract.

In the case of Krell v Henry (1903), the court discharged the contract when the
cancellation of the coronation of procession destroyed its primary purpose. Unlike
in Krell, the purpose of the contact (available of a trawler) is still achievable
through alternative means.

Also, in Herne Bay Steam Boat Co v Hutton (1903), this case conversely highlights
that when the contract retains some purpose, frustration does not apply. Similarly,
CTC’s fleet allows for the contract’s performance through alternative
arrangements, negating frustration.

The doctrine of frustration applies only when the entirety of the contract becomes
impossible or radically different to perform. The damage to one trawler constitutes,
at most, partial frustration. The courts have consistently refused to discharge
contracts on this basis. In the case of Davis Contractors Ltd v Freham Urban
District Council (1956), the House of Lords held that frustration does not apply
merely because performance has become more difficult or expensive. CTC’s full
utilization of their fleet may increase operational costs but does not make
performance impossible. Additionally, in the case of Tsakiroglou & Co. Ltd v
Noblee Thorl GmbH (1962), the contract was not frustrated despite a major
disruption (closure of the Suez Canal) because alternative routes were available.
Similarly, the availability of other trawlers negates frustration in MBU’s case.

Foreseeability relates to whether a reasonable party could anticipate the occurrence

of an event at the time of contracting. For CTC, operating a dry dock with a fleet of
vessels, the risk of fire would likely be deemed foreseeably given. The nature of
their business (handling combustible materials, machinery, or chemicals). The
obligation to ensure proper fire safety protocols, equipment, and trained personnel.
If CTC failed to foresee or mitigate such a risk, their reliance on frustration
weakens. Instead, negligence or lack of due diligence can be inferred.

In the case of Hadley v Baxendale (1854), this case established that damages could
only be claimed for losses foreseeable at the time of contract. It signifies that
parties must reasonably anticipate risks tied to their business. The dry dock fire is a
foreseeable risk, and alternative arrangements should have been planned for. In
Transatlantic Financing Corp v United States (1966), in this case, frustration was
rejected because alternative performance was possible despite additional costs.
Similarly, CTC’s ownership of multiple trawlers suggests they could perform their
obligations by reallocating resources.

CTC’s refusal to provide a substitute trawler breaches the reasonable expectations

set in the contract. The agreement did not allocate the risk of fire solely to MBU.
Courts are generally reluctant to apply frustration where the risk of such events
could have been addressed through explicit contractual provisions or operational
planning.

In the case of Amalgamated Investment & Property Co. Ltd v John Walker & Sons
Ltd (1977), the court held that the frustration does not apply when the event was
foreseeable or should have been contemplated. A fire at a dry dock, while
unforeseen operations and should have been mitigated by CTC.

Also, in Scanlon’s contract (1931), frustration was inapplicable because one

party’s failure to prepare for foreseeable risks undermined their argument.
Similarly, CTC failed to adequately mitigate foreseeable risks by maintaining
contingency plans.

Pollution testing is time-sensitive. The delay caused by CTC undermines the

purposes of contract. In the case of Hong Kong Fir Shipping Co. Ltd v Kawasaki
Kisen Kaisha Ltd (1962), the court held that the delay in repairs that deprived the
charter of the ship’s commercial purpose amounted to breach. In the scenario, the
delay rendered the trawler useless during critical testing periods, amounting to a
repudiatory breach.

In analyzing CTC’s stance in the given scenario and their contractual obligation,
the fire incident that damaged the trawler allocated to MBU is the crux of CTC’s
argument for frustration. It is my position that the fire was an unforeseen and
uncontrollable event that rendered the specific trawler unavailable for
performance.

In the case of Taylor v Caldwell (1863) as stated above, the destruction of a music
hall due to fire discharged the contract as the hall was essential to its performance.
Similarly, it is the position of CTC that the damage to the trawler made it
impossible to fulfill the specific charter party with MBU.

The fire in the dry dock can be viewed as an event outside CTC’s control, making
the original trawler unavailable.

The allocation of a specific trawler from CTC’s fleet is central to the contract. The
key issue is whether the contract was for the specific damaged trawler or whether
CTC’s entire fleet was available for substitution.

In the case of Maritime National Fish Ltd v Ocean Trawlers Ltd (1935), in this
case, a party could not claim frustration because the inability to perform was due to
their own allocation of licenses. Courts held that frustration cannot be self-induced.

If CTC had alternative trawlers in their fleet but chose not to allocate one to MBU,
they might be seen as having self-induced the frustration, thereby nullifying the
defense.

CTC’s claim that the trawler will be ready “in the not too distant future”
timeframes for repairs and the impact on the contract. In the case of Jackson v
Union Marine Insurance Co. Ltd (1874), the delay in repairing a ship was held to
frustrate the contract as the delay was unreasonable and defeated the contract’s
purpose. If the time required for repairs makes it impossible for MBU to meet its
critical objectives, the contracts purpose may be frustrated, but CTC’s liability will
depend on the reasonableness of its repair timeline.
Contracts often include implied terms about the availability and maintenance of
essential resources. CTC’s refusal to provide another trawler could be viewed as a
breach of these implied terms.

In Moorcock (1889), the courts implied a term that a wharf owner must take
reasonable care to ensure the safety of a vessel. Similarly, CTC may be expected to
ensure the availability of a substitute trawler.

Applying this to the given scenario, if the contract implicitly required CTC to
maintain or replace the trawler in case of damage, their refusal could constitute a
breach.

The contract does not explicitly allocate risk in the event of a supervening event
like the fire. CTC may argue that the risk of unavailability due to unforeseen
damage was not assumed by them.

In this case of Fibrosa Spolka Akcyjna v Fiarbairn Lawson Combe Bar bour Ltd
(1943), this case established that frustration discharges the contract and releases
the parties from their obligations. However, if one party has already received
benefits (such as advance payments), they may need to return them.

CTC’s argument for frustration must distinguish between genuine impossibility

and mere commercial impracticability. Courts have consistently held that increased
difficulty or expense does not amount to frustration.

In the earlier case mention (Davis Contractors Ltd v Fareham UDC (1956), the
House of Lords held that a contract is not frustrated merely because performance
has become more burdensome or costly. If CTC argues that reallocating another
trawler would disrupt their other contracts or incur extra costs, this may not suffice
to establish frustration.
If the contract contains a force majeure clause covering fire or similar events, CTC
could rely on it to limit their liability. However, in the absence of such a clause, the
doctrine of frustration is their primary defense.

In the case of Channel Island Feries Ltd v Sealink UK LtD (1988), force majeure
clauses must be interpreted strictly, and their applicability depends on the specific
wording.

CTC received an advance payment of half of the charter rate from MBU. If the
contract is deemed frustrated, CTC may be required to return this payment under
the principle of unjust enrichment.

CTC acted in good faith by promptly addressing the fire and offering assurances to
repair. They fulfilled their duty to mitigate further harm to MBU. Contracts imply
an obligation to act honestly and reasonably. CTC’s actions reflects their
commitment to managing the situation responsibly. In the case of Yam Seng Pte
Ltd v International Trade Corp (2013), the court recognized good faith as an
implied obligation in commercial contracts. CTC’s efforts to repair the vessel
demonstrate reasonable care in managing the unforeseen event. CTC and MBU
share the responsibility to mitigate losses arising from the fire. CTC’s inability to
provide another vessel shifts the focus to MBU’s efforts to secure alternatives.
Similarly, in the case of British Weshinghouse Electric v Underground Electric
Railways Co (1912), parties must take reasonable steps to mitigate losses caused
by a breach.

ADVICE
CTC is obligated under the charter party agreement to ensure the availability of a
functional trawler for the Marine Biology Unit (MBU) during the six-month
period. Since the fire at CTC’s dry dock damaged the trawler, preventing MBU
from performing pollution checks, CTC may be in breach of a contract unless they
can successfully invoke a force majeure clause (if present) or argue frustration of a
contract due to unforeseen circumstances. In Taylor v Caldwell (1863), it
establishes that if a contract becomes impossible to perform due to unforeseen
events that are not the fault of either party, the contract may be discharged.
However, this depends on the inclusion of a force majeure clause in the agreement.
Also, in Hedley v Baxendale (1854), CTC may be liable for damages resulting
from their failure to provide an alternative trawler if it was reasonably foreseeable
that MBU’s operations would be disrupted.

MBU on the other hand should consider CTC’s refusal to allocate another trawler
as a breach of contract, which disrupts their critical pollution testing project.

Legal Remedies and Actions:

Claim for Breach and Actions:

MBU can claim damages under Hadley v Baxendale (1854) for losses incurred due
to CTC’s failure to meet its obligations. The critical nature of the project makes
damages foreseeable.

Mitigation of losses:

Entering negotiations with another company for a substitute trawler is appropriate.

Courts expect a party to mitigate losses as per British Westinghouse Electric v
Underground Electric (1912).
Termination and Damages:

If the breach is fundamental and affects the essence of the contract, MBU can
terminate the contract and seek damages under Hong Kong Fir Shipping v
Kawasaki Kisen Kaisha (1962).