Innocent Misrepresentation: Shahida and Held a De Ste Croix

Introduction

The essential condition of the contract is that Shahida specifically wanted to purchase a painting by the local nineteenth-century artist Helda de Ste Croix. Shahida would probably not have bought the painting had it not been for the assurance of the sales assistant, Reegan's statement that the painting is in fact of the artist she is looking for. The display of the painting in the shop with the name Helda de Ste Croix tagged to it amounts to a representation that the painting is in fact by the stated artist.

Innocent Misrepresentation: Shahida and Helda de Ste Croix

Reegan, being an employee in the shop, is expected to have a fair expertise and knowledge of the items he is selling. Shahida is merely a shop owner, and it was not up to her to inspect if the painting was genuinely by the artist she is after to buy. The statement by Reegan was a key to her in entering an agreement of purchase (e.g., Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965] 1 WLR 623).

In the Sale of Goods Act 1979, ss 14 it is stated that "Where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality." Evidently, from the facts of the case, the quality of the painting by the apprentice is not as good as the original painter Shahida ought to purchase from. At the time of the purchase, both parties believed that the right product was being sold and bought. This highlights the importance of accurate representation in contractual agreements, as both parties rely on the information presented at the time of sale.

Legal Precedents and Implications

There has been a misrepresentation of fact in this case, and as Lord Justice Bowen said in Smith v Land and House Property Corp (1884) 28 Ch D 7, p. 15: "It is material to observe that it is often fallaciously assumed that a statement of opinion cannot involve the statement of a fact. In a case where the facts are equally well known to both parties, what one of them says to the other is frequently nothing but an expression of opinion. The statement of such opinion is in a sense a statement of a fact, about the condition of the man’s own mind, but only of an irrelevant fact, for it is of no consequence what the opinion is. But if the facts are not equally known to both sides, then a statement of opinion by the one who knows the facts best involves very often a statement of a material fact, for he impliedly states that he knows facts which justify his opinion."

Contractual Terms and Remedies

The essential subject matter of the contract, hence, the painting was correct. What was mistaken is the term or condition in the contract which could be either a breach of a condition that would terminate the contract or a warranty that would entitle for damage. Shahida has a ground for actionable misrepresentation of inducement since the statement of Reegan inclined her to purchase the painting. Reegan’s interest is to get paintings sold, so it is natural to consider that he is aware that Shahida will act upon his statements of opinion.

Section 2(2) of the Misrepresentation Act 1967 provides that, where a person has been induced to enter into a contract because of a negligent/innocent misrepresentation, "and he would be entitled, by reason of the misrepresentation, to rescind the contract, then, if it is claimed, in any proceedings arising out of the contract, that the contract ought to be or has been rescinded the court or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of the opinion that it would be equitable to do so…”

Conclusion and Recommendations

Reegan did not intend to commit fraud, and since he did not know his boss had changed a name for the painting, this I believe is a case of innocent misrepresentation. It would be probably natural for Shahida to want to return the painting as soon as possible and get her money back and hence be in a state before the transaction was completed. In this particular case, in order to claim rescission, the lapse of time will be key to the courts. Since it is non-fraudulent representation, time starts counting from the day the actual contract was completed, i.e., five years. The number of years that have gone by will show the court that she, in fact, has accepted the contract and a reasonable time has lapsed.

My advice will be that Shahida should claim damages under s2(2) of the Act, and it may only be awarded, as an alternative remedy to rescission, where rescission itself is also available. In a claim for innocent misrepresentation, the Court of Appeal held in Geoffrey Alan Salt v Stratstone Specialist Ltd [2015] EWCA Civ 745, 16 July 2015, that a court will only be able to award damages under s2(2) of the Misrepresentation Act 1967 as an alternative remedy to rescission if rescission itself is also available as a remedy. The Court of Appeal has further confirmed that a lapse of time may serve as a bar to rescission, but only where the lapse of time is reasonable such that it would be inequitable in all the circumstances to grant the rescission. What is reasonable will require close attention to the specific facts of the case. The court will most probably rule in her favor since her delay in rejecting the painting is due to her not discovering that it was not a genuine one she was after, and she can recover the price she has paid.

References

Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965] 1 WLR 623.

Smith v Land and House Property Corp (1884) 28 Ch D 7.

Geoffrey Alan Salt v Stratstone Specialist Ltd [2015] EWCA Civ 745.

Misrepresentation Act 1967, s2(2).

Sale of Goods Act 1979, ss 14.