Question

A few days later Mr Choden is investigating the purchase of a cafe in the city from William. He does a thorough analysis of the café business and is impressed but Mr Choden particularly likes the café because the premises include an upstairs apartment which suits him in every way including its central city location. When showing Mr Choden around the café on one of his visits one of the customers exclaims “This is a great buy. It’s always packed here at lunch time.” WIlliam quickly says “That’s right; we always have full tables at lunch time because of the workers from the furniture shop nearby. We are the closest cafe.” This is true but William does not mention that the shop owners have told him that the shop will soon be closed and that the furniture shop will be moved to the suburbs. After William and Mr Choden sign the written contract for sale of the cafe an announcement comes that the shop will soon close. Mr Choden is annoyed but thinks that he still wants to go ahead with the purchase although he has not said anything to William.

QUESTION THREE: (20 marks. 720 words maximum)

Discuss whether William has made a contractual misrepresentation about the business to Mr Choden and the possible remedies that he might have under the Contract and Commercial Law Act 2017. Include in your answer a brief explanation as to whether the customer’s response is of any significance.

Answer 1

Issue: Mr. Choden is interested in purchasing William's cafe. He is particularly impressed by the upstairs apartment and the central location. While he is being shown around the cafe by William, a customer pointed out that it would be a good buy, as the cafe is always packed at lunchtime, and William too agrees, saying the workers of the nearby furniture store have their lunch in the cafe. But he does not mention that the furniture store is about to close down shortly. After the contract is signed, it becomes known to Mr. Choden that the furniture store is closing down.

Law: One of the essential elements of a valid contract is free consent between the contracting parties. Consent is free when it is not caused by coercion, undue influence, misrepresentation or mistake. If a party to a contract has been induced to enter into a contract by misrepresentation, whether innocent or fraudulent, by another party to the contract, the injured party is entitled repudiate the contract and to recover damages from that other party., as if the representation were a term of the contract that has been breached ( S. 35 of the Contract and Commercial Law Act, 2017).

Analysis: Though the primary reasons for Mr. Choden to be interested in the property seem to be its central location, and the upstairs apartment, the volume of business of the cafe must also have been one of his reasons. There has been misrepresentation on the part of William by not mentioning that the nearby furniture shop, the workers of which were a major source of revenue for the cafe, was closing down shortly. Whether such representation was innocent or fraudulent is besides the point.

Conclusion: As Mr. Choden's consent was caused by misrepresentation, it is a voidable contract. He can choose to repudiate the contract, and he should be able to recover not only the price paid for the cafe, and also damages for any loss that he may have suffered as a result of the contract.