Office Ltd Vs Hi-Tech Ltd - Case Study

Office Ltd v Hi-Tech Ltd

Office Ltd entered into a contract with Hi-Tech Ltd to upgrade their computer systems, following receipt of advice it now transpires is dubious. If Office Ltd are to rescind the contract and claim damages, they will need to prove that some or all of the information provided by Hi-Tech Ltd amounts to misrepresentation, the remedies for which will depend on the state of mind with which any such information was made.

Misrepresentation requires that there has been a false statement of fact or law, and any such statements have induced the contract. The statements made by Hi-Tech Ltd relate to their systems, 'proven track record', that there have been successful installations and that a number of facilities described in their brochure as being, 'incorporated into the system' have subsequently failed to work. Each of these statements will now be considered in turn to see if they meet the requirements of being an actionable misrepresentation.

The statement about Hi-Tech Ltd's 'proven track record' is clearly not a statement of fact. It is plausible that to claim a proven track record, only one system out of a thousand would have to work. To view such a statement positively or negatively would therefore amount to embellishment of a claim, sales talk, or, as described in Carlill v Carbolic Smoke Ball Co , 'mere puff'. Such statements by their nature aim to, and in the present case clearly, induce formation of the contract.

Hi-Tech ltd may try to argue that it is in fact an honest statement of opinion, as in Bissett v Wilkinson . However, as there is no factual basis or authority for Hi-Tech Ltd's statement it is unlikely this would bear any weight, especially given the context of the statement. Were that approach to fail, Hi-Tech Ltd may argue that at the very least it was a half-truth. However the case of Dimmock v Hallett concerned a landlord selling property he described as, 'fully let' when in fact the tenants had served notice to terminate their tenancies. The subsequent judgement established the principle that representors must not negate information which may be considered relevant by the representee, as such, on that basis, Hi-Tech's argument would also fail.

On the other hand, Hi-Tech Ltd's claim that there have been successful installations and their brochure purporting that other facilities have also been 'incorporated into the system' are clearly a questions of fact although it is not clear how it transpired these claims were found to be false.

If we suggest that Office Ltd had taken time to double check the information, perhaps through quick phone calls to other companies, this may cause issues for Office Ltd in that Hi-Tech Ltd could then argue there was no reliance on their statements rendering the requirement that their statement induced the contract ineffective. The relevant authority is Attwood v Small , in which the owner of a mine sought to confirm the seller's statements as to its earning potential by commissioning his own report. It was held that the purchaser had not relied on the seller's statement, and so could not take action for misrepresentation. Office Ltd could try to distinguish this, in that a few quick phone calls is rather different from commissioning independent research on the issue, and that in any case it was severely misleading information. If this argument was successful then Office Ltd would still be entitled to remedies.

What are the remedies available? The primary remedy for misrepresentation is rescission of the contract. This is available whether the misrepresentation was made fraudulently, negligently, or innocently. The only bars to its availability are: affirmation of the contract with knowledge of the misrepresentation; lapse of time; impossibility of restitution;