CONTRACT LECTURES
TRANSCRIPT CONTRACT LECTURE 6
CLAIRE STRICKLAND Pre-contractual statements and misrepresentation Pt 1 time : 45 mins 05 secs
Track/slide 17
06.34
Whilst the case of Dimmock v Hallett 1866 demonstrates that sales talk is not normally
actionable, the case of Carlhill v Carbolic Smoke Ball Company 1893 shows that if the
sales talk is specific enough and shows an intention to create legal relations, it may be
construed as an offer.
And, whilst beliefs or opinions are not normally actionable as they do not amount to a
statement of present fact, the following case shows that they may be if the person stating the
belief or opinion does not genuinely hold that opinion or belief.
The case we need to consider is Bisset v Wilkinson 1927
This case was heard by the Judicial Committee of the Privy Council before 5 law lords on
appeal from the Court of Appeal in New Zealand. Note that the 2 parties are known as the
plaintiff/defendant and then alternately as the appellant/respondent depending on who is
appealing and who is responding to the appeal. First we shall track the progress of the case
through the courts and then look at the facts.
Thus, at trial in the Supreme Court of New Zealand
Bisset is the plaintiff who sues Wilkinson and another for money owed to him under a
contract for the sale of land. In the action Wilkinson counterclaimed and by way of defence
argued for RECISSION of the contract for MISREPRESENTATION.
Bisset won – in other words, the court held that there was no misrepresentation.
On appeal in the Court of Appeal in New Zealand Wilkinson appealed. The court set aside
the decision of the lower court and ordered recission of the contract on the grounds of a
misrepresentation. Thus, Wilkinson won.
Bisset then appealed.
The Privy Council in London upheld the original decision of the Supreme Court of New
Zealand – that there was no misrepresentation – and thus Bisset won. He was entitled to the
payments owed him under the contract.
This course of events shows how difficult it is sometimes to decide if a pre-contractual term is
or is not a representation and if so, if it is a misrepresentation.
The facts.
In May 1919 Bisset made a contract with Wilkinson and his business partner whereby
Wilkinson bought 2 blocks of land in southern New Zealand called ‘Homestead’ and
‘Hogans’ for £13, 260 10 shillings. Wilkinson paid £2000 when the contract was signed, the
balance being due in 1924. Interest on the balance was to be paid in the meantime every 6
months.
Wilkinson and his business partner set up in business as farmers and bought the land for
sheep farming. One of them had no knowledge about sheep farming but one did because his
father was a sheep farmer and he had inspected the land for them before the contract was
signed and given them advice.
During the negotiations Wilkinson and his partner alleged that Bisset had represented that the
land would sustain 2000 sheep. Bisset agreed that he had said something to this effect and he
said: ‘I told them that if the place was worked as I was working it, with a good 6 horse team,
my idea was that it would carry 2000 sheep’.
At trial the judge said that these comments were only an expression of OPINION not a
statement of fact and that it was an HONEST opinion. Thus there was no misrepresentation
as there was no statement of present fact.
In the Court of Appeal it was held to be a statement of fact and also a misrepresentation.
In the Privy Council their lordships said that one had to take account of:
-
the material facts
the knowledge of each party
their relative positions
the actual words used
and the actual condition of the subject matter, in this case the land.
By reference to such considerations it was held to be of crucial importance that the land in
question had NEVER been used for sheep farming. Thus a statement as to its carrying
capacity for sheep could only be an OPINION. We must remember the knowledge of each
side – on both sides there was knowledge of sheep farming.
The next question that had to be decided was whether this opinion was HONESTLY held.
The Privy Council said that if a REASONABLE MAN (an objective test) with Bisset’s
knowledge could have come to the same conclusion about the carrying capacity of the land,
then it could be an honest opinion – otherwise it could be a misrepresentation. They held it
was an honest opinion and so was not a misrepresentation.