Misrepresentation
Misrepresentations?
a) “Business booming”, “goldmine,” “able to retire soon.”
These statements are mere ‘puffs’, characterised by their lack of precision 1 and
hyperbole.2 Whilst the term ‘goldmine’ has been previously held actionable,3 in that
case the property in question was objectively worthless, and thus radically different
from its characterisation in a way that Geraint’s vineyard is not.
b) “Order books have twenty contracts… cover half of wine purchased.”
A vendor’s positive description of current tenants of a property, without disclosing his
knowledge of their impending departure, was held actionable.4 Considering Geraint’s
use of the vaguely promissory ‘will cover’, and that this false impression concerns the
potential loss of 50% of Deryck’s sales, Geraint’s half-truth is actionable.
c) “Turnover is $2 million p.a.”, “last year’s...profit was $700,000.”
If the low turnover of 2011 is actually characteristic of the vineyard’s average
turnover, and thus its inherent worth, it will constitute a misstatement of present fact,
and action will lie.5
d) “...Several...people keen to purchase, one...already made a bid.”
Falsely representing the existence of competing bidders is actionable in England,6
just as a defendant claiming he had been offered substantial sums of money to sell
has been so held in Victoria. 7 Because this statement is necessarily fraudulent,
materiality is not a requirement.8
e) “I wish to retire.”
Statements of intention, clothed in the language of present tense 9, are potentially
actionable if not honestly held by the plaintiff.10 In England, misrepresentation was
found where a vendor made the specific promise not to run a competing business in
the local area subsequent to the sale. 11 However, damages are awarded only to
correct the purchaser’s ‘prejudice or disadvantage’ incurred by ‘altering his
position’,12 and thus are not assessed by reference to the profits Deryck would have
made if Geraint had actually retired, but rather the ones he would make from
1Carlill
v Carbolic Smoke Ball [1893] 1 QB 256.
v Valherie [2005] SASC 350.
3Senanyake v Cheng [1966] AC 63.
4Dimmock v Hallett (1866) LR 2 Ch App 21.
5Downs v Chappell [1997] 1 WLR 426.
6Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC
254.
7Nicholas v Thomson [1924] VLR 554 (‘Nicolas’).
8Nicholas [1924] VLR 554.
9Balfour v Hollandia Ravensthorpe NL (1978) 18 SASR 240 at 252.
10Edgington v Fitzmaurice (1885) 29 Ch D 459 (‘Edgington’).
11East v Maurer [1991] 1 WLR 461 (‘East’).
12Toteff v Antonas (1952) 87 CLR 647 at 650.
2Mitchell
Geraint Misbehavin’: LAWS2112 Law of Contract B – Advice to Deryck
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purchasing a ‘hypothetical profitable business’ in the absence of Geraint’s
assurance.13
Terms/collateral contracts?
None of these representations are terms. Whilst clearly important to Deryck’s
purchase,14 Geraint’s comments are not couched in clearly promissory language,15
and the parole evidence rule will exclude spoken remarks from the written contract.16
Similarly, a collateral contract cannot contradict a written contract.17
Inducement?
Where a material representation is made so as to induce entry into a contract, and a
contract is subsequently entered into, there is a factual inference that there was
inducement.18 Deryck is not obliged to verify the truth of Geraint’s representations.19
Damages?
Damages are available for deceit or negligence.20 Deceit merely requires that Geraint
lacked honest belief in his representations. 21 Considering each concerned the
essentials of Geraint’s financial state, it is likely he was aware of their falsehood.
Alternatively, Geraint’s feigning he knew said details is sufficient to constitute
deceit.22 If proven, Deryck is typically entitled to recover the difference between the
property’s actual value at purchase and the sum paid,23 plus consequential losses
‘flowing directly’ from the purchase.24 It is arguable that said losses no longer have to
be foreseeable; 25 however, when considered within the overarching paradigm of
‘direct causation’, such that losses caused by the purchaser’s own ‘folly, error or
misfortune’ are not recoverable,26 the better view is that Deryck’s cannot recover for
the recession or the phylloxera virus.
Geraint is alternatively liable in negligence, as Deryck is part of a class of people
whom Geraint ought to have contemplated would reasonably rely on his statements,
and did so.27 The available damages will, in this case, be largely the same as for
deceit. Both the occurrence of a recession 28 and appearance of a disease 29 have
been characterised as unforeseeable circumstances.
13East
[1991] 1 WLR 461 at 467-8.
v Hill [1947] KB 554.
15JJ Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435.
16Equuscorp Pty Ltd v Glengallen Investments Pty Ltd [2004] HCA 55.
17Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 132.
18Gould v Vaggelas (1984) 157 CLR 215 at 236 (‘Gould’).
19Redgrave v Hurd (1881) 20 Ch D 1.
20Heilbut, Symons & Co v Buckleton [1913] AC 30.
21Derry v Peek (1889) 14 App Cas 337.
22Commonwealth v Murray ATR ¶80-207: 64.
23Potts v Miller (1940) 64 CLR 282.
24Gould (1984) 157 CLR 215.
25PalmerBruyn & Parker Pty Ltd v Parsons (2001) 208 CLR 388 at [65] (per Gummow J);
Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC
254.
26Gould (1984) 157 CLR 215 at 220.
27Shaddock (L) Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225.
28South Australia Asset Management Corporation v York Montague [1996] UKHL 10.
29South Australia v Johnson (1982) 42 ALR 161.
14Couchman
Geraint Misbehavin’: LAWS2112 Law of Contract B – Advice to Deryck
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Rescission?
Rescission is typically available for misrepresentation.30 However, several bars may
apply:

Restitutio in integrum
In equity, rescission requires only substantial restitution. 31 The deterioration of the
vineyard will thus not be fatal, so long as Deryck has made reasonable and
conscientious efforts to maintain it.32 Destruction of a contract’s subject matter may
bar rescission;33 however, as the land is the contract’s primary subject matter, and
the vines are essentially fungible, Deryck could simply pay the value of the destroyed
vines. Furthermore, the Court can order ‘partial rescission’34, such that any restitution
reflects the gains received by Deryck in selling the vineyard to the third party.35

Affirmation
Rescission must be communicated to the other party within a reasonable time.36
Although Deryck has waited several months to seek legal remedies, the comparative
briefness of this period, the fact that Geraint has suffered no tangible loss in this time,
and the possibility of Deryck’s legal ignorance37 make this bar unlikely to apply.
v Kruger (1955) 94 CLR 216 (‘Alati’).
94 CLR 216.
32Alati(1955) 94 CLR 216.
33Brown v Smitt (1924) 34 CLR 160.
34Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102.
35Hartigan v International Society for Krishna Consciousness Inc [2002] NSWSC 810.
36Leaf v International Galleries [1950] 2 KB 86.
37Coastal Estates Pty Ltd v Melevende [1965] VR 433.
30Alati
31Alati(1955)
Geraint Misbehavin’: LAWS2112 Law of Contract B – Advice to Deryck
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Misleading and Deceptive Conduct
As a natural person, action can be brought against Geraint under s18 of the
Australian Consumer Law (Queensland)38 as per the Fair Trading Act 1989 (Qld).39
‘Trade or commerce’?
The sale of land between individuals constitutes trade or commerce when
undertaken for commercial profit,40 and this conveyance will be as such even if not
part of the primary business of winemaking.41
‘Misleading or deceptive’?
a) “Business booming”, “goldmine,” “able to retire soon.”
‘Puffs’ are actionable if likely to cause error in the relevant audience, considered in
light of ‘the ordinary incidents and character of commercial behaviour’. 42 Geraint’s
fairly amorphous claims lack the objective inaccuracy of many actionable puffs; they
neither offer an external comparison,43 nor constitute a ‘firm commitment’44 and are
likely inactionable.
b) “Order books have twenty contracts… cover half of wine purchased.”
Silence is actionable where there is a ‘reasonable expectation’ of disclosure,45 such
as failing to disclose a key ‘unusual’ aspect of a property’s financial future.46 Just like
non-disclosure of the impending exit of a key employee, 47 the impending loss of 50%
of sales is actionable, particularly as such information was not openly available for
Deryck to discover 48 and Geraint possibly knew of Deryck’s incompetence. 49 It is
arguable that Geraint’s silence must be intentional,50 however, because it occurs as
part of a ‘half-truth’, this is unlikely to be required.51
c) “Turnover is $2 million p.a.”, “last year’s...profit was $700,000” AND
d) “...Several...people keen to purchase, one...already made a bid.”
As conduct directed at an individual, there are three relevant indicia:52
a. Nature of parties. Geraint is an affluent businessman with the
monopoly of knowledge, whilst Deryck is essentially incompetent.
and Competition Act 2010 (Cth) sch 2 (‘Australian Consumer Law’) s 18.
Trading Act 1989 (Qld) s 16.
40O’Brien v Smolonogov (1983) 53 ALR 107; Havyn Pty Ltd v Webster [2005] NSWCA 182.
41Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325(‘Bevanere’).
42Australian Competition and Consumer Commission v Kaye [2004] FCA 1363 at [122].
43Petty v Penfolds Wines Pty Ltd (1994) 49 FCR 282.
44Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [92].
45Demagogue Pty Ltd v Ramensky(1992) 39 FCR 31.
46Colliers Jardine (NSW) Pty Ltd v Balog Investments Pty Ltd (Unreported, Federal Court,
Beazley J, 16 December 1994).
47Bevanere (1985) 7 FCR 325.
48Miller & Associates Insurance Broking Property Ltd v BMW Finance Australia Ltd [2010]
HCA 31.
49Hai Quan Global Smash Repairs v Ledabow [2004] ATPR ¶42-205 at 52, 553.
50Rhone-Polenc Agrochimie SA v UIM Chemical Services (1986) 12 FCR 477, 489.
51Johnson Tiles Pty Ltd v Esso Australia [1999] FCA 477
52Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60.
38Consumer
39Fair
Geraint Misbehavin’: LAWS2112 Law of Contract B – Advice to Deryck
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b. Character of transaction. It is a transaction of serious business impart,
and Deryck could have self-protected.
c. Contents of representation. There is no disclaimer, and the
information is presented as Geraint’s own.
As each statement constitutes an unambiguous falsehood, both are actionable.
e) “I wish to retire.”
As a statement about the future, Geraint must show reasonable grounds for making
this claim.53 A failure by a vendor, when directly queried, to disclose his knowledge of
future competing businesses in the same area has been actionable under s18,54 and
likely would here.
Inducement?
The aforementioned common law position has been largely affirmed in the context of
s18.55
Remedies?

s236
s236 allows recovery for any ‘loss or damage’ caused by contravention of s18.
Typically, the measure of damages is analogous to tort.56 In the context of sale of a
business, this usually amounts to the price paid for a business less its actual value. 57
Similarly, consequential losses are recoverable if they are a direct result of the
misrepresentation, and even if the representations didn’t actually concern the subject
of those losses.58 Loss caused after discovery of a misrepresentation may suffice to
break the ‘causal chain’,59 however since it is clear that Deryck attempted to sell the
business from October 2011 and has had little opportunity to mitigate his losses, it is
arguable that these subsequent operative losses are still recoverable. It has further
been held that loss of profit through alternative business opportunities is
recoverable, 60 though there is no evidence Deryck was considering doing so. By
bringing an action under the Queensland legislation, Deryck’s losses will not be
reduced for a failure to take reasonable care, as they might under the
Commonwealth ACL.61

ss237 and 243
These sections, largely supplementary to s236, 62 empower a court to make
discretionary orders to compensate for loss or likely loss suffered through
53Australian
Consumer Law s 4.
v Your Tabs Pty Ltd (in liq) [2000] NSWCA 150.
55Ricochet Pty Ltd v Equity Trustees Executor & Agency Co Ltd (1993) 41 FCR 229.
56Gatesv City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 6, 14.
5757Gould v Vaggelas (1984) 157 CLR 215; Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184
CLR 281.
58North East Equity Pty Ltd v Proud NomineesPty Ltd [2010] FCAFC 60.
59Baillieu Knight Frank (Gold Coast) Pty Ltd v Susan Pender Jewellery [1997] ¶ATPR 41-542.
60Sellars v Adelaide Petroleum NL (1994) 179 CLR 332.
61Consumer and Competition Act 2010 (Cth) s137B.
62Peter Gillies, ‘Assessmment of Damages Under the Australian Trade Practices Act’ (May
2003) 8 International Trade and Business LawAnnual 1, 9.
54Hardy
Geraint Misbehavin’: LAWS2112 Law of Contract B – Advice to Deryck
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contravention of s18. A contract’s failure to meet expectations does not necessarily
enliven s18, as there must be actual loss or damage;63 here, Deryck’s spending $4
million on a $2 million property is sufficient to constitute loss. The general law of
rescission is a persuasive, but not decisive, influence on s237 interpretation.64 So,
whilst a delay of two years has been held sufficient to constitute affirmation, 65 a
lesser delay of nine months may not prove so, especially if Deryck is unaware of his
legal rights and no detriment has occasioned Geraint. It is clear that s237(2),
empowering the Court to apportion damages ‘in whole or in part for the loss or
damage’, does not typically allow reduction for negligence.66 Absent an ‘abnormal’
level of gross recklessness,67 Deryck has not vitiated s18’s effect.
CONCLUSION
Deryck can affirm the contract and seek damages at common law or under ACL
s236, seek to rescind the contract at common law or discretionary orders per ACL
s237.
63Marks
v GIO Australia Holdings Ltd [1998] HCA 69.
Australasia Pty Ltd v Cosmoluce Pty Ltd [2008] NSWSC 635.
65Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) FCR 546.
66I & L Securities Pty Ltdv HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41.
67Henville v Walker [2001] HCA 52 at [106].
64Chint
Geraint Misbehavin’: LAWS2112 Law of Contract B – Advice to Deryck
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BIBLIOGRAPHY
A – Articles/Books
Frederika de Wilde, ‘The Less Said – the Worse: Silence as misleading and deceptive
conduct’ (2007) 15 Trade Practices Law Journal 7
Peter Gillies, ‘Assessmment of Damages Under the Australian Trade Practices Act’ (May
2003) 8 International Trade and Business LawAnnual 1
Jeannie Paterson, Andrew Robertson and Arlen Duke, Contract Cases and Materials
(Thomson Reuters, 12th ed, 2012)
Jeannie Paterson, Andrew Robertson and Arlen Duke, Principles of Contract Law (Thomson
Reuters, 4th ed, 2012)
N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, (LexisNexis
Butterworths, 9th ed, 2008)
Nick Seddon and Saul Fridman, ‘Misleading conduct and contributory fault: Inconsistency
under the Australian Consumer Law’ (2012) 20 Australian Journal of Competition and
Consumer Law 87
B – Cases
Australian Competition and Consumer Commission v Kaye [2004] FCA 1363 at [122]
Alati v Kruger (1955) 94 CLR 216
Baillieu Knight Frank (Gold Coast) Pty Ltd v Susan Pender Jewellery [1997] ¶ATPR 41-542
Balfour v Hollandia Ravensthorpe NL (1978) 18 SASR 240
Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325
Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60
Brown v Smitt (1924) 34 CLR 160
Carlill v Carbolic Smoke Ball [1893] 1 QB 256
Chint Australasia Pty Ltd v Cosmoluce Pty Ltd [2008] NSWSC 635
Coastal Estates Pty Ltd v Melevende [1965] VR 433
Colliers Jardine (NSW) Pty Ltd v Balog Investments Pty Ltd (Unreported, Federal Court,
Beazley J, 16 December 1994)
Commonwealth v Murray ATR ¶80-207: 64
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594
Couchman v Hill [1947] KB 554
East v Maurer [1991] 1 WLR 461
Edgington v Fitzmaurice (1885) 29 Ch D 459
Demagogue Pty Ltd v Ramensky(1992) 39 FCR 31
Derry v Peek (1889) 14 App Cas 337
Dimmock v Hallett (1866) LR 2 Ch App 21
Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [92]
Downs v Chappell [1997] 1 WLR 426
Equuscorp Pty Ltd v Glengallen Investments Pty Ltd [2004] HCA 55
Gatesv City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Gould v Vaggelas (1984) 157 CLR 215
Hai Quan Global Smash Repairs v Ledabow [2004] ATPR ¶42-205 at 52, 553.
Havyn Pty Ltd v Webster [2005] NSWCA 182
Hardy v Your Tabs Pty Ltd (in liq) [2000] NSWCA 150.
Hartigan v International Society for Krishna Consciousness Inc [2002] NSWSC 810
Heilbut, Symons & Co v Buckleton [1913] AC 30
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) FCR 546
Henville v Walker [2001] HCA 52 at [106]
Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 132
I & L Securities Pty Ltdv HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41
JJ Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435
Geraint Misbehavin’: LAWS2112 Law of Contract B – Advice to Deryck
7
Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281
Leaf v International Galleries [1950] 2 KB 86
Marks v GIO Australia Holdings Ltd [1998] HCA 69
Miller & Associates Insurance Broking Property Ltd v BMW Finance Australia Ltd [2010] HCA
31
Mitchell v Valherie [2005] SASC 350
Nicholas v Thomson [1924] VLR 554
North East Equity Pty Ltd v Proud NomineesPty Ltd [2010] FCAFC 60
O’Brien v Smolonogov
PalmerBruyn & Parker Pty Ltd v Parsons (2001) 208 CLR 388 at [65]
Petty v Penfolds Wines Pty Ltd (1994) 49 FCR 282
Potts v Miller (1940) 64 CLR 282
Redgrave v Hurd (1881) 20 Ch D 1
Ricochet Pty Ltd v Equity Trustees Executor & Agency Co Ltd (1993) 41 FCR 229
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Senanyake v Cheng [1966] AC 63
Shaddock (L) Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225
Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254
South Australia Asset Management Corporation v York Montague
South Australia v Johnson (1982) 42 ALR 161
Toteff v Antonas (1952) 87 CLR 647 at 650
Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102
C - Legislation
Competition and Consumer Act 2010 (Cth)
Fair Trading Act 1989 (Qld)
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