Boris Ignachkov Legal Principles and Key Points
- In the case of With v O’Flanagan [1936] Ch 575, the court held that while disclosure is not generally a duty, it is crucial to disclose in all contracts particularly when a representation has been made in respect of an intention.
- This contract law case is abut rescission and misrepresentation.
Facts of the Case
- C wanted to sell his medical practice and informed D of the annual income the practice made.
- C then became ill causing the value of the practice to drop significantly. D sought to rescind the contract because the practice’s income was no longer at its stated income per annum.
Issues
- Whether a misstatement has been made if it was true during pre-contract enquiries.
- Whether facts must be disclosed if circumstances change prior to signing a contract of sale.
Held by Court of Appeal
- Appeal allowed – since C did not inform D of the change in circumstances when the medical practice was sold, the statement made therefore constituted to a misrepresentation.
Lord Wright MR
Misrepresentation
- “A representation is not like a warranty; it is not necessary it should be strictly construed or strictly complied with; it is enough if it is substantially true; it is enough if it is substantially complied with. If it is not substantially complied with then the court finds itself in the range of misrepresentation and must give effect to that position if it is satisfied that the plaintiffs acted upon the representation in concluding a bargain about which there can be no doubt in this case”.
- The judge referred to Davies v London and Provincial Marine Insurance Co [1878] 8 Ch D 469 where it was similarly held failing to disclose it in time counts as withholding information therefore constituting as misrepresentation.
- As demonstrated by in Re Scottish Petroleum Co (1883) 23 Ch D 413 and Smith v Kay [1859] 7 HL Cas 750, “the position is based upon the duty to communicate the change of circumstances. The matter, however, may be put in another way though with the same effect, and that is on the ground that a representation made as a matter of inducement to enter into a contract is to be treated as a continuing representation.”
- C was liable because the statement was a continuing representation which later proved to be false.
