• Internal Code :
  • Subject Code : BULAW
  • University : Federation University
  • Subject Name : Law


Bea’s potential claims in contract law against Steven

Steven is guilty of misleading and deceptive conduct which is a statutory prohibition that does not allow for making misrepresentations. The statutory prohibition is contained in Section 18 of the Australian Consumer Law. The whole basis of contractual negotiations is built upon the duty of the contracting parties not to engage in misleading and deceptive conduct. Misleading or deceptive conduct covers statements portraying a business to be profitable when in fact it is not. Similarly, a statement with respect to a machine purporting the same to be working when in fact it is not would be actionable misrepresentation if in fact the machine is causing a loss owing to its failure in its operations. The misleading conduct may not be the exclusive cause for the damage or loss occasioned as a result of the conduct. 

A misrepresentation is the provision of falsified information by one party to the other party in such a manner that the other party is induced by the first party to enter into the contract per Redgrave v Hurd and Walters v Morgan. A fraudulent misrepresentation is with reference to a statement of fact which is made devoid of any honestly held belief in the truth of the statement along with an intention that the other party or the recipient of the statement of fact will contract with the paty by getting induced by such statement of fact, per Commercial Banking Co of Sydney Ltd. v. RH Brown & Co. The essential point to highlight here is that the innocent party must have been actually induced to enter into the contract. In such a situation, the fraudulent misrepresentation is actionable. This is in contrast to “innocent misrepresentation” which is with reference to an honest but false statement of past or existing pre contractual statement, per Carr v. Westward Ho Gold Development NL, Edgington v, Fitzmaurice and Civil Service Co-op Society of Victoria Ltd. v. Blyth. Such misrepresentation is done in the context of pre contractual negotiations.  Further, a conduct may constitute an impression that is misleading, as implied from the behavior of the party or the surrounding circumstances, per Legione v Hateley. It has been held that a conduct which is proactively designed to conceal information or is misleading would result in the bringing forth of an obligation on part of the person making the conduct reveal the correct position, per Jennings v. Zilahi Kiss. 

The conduct of Steven must be analyzed from his behavior and surrounding circumstances, per Legione v. Hateley. The action of Steven in representing to Bea that the painting was an original painting by the reputed artist Arthur Master constituted a misleading and deceptive conduct in terms of a misrepresentation in terms of Section 18 of the Australian Consumer Law. Bea had gone to the store upon being induced by the advertisement of Steven which proclaimed that “Steven’s Art and Antiques – The Finest in Collectibles – Internationally Recognized Artists!” thereby purporting to sell Antiques sold by reputed International artists. Steven had placed the painting signed with the name “Master” thereby indicating that the painting was by the reputed international artist Arthur Master and had in fact specially answered in the positive when Bea specifically asked as to whether the painting was an original one by Master, thereby creating an impression in a reasonable mind that “Master” was with reference to the international artist. This was a false information as it later transpired that the painting was not by an international artist but a local artist sharing the same surname of “Master” when Bea got the painting examined by an art expert later upon having it re-examined for potential resale. As per Redgrave v Hurd and Walters v. Morgan, the advertisement of Steven being false as Steven had for sale painting by local artist instead of international artist and having induced Bea to purchase such painting committed Misrepresentation. As per Jennings v. Zilahi Kiss, Steven was bound to reveal the correct position in light of the advertisement which referred to his offerings to be only for international artists.  Thus, Steven knew that his assent to Bea’s query regarding the creator of the painting was devoid of honesty as his reference to “Master” was with reference to the local artist instead of an international artist, thereby committing fraudulent misrepresentation, per Commercial Banking Co of Sydney Ltd v RH Brown & Co. Thus, Steven committed an act of fraudulent misrepresentation as it was on the basis of his false representation that the painting was by an international renowned artist coupled by his indication that the painting was by “Master” that Bea was induced to enter into the contract with Steven to buy a painting which she thought was by Arthur Master, making the fraudulent misrepresentation by Steven to be actionable. 

Steven’s potential defenses 

Steven may plead defense to Misrepresentation with regard to his conduct indicating the painting to have been done by the internationally renowned artist Master by proving on the basis of reasonable grounds that the statement made by Steven was believed by him to have been true. Alternatively he may plead that some other person had made the statement and that he did not have any reason to know that the statement which was made was not true. In the instant case, it was Steven who had purported in response to Bea’s query as to whether the painting was prepared by “Master” originally. Although Bea may have been referring to the internationally acclaimed artist Arthur Master, Steven may take the defense that the painting was done by Andrew Master instead of Arthur Master and had honestly believed when Bea inquired about the creator of the painting that the same was done by the Andrew Master instead of Arthur Master. 

Party which is likely to prevail in the event that the case goes to court 

In the event that the case goes to court, it is likely that Bea would prevail over Stephen. This is because Bea was induced by Steven’s advertisement proclaiming that the paintings sold by Steven were done by internationally renowned artists. The reference given in the painting was signed as “Master” which in the context of the advertisement would, according to a reasonable man, be with reference to the internationally acclaimed artist Arthur Master instead of Andrew Master, the local artist. 

Remedies in contract law available to Bea

In the instant case, Bea had been represented with a lie from Steven that the painting sold to her was done by Arthur Master, the renowned international painter, when in fact it was by a local artist called as Andrew Master. The worth of the painting by Andrew Master was merely around $400 whereas as it was represented to Bea that the painting was by Arthur Master, she considered the painting to be worth $40,000. However, she bought it for $4,000 which greatly exceeds the actual worth of the painting. As a result, Bea may seek remedies in contract law against Steven. 

Bea may seek various remedies in contract law against the act of Misrepresentation by Steven. These may be statutory remedies provided under the Australian Consumer Law as well as common law remedies. Statutory remedies under Section 18 of the Australian Consumer Law include enforcement and civil remedies as delineated under Chapter 5 of the Australian Consumer Law. These include pecuniary penalties, injunctions and damages. 

In addition to statutory remedies, the misled party, which in this case is Bea may proceed against the other party, which in this case is Steven, for the misleading action in telling a lie or negligently providing misinformation, as a tort based action for the resultant losses accrued to Bea. With reference to an action in deceit or misrepresentation, the burden of proof is on Bea to show that Steven committed the act of misrepresentation. Bea may allege deceit or misrepresentation by proving that Steven actually lied or made statements without duly considering whether or they were true. The remedies which may be sought by Bea based on misrepresentation would depend on the character of the misrepresentation. As such, for fraudulent misrepresentation, the available remedy is that of rescission of contract. This would be on the rationale that it would be unconscionable to allow the representor, in this case, Steven to persist in its own strict terms and procure a benefit as a result of its false representation, per Redgrave v Hurd. Thus, Bea may seek both rescission of contract as well as damages due to the acts of misrepresentation by Steven.

If Bea claims innocent misrepresentation, then she may be entitled to her claim of relief to rescission of contract as in the case of rescission of contract, evidence of fraud is not material, with the only requirement for satisfaction being that of misrepresentation. Bea may also claim rescission of contract in case of fraudulent misrepresentation, however, in such a case, she may have to fulfil a higher or stricter burden of proof. On the other hand, if Bella claims fraudulent misrepresentation, she may seek damages in addition to rescission of contract. 


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