Smith v Land & House Property Corporation
Court of Appeal
Citations: (1884) 28 Ch D 7.
The claimant put up their hotel for sale. The particulars of sale described the property as being let to a ‘most desirable tenant’ for a rent of £400 over a 7.5 year term. The defendant sent their secretary to examine the property. The secretary reported back that it was unlikely that the tenant could pay that rent given the poor business he was doing. This was correct – the tenant had missed several payments.
Despite this, the defendant chose to believe the claimant that the tenant was nevertheless pay the rent. They bid on the property and won. Before the property was transferred, the tenant went into liquidation. The defendant refused to complete the sale, so the claimant sued for specific performance. The defendant responded that the transaction should be avoided for misrepresentation.
- Had the claimant made a material misrepresentation?
- Did the defendant rely on that misrepresentation when entering the contract?
The Court of Appeal held in favour of the defendant. The description of the tenant as desirable was not a mere opinion. It contained an implicit assertion of fact: that the claimant new of no reason the tenant might not be considered desirable. In fact, the claimant did know of a reason – the tenant had not been paying the rent. As such, the claimant made a misrepresentation. This defendant had relied on the claimant’s misrepresentation when entering into the contract, so it could be avoided.
This Case is Authority For…
A statement of opinion can amount to a misrepresentation if it contains an implicit assertation of fact.
A misrepresentation induces the contract if but for the misrepresentation, the innocent party would not have entered into the contract.