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Negligent Misrepresentation

By Edited Jun 13, 2016 0 0

Perhaps the best way to introduce this topic would be to give an example and a context.

Suppose Ben just sold a faulty dell pc to Amy, a college student, misrepresenting it to be a high quality macbook pro:

Let us examine the possible negligent misrepresentation, assuming a misrepresentation act is available.

Under the misrepresentation act, the onus of proof lies upon Ben to show that he had taken due care, or is absent a duty. This happens even if Amy is unable to definitively prove Ben's negligence. This is in contrast to common law where the burden of proof is on Amy to prove said negligence.

Under the Act, this allows Amy to
potentially sue for the damages as if the negligence was fraudulent inducement, barring a few exceptions covered below. Here, it is likely Ben might find himself in a place where he is hard pressed to explain why he had not verified the truth of his statements.

Question of Special Knowledge, or i.e. would Amy know?
If Ben is in the business of selling laptops, it can be adduced a requirement of special knowledge on his part.
In Esso Petroleum v Mardon, Esso was held liable for their negligent misrepresentation as they were expected to and did have special knowledge when making and representing their assessment.
A laptop seller would be expected to know what he was selling.

Question of due care, or i.e. Who was in a better position to check the laptop
Should Ben be a seller of laptops, even as a sideline, then it is clear that he would be in a better place to find out if the laptop was a dell. It would seem hard for Ben to say he had exercised reasonable care in verifying the truth of his claims. If he can however prove that in the research he did was reasonable, and he had such reasonable grounds to believe in the claim, he might be able to relegate the misrepresentation to one that was innocent.

In contrast, if Ben was a college student, then as per the case of Bisset v Wilkinson, the "vendor was not possessed of any special skill or expertise in relation" to the laptop in this issue.
This then begs the question of why he would spend such money on an expensive item, bringing him under the principle in Howard Marine & Dredging Co Ltd v A Ogden & Sons, where they had found it hard to show reasonable grounds in believing the truth of his misrepresentations.

Suing for Damages
There are certain restrictions that one might be wary of.
Should Ben be be found liable on negligence, he may raise contributory negligence so as to reduce claimable damages, if Amy was amiss in checking the laptop.

Bars:
1) Affirmation; buyer must have made an attempt to reverse contract upon knowledge of misrepresentation
-but requires knowledge of facts giving rise to right to rescind
-can be implied from conduct (although delay can be argued to be for verification of suspicion)
2) Time Lapse; for non-fraudulent misrepresentation only
limited to a reasonable time frame
3) Third Party Enters
if innocent third party had contracted away item of dispute, claimant must go into reliance damages.
4) Impossibility
giving and taking back of obligations and advantages, can lead to damages in lieu
5) Inequity: Misrepresentation Act S2(2) (this is only if applicable to your area)
To provide protection for trivial misrepresentation leading to fraudulent damages
S1(a) Liberalises access to rescission
S2(2) restricts said access

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