With v O’Flanagan
Court of Appeal
Citations: [1936] Ch 575; [1936] 1 All ER 727.
Facts
The claimant bought a medical practice from the defendant. During negotiations, the defendant told the claimant that the profits for the business were £2000 per year. This was true at the time. However, by the time of contracting circumstances had changed. The profits were substantially lower. The defendant failed to tell the claimant this. When the claimant found out, they sued for rescission of the contract.
Issue(s)
- Could the contract be rescinded for misrepresentation?
Decision
The Court of Appeal held in favour of the claimant and rescinded the contract. The defendant made their representation with a view to inducing the contract. It should therefore be treated as a continuing representation. This being the case, the defendant had a duty to inform the claimant of the truth when circumstances changed.
This Case is Authority For…
Normally, mere silence is not a misrepresentation. However, if one party makes a statement which later becomes false, they are generally under a duty to correct that statement. If they do not, this can be an actionable misrepresentation.
Other
There may be other cases where a party has a duty of disclosure. This is usually true in insurance contracts and fiduciary relationships, for example.
