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 CONTRACT LAW PROBLEM QUESTION

Jodie v Bruce

Misrepresentation
The first statement is Bruce’s assurance that the horse is free from hereditary
diseases. This is an oral statement of a material fact and not a ‘mere puff’.1 This
information was given in the pre-contractual stage and was determined to be false
after the race. The fact that the statement was made before the creation of a contract
is essential to establish a misrepresentation.23 Jodie relied on this statement when
deciding to purchase the horse as she was reassured when Bruce informed her of
this fact.4 She also demonstrated her intention of reliance by initiating the questioning
on this matter. A reasonable person would have been induced by this statement to
enter the contract. Thus, there is a presumption that this statement constitutes an
actionable misrepresentation.

Bruce also made an oral statement indicating that all horses he sells are
checked by a vet who issues a certificate confirming the good health of the horses.
However, the check was made once the horse has already been purchased by Jodie.
This could also amount to a misrepresentation as it is a false statement of a material
fact, made by Bruce and has induced Jodie into entering the contract as she thought
the good health of the horse was certified.

Fiction of fraud misrepresentation

Regarding the type of misrepresentation, Bruce sold the horse before having
the horse medically inspected. This could correspond to fiction of fraud
misrepresentation under section 2(1) of the Misrepresentation Act. According to Yam
Seng Pte Ltd v International Trade Corp Ltd,5 an innocent party must demonstrate
that several criteria are met. Jodie entered into a contract with Bruce. She did so
whilst relying on the statement that the horses were without hereditary diseases. The

1 Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1.

2 Roscorla v Thomas [1842] 3 QB 234.
3 Curtis v Chemical Cleaning Co [1951] 1 KB 805.
4 JEB Fasteners Ltd v Marks Bloom & Co [1983]
5 [2013] EWHC 111 (QB).
representation was false as the horse purchased suffers from a hereditary condition.
As a result of entering the contract, Jodie suffered a loss since the horse was
probably overvalued and she would not have purchased a horse with such a
condition. Moreover, she lost a great chance to win the race partly because of the
horse’s condition.

Accordingly, fictional fraud is likely to be established. Jodie could rescind the

contract and sue for damages as if actual fraud has been committed. 6

Fraudulent misrepresentation
Jodie could also claim for damages under the tort of deceit if she can establish
the existence of a fraudulent misrepresentation.7 Ludsin Overseas Ltd v Eco3 Capital
Ltd exposes the requirements for deceit.8 There must be a false representation, the
defendant must know the representation to be false or be reckless as to whether it is
true or false. The defendant intends that the claimant should act in reliance on it and
the claimant does so consequently suffering a loss. For both statements, Bruce knew
that the horse was not yet certified by a veterinarian and was reckless as whether the
horse did or did not have a hereditary disease. He also knew that Jodie would act in
reliance of that essential representation. As discussed previously, she did act in
reliance and suffered a loss.

In conclusion, Jodie could rescind the contract as well as make a claim to

recover all direct and indirect losses caused by the deceit even if not reasonably
foreseeable.9 She could claim for the difference in price between a horse with such a
disease and a horse of a similar type without a hereditary disease. Profits that the
claimant lost the opportunity to make on an alternative business are recoverable.10
By analogy, if the representation had not been made, she would not have entered the
contract and would have purchased a healthy horse, potentially winning the race.

Rescission and damages

6 Royscot Trust v Rogerson [1991] EWCA Civ 12.

7 Derry v Peek [1889] UKHL 1.
8 [2013] EWCA Civ 413.
9 Doyle v Olby Ironmongers Ltd [1969] 2 QB 158.
10 East v Maurer [1991] EWCA Civ 6.
 Rescission is the principal remedy to misrepresentation. It consists in
implementing the status quo ante. However, rescission may be barred if the innocent
party affirms the contract or delays too long before rescinding. Bruce could argue that
several months have gone by since the contract has been concluded and that since
Jodie has trained actively for several months with the horse, she has delayed too
long the rescission therefore affirming the contract. Jodie could in turn indicate that
she had not noticed the symptoms of the disease previous to the race thus not
realizing the false nature of Bruce’s statement. Many cases suggest that a lapse of
time cannot operate as a bar if the misrepresentee acts promptly after discovering
the truth. This was affirmed in Clough v London and North Western Railway, based
on the issue that a misrepresentee cannot be blamed for the inherent length of time
necessary to realize the falsity of a statement as long as rapid action follows.11 Bruce
could also claim that Jodie was responsible of ensuring the accuracy of his statement
by checking the certificate. However, the court is likely to consider her opportunity to
investigate the truth as irrelevant since Bruce was in the best position to provide
precise information.12 In this case, restitutio in integrum is possible.

Regarding damages, they can be claimed under the Misrepresentation Act

1967. The court is given the discretion to award damages for non-fraudulent
misrepresentations instead of rescission.

To conclude, Jodie has two actionable misrepresentations which allow her to

rescind the contract if she wishes,13 as well as claim for damages under fiction of
fraud or fraudulent misrepresentation. A claim under fiction of fraud is more likely to
succeed as Bruce’s fraud needs not be established. Rescission equates to Jodie
returning the horse to Bruce while recovering the £20000. Regarding damages, she
could claim all losses as a result of the contract namely the difference in value
between a healthy similar horse and the one purchased, as well as a percentage of
the potential gains from the race dependent on her probability of winning.

11 [1871] LR 7 Exch 26.

12 Redgrave v Hurd (1881) 20 Ch D1.
13 Bristol & West Building Society v Mothew [1996] EWCA Civ 533.
Breach of contract
As Jodie is a professional horse rider, the contract is a business to business
contract. There being no written contract, the Sale of Goods Act 1979 (SGA) implies
three terms. Firstly, according to section 13 of the Act, there is an implied term that
the horse must fit the description as free from hereditary diseases. This term was
breached as the horse did have a disease. Secondly, under section 14(2), there is an
implied term that the horse is of satisfactory quality. There is a reasonable
expectation that a £20000 racehorse should not suffer from a disease that affects its
capacities. Lastly, section 14(3) indicates that there is an implied term that the horse
is reasonably fit for the purpose for which it was purchased. Being purchased as a
racehorse, its inherent lack of speed breaches that term.

The intention of the parties to establish the healthiness of the horse and its
certification as terms of the contract could be objectively deduced from their conduct
based on ‘the totality of evidence’. 14 The Court is likely to consider that the
statements were intended to be contractually binding. Indeed, the statement was
expressed moments before the contract was made.15 Moreover, both parties were
aware of the importance of the statement as but for the latter, Jodie would not have
entered the contract. The statement of the good health of the horse was of high
importance to Jodie and could thus amount to a term.16 Bruce, as the seller, was in
better position to know the truth and that characteristic should be ‘within his own
knowledge.’17 In Schawel v Reade,18 the seller reassured the claimant indicating that
everything was in order with the horse and following that statement the claimant
bought the horse. The horse turned out unwell, so the buyer brought a successful
claim before the court.

Thus, the horse being unwell constitutes a breach of the contract upon which
Jodie could make a claim. Jodie could seek termination of the contract or
compensation for loss suffered after the breach. Robinson v Harman provides that
expectation damages should place the innocent party in the position as if the breach

14 Heilbut Symons v Buckleton [1913] AC 30 [51].

15 Routledge v McKay [1954] 1 WLR 615.
16 Bannerman v White (1861) 10 CB NS 844.
17 Ibid (n15) Bentley.
18 [1913] 2 IR 64.
had not occurred.19 She could be awarded the difference in value between 20000£
and the horse’s true value at the time of purchase. On the other hand, the ‘cost of
cure’ approach would enable Jodie to claim damages to enable the purchase of
£20000 healthy racehorse. Moreover, although Jodie’s chances of winning the race
on proper performance of the contract were not guaranteed, she arguably lost the
opportunity to win. Because her victory depended on the actions of other participants
i.e. third parties, the ‘loss of chance’ approach should be adopted.20 According to
Chaplin v Hicks, 21 since Jodie had a substantial chance of competing, she could
claim for a percentage of £50000 which the judges will evaluate relatively to her
chances of winning. An alternative are reliance damages which place the innocent
party in the position before the contract was made. These damages do not rely on
the evaluation of the judges. On this basis, Jodie could claim the restitution of the
£20000 without consideration as well as additional expenses related to the reliance
on the contract.22 Whilst more speculative, expectation damages could allow Jodie to
make a greater claim.

Bruce could argue that the defective equipment would break the chain of
causation between the breach and the £50000 loss of potential gains. However, the
horse’s slowness could amount to a sufficient substantial cause of the loss of the
race. Additionally, Bruce could put forward the remoteness of the loss of potential
income. In fact, whilst the loss of the race naturally results from the breach fulfilling
the Hadley v Baxendale first requirement,23 this loss is unlikely to be considered as
reasonably foreseeable as the race was not described as within Bruce’s knowledge.
As it does not meet the second part of the Hadley test, a claim for those expectation
damages is likely to fail. Thus, reliance damages should be the preferred alternative
for Jodie. Bruce may argue that she had a duty to mitigate her loss. However, she
trained the horse for several months without realizing and relied on the certificate of
the vet.

19 (1848) 1 Ex 850.
20 Allied Maples [1995] 1 WLR 1602.
21 [1911] 2 KB 786.
22 McRae v Commonwealth Disposals Commission [1951] ALR 771.
23 (1854) 156 ER 145.
The delay in delivery of the horse
Bruce promised he would deliver the horse within five days. However, he
delivered three days late. Whilst this constituted a breach of an express term, Jodie
accepted the breach through conduct according to section 35(A) SGA. Jodie cannot
claim for damages related to the late delivery for breach of warranty as she did not
incur a loss because of the delay,24 the horse was on time for practice.

Jodie v vet

Negligent misstatement
Jodie could make a claim against the veterinarian under negligent
misstatement at common law. In fact, although Jodie has not entered a contract with
the vet, the latter was still under a duty of care to establish a certificate under with
reasonable care. 25 The requirements for liability in tort for negligent
misrepresentation provided in Steel v NRAM are present. 26 It was reasonable for
Jodie to rely on the certification of a professional veterinarian regarding the state of
health of the horse. Also, a vet would have reasonably foreseen that a purchaser
would rely on the statement. The proximity between the parties is insufficient as even
though Bruce told Jodie that the horse had been certified by a vet, that certificate was
inexistant at the time the intention to enter the contract was manifested. Jodie
thought that the certificate was already existent when deciding to buy the horse. The
statement made by the vet is not a forecast nor a promise,27 it was a certificate which
does not give rise to a warranty. Additionally, contrary to Hunt v Optima, 28 the
purchase contract did not impose an obligation on the vet. Such a claim would not be
successful as Jodie did not base herself on the designated certificate to enter the
contract.

24 S 11(4) SGA.
25 Esso Petroleum Co Ltd v Mardon [1976] QB 801.
26 [2018] 1 WLR 1190 [23].
27 Ibid (n29).
28 [2014] Build LR 613.
Jodie v Horsie&Co

Jodie has signed an electronic contract with Horsie&Co with two clauses
limiting liability to £500 for financial loss caused by defects of the product and
excluding liability for injuries resulting from the use of the product. She is a
professional horse rider and purchases the equipment in order to exercise her
profession. Therefore, it is a business to business contractual relationship.

The validity of the exclusion of liability

The terms were incorporated as they were part of the signed contract.29 Whilst
they cover the liability incurred from the defect of the product, Jodie could still
possibly issue a claim based on statutory provisions.

Incorporation
In Thornton v Shoe Lane Parking Ltd, 30 Lord Denning indicated that the
incorporation of a total exclusion of liability for both personal injuries and damage to
the customer’s property needs to be clearly ‘printed in red ink with a red hand
pointing to it’. In this case, the terms are very wide and destructive of rights so it
could be required that the terms be printed in such a way. Horsie&Co could argue
that this requirement does not apply as the liability for financial loss is not completely
excluded but limited to £500. However, this limitation clause is likely to be considered
by the court as a pretence of a total exclusion clause and should therefore not be
treated differently. Therefore, Jodie could argue that these clauses were not
effectively incorporated into the contract.

Construction
There is no ambiguity in the formulation of the clauses. If the clauses mention
the company’s negligence, then liability for negligence is excluded. If negligence is
not mentioned, then the clause must be broad enough to include negligence
implicitly. The clauses appear ‘wide enough’. 31 However, since the clauses cover

29 L’Estrange v Graucob [1934] 2 KB 394.

30 [1971] 2 QB 163.
31 Canada Steamships Lines v R [1952] AC 192.
more than one type of liability, negligent liability is not excluded.32 They do not meet
the judicial threshold for exclusion of liability negligence. The clauses can be
interpretated contra proferentem.

Compatibility with statutory provisions

Regarding whether the clauses are compatible with the Unfair Contract Terms
Act 1977 (UCTA), the clause that seeks to exclude Horsie&Co’s liability for personal
injury is rendered automatically ineffective by section 2(1) UCTA. Also, s 2(2) UCTA
indicates that the clause regarding the exclusion of liability for defects must satisfy
the reasonableness test from s 11 UCTA. Whilst there is a substantial difference in
bargaining power between the parties as this is an electronic contract which cannot
be negotiated by Jodie, Jodie still could have chosen to purchase this equipment
from another manufacturer. Courts have manifested their greater reluctance to
determine clauses as unreasonable in B2B contracts owing to their valuation of the
freedom of contract.33 As mentioned above, considering the extent of exclusion of
liability, Horsie&Co has not undertaken sufficient efforts in bringing these clauses to
Jodie’s attention. Nevertheless, if the innocent party could have obtained an
insurance for this type of loss, then it could be considered reasonable to exclude
liability under a limitation clause.

In conclusion, such terms in a unilateral contract will in this case overweigh

the freedom of contract argument. Jodie is likely to be successful in claiming the
clauses to be enforceable in law due to their unreasonableness. Jodie could
therefore issue a claim against Horsie&Co for the £15000 of medical expenses due
to the injury as they were caused by the defect of the equipment sold by the
company. She could also claim for the cost of entering the competition and possibly
for a percentage of the potential gains related to winning the race.

32 White v Warwick [1953] 1 WLR 1285.

33Ibid (n31).
 BIBLIOGRAPHY

Primary sources

Legislation
Consumer Rights Act 2015
Misrepresentation Act 1967
Sale of Goods Act 1979
Unfair Contract Terms Act 1977

Cases
Allied Maples [1995] 1 WLR 1602
Bannerman v White (1861) 10 CB NS 844
Bristol & West Building Society v Mothew [1996] EWCA Civ 533
Canada Steamships Lines v R [1952] AC 192
Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1
Chaplin v Hicks [1911] 2 KB 786
Clough v London and North Western Railway [1871] LR 7 Exch 26
Couchman v Hill [1947] KB 554
Curtis v Chemical Cleaning Co [1951] 1 KB 805
Derry v Peek [1889] UKHL 1
Dick Bentley Production v Harold Smith Ltd [1965] 1 WLR 623
Doyle v Olby Ironmongers Ltd [1969] 2 QB 158
East v Maurer [1991] EWCA Civ 6
Esso Petroleum Co Ltd v Mardon [1976] QB 801
Evans J & Son Ltd v Andrea Ltd [1976] 1 WLR 1078
Hadley v Baxendale (1854) 156 ER 145
Heilbut Symons v Buckleton [1913] AC 30
Hunt v Optima [2014] Build LR 613
Inntrepreneur Pub Company v East Crown Ltd [2000] 2 Lloyd's Rep 611
JEB Fasteners Ltd v Marks Bloom & Co [1983]
L’Estrange v Graucob [1934] 2 KB 394
Ludsin Overseas Ltd v Eco3 Capital Ltd [2013] EWCA Civ 413
McRae v Commonwealth Disposals Commission [1951] ALR 771
Robinson v Harman (1848) 1 Ex 850
Roscorla v Thomas [1842] 3 QB 234.
Routledge v McKay [1954] 1 WLR 615
Royscot Trust v Rogerson [1991] EWCA Civ 12
Schawel v Reade [1913] 2 IR 64
Seng Pte Ltd v International Trade Corp Ltd [2013] EWHC 111 (QB)
Steel v NRAM [2018] 1 WLR 1190
Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163
Redgrave v Hurd (1881) 20 Ch D1
White v Warwick [1953] 1 WLR 1285

Secondary Sources

Books
O’Sullivan J, O’Sullivan & Hillard’s The Law of Contract (8th edn, OUP 2018)