This summary is intended for law students who are studying the important case of Attwood v Small [1838] 6 Cl & F 232. The case deals with the complexities of misrepresentation and the role of expert opinion in contractual agreements. It provides a detailed examination of the circumstances under which a contract can be voided due to false statements.

  • In the case of Attwood v Small [1838] 6 Cl & F 232, the courts held that it must be proven that the party was induced into entering the contract because of the alleged misstatement.
  • This contract law case is about insurance fraud and misrepresentation.
  • This case begs the question of what constitutes being induced into a contract.

Facts of the Case Attwood v Small

  • C and D agreed to a contract related to the purchase of a mine based on the size and value of a mineral ore.
  • C made false statements on the mineral ore’s capacity. D however provided experts who mistakenly agreed with C’s statement on the mine’s capacity. D then purchased the mine.
  • The evaluations conducted by both C and D’s experts were revealed as inaccurate 6 months late. D then pursued a claim of false representation and attempted to rescind the contract.

Issues in Attwood v Small

  • Did C rely on the representation made or expert evidence?
  • Did C act upon that reliance?

Held by House of Lords

  • Judgment reversed – there was no evidence of fraud.

Lord Wynford

Reliance on the representation

  • Reliance is enough for a successful claim of false representation to terminate a contract.
  • C wilfully prevented papers from coming out to D and should not have done so.
  • “But what is a reasonable time for the party to make his objection, is particularly a question of fact to be judged of properly by a jury on a due consideration of all the circumstances of the case, of the importance of the subject, the difficulties that a prudent man would find himself encumbered with when attempting to make up his mind whether it formed an objection to the contract or not”.

Lord Brougham

Acting upon the reliance

  • ”Is there any such fraud as gave rise to the contract which ought to entitle the party to have that contract rescinded? Then would arise the question of legal and equitable fraud. It is sending an equitable question to be tried by a jury”.
  • D does not have a duty to corroborate the representation relied upon. Typically there is a falsehood when the other party has no knowledge of the matters but here experts were considered before making a decision.
  • “The agent must, in fulfilment of his directions, have made a representation; and moreover, the representation so made must have had the effect of deceiving the purchaser; and moreover, the purchaser must have trusted to that representation, and not to his own acumen, not to his own perspicacity, not to inquiries of his own”.

Earl Devon

  • “A Court of Equity will only interfere with this doctrine of the common law in those cases, in which it is proved that one party has made a representation of a material circumstance which he knows to be false, and the falsehood of which the other party has no means of knowing; and in which it can be further shown that the contract, which it is sought to set aside, was founded upon this misrepresentation so made, and in reliance of the facts so misrepresented”.
  • The circumstances of C and D must be taken into account. The buyer did not knowingly rely on the statements made by the seller instead his judgment was influenced by his own experts who he sent to monitor the mine.

Significance of the Case on the Development of the Law

Attwood v Small is a cornerstone case in contract law, primarily dealing with the issues of misrepresentation and the rescission of contracts. The significance of this case extends through its detailed examination of reliance on expert advice and its impact on the enforceability of contracts. Here are three critical aspects in which Attwood v Small has influenced subsequent legal developments:

  1. Clarification of Misrepresentation and Reliance: The case highlights the necessity for the claimant to demonstrate reliance on the defendant’s misrepresentation when entering into a contract. This principle has been pivotal in shaping the doctrine of misrepresentation in contract law, influencing numerous cases such as Redgrave v Hurd (1881), where reliance on a misrepresentation was again central to the court’s decision to allow rescission.
  2. Expert Opinion and Due Diligence: The role of expert evaluations in Attwood v Small underscored the limits of relying on external advice when making contractual decisions. This aspect of the case has had a lasting impact on how contractual due diligence is perceived, particularly in cases like Smith v Eric S Bush (1990), where the court considered the reasonableness of relying on professional advice when entering into contracts.
  3. Rescission Rights and Contractual Remedies: The decision in Attwood v Small also contributed to the development of legal standards regarding the remedies available for contractual misrepresentation. It set a precedent for the conditions under which rescission could be an appropriate remedy, influencing later cases such as Leaf v International Galleries (1950), which further elaborated the conditions under which a contract could be rescinded due to misrepresentation.

Exam Questions and Answers

Below you will find answers to questions that are most commonly asked based on this case.

How does the burden of proof for misrepresentation vary in cases involving expert and non-expert advice?

The burden of proof for misrepresentation requires the claimant to demonstrate reliance on false statements, which varies significantly between expert and non-expert advice. In cases involving experts, like Smith v Eric S Bush (1990), courts expect a higher degree of reliance due to the expert’s assumed knowledge and competence. Conversely, with non-expert advice, the claimant must show they reasonably relied on the advice given the adviser’s apparent authority or knowledge.

What are the limits of contractual liability in cases where both parties have access to expert advice?

When both parties have access to expert advice, the limits of contractual liability hinge on the reasonableness of their reliance on this advice. In Smith v Eric S Bush, the court determined that liability could be limited if both parties were aware of the expert’s limitations and still proceeded. This suggests a mutual understanding and acceptance of potential risks associated with the advice, potentially limiting claims for misrepresentation.

How have modern contract laws evolved to address the complexities introduced by technological advancements in expert evaluations?

Modern contract laws have adapted to include more explicit terms regarding the use of technology in expert evaluations. Recent cases, such as BSkyB Ltd v HP Enterprise Services UK Ltd [2010], reflect these changes, emphasizing the need for clear contractual terms on the scope and limits of technological evaluations. This ensures both parties understand and consent to the methods and implications of technologically driven expert advice, reducing disputes over misrepresentation.