Walters v Morgan
Court of Chancery
Citations: (1861) 3 De Gex, Fisher & Jones 718; 45 ER 1056.
The defendant agreed to grant the claimant a lease of over land for the purposes of finding and digging up minerals. In return, the claimant agreed to pay the defendant a sum for every ton of minerals taken off the premises. The defendant further agreed to grant the claimant an option to renew the lease for 21 years for the same rates after 12 months had passed.
At the time this contract was made, the defendant had only recently bought the land. He was not familiar with it or the value of minerals. As a result, he undervalued the minerals on the land. The claimant, by contrast, was familiar with the land at the time. The claimant pressured the defendant into signing the lease quickly without legal advice, stating ‘you will trust to me for making a fair allowance if [the minerals] should turn out more valuable’.
On the final day of the first lease, the claimant wrote to the defendant to exercise the option. The defendant refused to grant a second lease. He argued that the option was voidable for misrepresentation. The claimant sought specific performance of the option.
- Was the option voidable for misrepresentation?
The Court held in the defendant’s favour. The claimant’s mere failure to tell the defendant the true value of the land did not allow rescission of the contract. However, the claimant had taken positive action to stop the defendant working out the true value of the land. This was sufficient to amount to an actionable misrepresentation.
This Case is Authority For…
Unless the parties have a fiduciary relationship, a seller is not required to disclose to potential buyers any material fact which might affect the price of the goods being sold. Silence will not amount to misrepresentation. However, the seller may not induce a false belief in the buyer through positive words or conduct.
The inadequacy of consideration is not sufficient reason on its own to refuse the remedy of specific performance.