Contract law does not have specific principle requiring disclosure, but there are certain cases where it is needed. Where there is misrepresentation, non-disclosure or mistake, the possible responses are: 1. The contract is void ab initio 2. The contract is voidable via rescission 3. The contract can be rectified to correct the mistake (see previous supervisions) 4. Damages can be awarded to remedy the wrong
Where the issue is a statement made in course of negotiations, the remedy will depend on classification of the statement: 1. Contractual term (a ‘warranty’) – damages for breach of contract, possibly termination for breach (depending on nature of term) 2. Misrepresentation – rescission (subject to bars), and potential tort or Misrepresentation Act 1967 damages
At one point, misrepresentation could be ground for rescission and damages were available only under the tort of deceit if there was fraud; no damages for innocent misrep. In Hedley Byrne v Heller (1964), HOL made clear breach of the DOC to avoid negligent misstatement could give rise to damages. 1967 Misrepresentation Act extended damages under s 2(1) to the case of misrepresentation inducing a contract where the representor cannot prove absence of negligence or bad faith. This made inference of collateral contract less necessary, although still necessary because representations as to future are harder to fit in scope of Act.
Categorising statements made in negotiations Mere puffs These have no legal effect, they mean nothing - Dimmock v Hallett (1866) (auctioneer claim that land ‘fertile and improvable = puff) - Cf. Carlill v Carbolic Smoke Ball Co (1893) (CBS tried to claim promise puffery; Bowen said extravagant promise was with aim to profit, should be bound)
Contractual Terms (warranties) The test is whether parties objectively intended it to be a term (see identification of terms – S3) - Heilbut, Symons & Co v Buckleton (1913) (Moulton: question is whether there is “evidence of an intention by one or both parties that there should be contractual liability in respect of the accuracy of the statement”)
A misrepresentation can be a contractual term, but does not need to be to ground a misrep claim. See statute about implied terms under CRA and SGA (see S3), esp CRA 2015.
Misrepresentations A material false representation of fact or law, addressed to the claimant, which induced C’s entry into the contract. - Pankhania v Hackney LBC (2002) (Confirms false statements of law can be misrep)
A statement of fact is required for misrepresentation; this must be objectively decided (would reasonable person think the representor asserting a fact?)
v Statement of fact is distinct from an opinion, which is not an actionable representation
Where there is an imbalance of knowledge, the better-informed party making the statement “impliedly states that he knows facts which justify his opinion” – thus it is a statement of material fact (Bowen, Smith v Land & House Property Corpn (1884)) - Smith v Land & House Property Corpn (1884) (most desirable tenant) - Esso Petroleum Co Ltd v Mardon (1976) (bad petrol production estimate; because of expertise, representation figure arrived at with reasonable care and skill)
Where parties have equal knowledge, statements of opinion will usually be taken as such - Bisset v Wilkinson (1927) (sheep farm conversion, 2,000 sheep = opinion, best guess)
In an insurance contract, statement of belief does not carry implied representation there are reasonable grounds for the belief, though there must be some basis - Economides v Commercial Union (1997) (underestimate of flat’s contents’ worth)
v A misrepresentation as to a man’s intention is a misstatement of fact - Edgington v Fitzmaurice (1885) (stated intent to use investment to expand business; actual intent to pay off existing debt = misrepresentation, misstatement of fact) § Bowen: “the state of a man’s mind is as much a fact as the state of his digestion … A misrepresentation as to the state of a man’s mind is, therefore, a misstatement of fact”
If someone changes mind later, will not be a misrepresentation if it was an accurate statement of intention at the time (but presumably only if after contract – if before, duty to correct) - Kleinwort Benson v Malaysia Mining Corpn (1989) (statement of policy to insure subsidiaries; policy changed ≠ misrep) § Cf. Wales v Wadham (1977) (said non-disclosure of wife’s change of intention not misrep, but this is a bad decision)
v Misrepresentation can be made through conduct; see below for non-disclosure vs mere silence - Spice Girls Ltd v Aprilla World Service BV (2002) (acted like H would still be in group)
v If statement is true when made, but becomes false (or party finds out), duty to correct the false impression (crucial moment is when representee enters contract and representation is false) - With v O’Flanagan (1936) (value of medical practice declined between representation and signing of contract)
Treitel argues this also applies to stiuations where you ought to have known it was false. Cartwright argues liability for misrepresentation is strict – even if D never aware it is a misrepresentation, should be liable.
Presumably converse applies – if false when made, but true when entered, no operative misrep. If maker knows statement became false and representee is in reliance, may be guilty of deceit.
A material inducement is required – the representation must in fact induce entry into contract (reliance) - JEB Fasteners v Marks Bloom & Co (1938) (motivation to acquire directors, regardless of misrep) - Cf. Zurich Insurance Co plc v Hayward (2017) (false insurance claim; insurers knew it was false, but no evidence, so settled; when found evidence, fact they knew when settling didn’t prevent inducement)
v Zurich Insurance made clear that: o not necessary in law to prove the representee believed the statement was true (but must still show inducement, which is a question of fact) o if representation objectively ‘material’ (would influence reasonable person), very strong inference of fact that it was causative in this case; particularly strong for a fraudulent (deliberately misleading) statement which is objectively relevant and material § Clarke said a fraudster cannot be allowed to deny the causative role the statement played, or that the statement was material
Handley (2015) argues it is correct to avoid a single-cause burden – this would involve hypothetical retrospective speculation. Stapleton also approved this approach; says the but-for test is of dubious validity, since decision-makers often have many reasons to act – there may not be a but-for cause.
v Misrepresentation only needs to be one reason for entering, not the only/main/decisive one - Dadourian Group International Inc v Simms (Damages) (Arden: “the misrepresentation does not have to be the sole inducement … it is enough if [it] plays a real and substantial part, albeit not a decisive part”) - Edgington v Fitzmaurice (C also relied on own mistake about receipts under contract) - Zurich Insurance
v It will not be sufficient to avoid liability to say the representee had or could have investigated the matter/found out the truth themselves - Redgrave v Hurd (1881) (purchaser ≠ look at papers, would have revealed worthless; still misrep; see Jessel) - Cf. Peekay Intermark v Australia & New Zealand Banking Group (2006) (false oral statement; true nature of investment in paperwork, signed = misrep corrected)
Remedies: Rescission for Misrepresentation Rescission operates where equity sets aside the contract induced by misrepresentation. Often described in the language of “unravelling”.
It is “not necessary … to prove that the party who obtained [the contract] knew at the time when the representation was made that it was false…” (Jessel, Redgrave v Hurd). Rescission is strict liability; no fault or awareness is needed.
Rescission makes contract voidable, not void. Takes effect retrospectively, treating situation like contract never formed (aim to put parties in start positions). (Cf. termination for breach – ends the contract moving forwards; previous rights/duties stay valid, does not matter if parties can’t be restored).
Limited authority says rescission is a self-help remedy – C only needs to give D notice, contract rescinded. Exception to actual notice where contract is for transfer of property and C repossesses, or where party at fault has deliberately made it impossible to communicate and C displays intention. - Car & Universal Finance v Caldwell (1965) (notifying police and Automobile Association sufficient to rescind from the fraudulent party who absconded)
v O’Sullivan (2000) doubts whether rescission is a self-help remedy – views as discretionary judicial remedy. There had been self-help rescission for fraud at common law, but equity had a broader doctrine of rescission outside fraud which was always judicial. Odd that CL is prevailing over equity here. Confusion perhaps arising from termination for breach, which is self-help.
v Islington LBC v Uckac (2006), Dyson: “A contract which is void is no contract at all. Since it never exists, it is not something which … can be ‘brought to an end’. A contract which is voidable exists until and unless it is set aside by an order of rescission made by the court at the instance of a party seeking to terminate it or bring it to an end. A representee … may affirm or disaffirm the contract … If he disaffirms and seeks to bring the contract to an end, the court may make an order of rescission, but in some circumstances will refuse to do so.”
Parties can get indemnity for expenses representor would necessarily have incurred (not compensation) - Eg. Whittington v Seale-Hayne (1900) (business rates and repair covenants of farm indemnified)
Bars to Rescission The starting point is that “the normal remedy for misrepresentation is rescission … [it] should be awarded if possible” (Longmore, Salt v Stratstone Specialist Ltd (2015)). However, there are bars:
v Affirmation – where the representee, with knowledge of misrepresentation (and that it gives him the right), elects not to rescind, rescission is barred - Peyman v Lanjani (1985) (must be aware of right to rescind for valid affirmation; but if representor views as valid affirmation and relies, representee estopped from denying)
v Laches – rescission is barred after a reasonable lapse of time from the making of the contract (in non-fraudulent cases; rescission can be claimed irrespective of time in instances of fraud) - Leaf v International Galleries (1950) (painting, five years = too long – deemed to accept performance under SGA = no breach remedies, which meant no rescission)
In Leaf, Denning: “rescission for innocent misrepresentation must at any rate be barred when a right to reject for breach of condition is barred” because a “condition is a term of the contract of a most material character” – reasoning that if breach claims are barred by lapse, rescission should be too. Controversial. Equitable remedies can be barred by equitable defence of laches, but not made out here since laches only begins to run when C learns of right to rescind.
Salt doubted whether Leaf still good law. Longmore notes Leaf was pre-1967 law, in light of s 1 seems not to be good law that representor should not be in worse position than if representation had become term of contract. It does not seem “lapse of time on its own can be a bar to rescission in this case.” Note Leaf and Salt both CA, no hierarchy.
v Impossibility of restitutio in integrum – rescission requires mutual restitution, so impossibility of putting parties in starting position is a bar at common law - Hunt v Silk (1804) (not misrep case; occupation during period = restitution impossible) - Clarke v Dickson (1858) (partnership became LLC, cannot restore)
Different matter in equity – Erlanger v New Sombrero Phosphate Co (1878), Blackburn: Equity “can take accounts of profits, and make allowance for deterioration … the practice has always been for a Court of Equity to give this relief whenever … it can do what is practically just, though it cannot restore the parties precisely…”. “Practical justice” emphasised by CA in Salt as well.
Spence v Crawford (1939), Wright: “the court will be more drastic in exercising its discretionary powers in a case of fraud than in a case of innocent misrepresentation”
This flexibility has been applied in modern law for ‘practical justice’ - O’Sullivan v Management Agency (1985) (UI case; Irish popstar; agency keep reasonable fee for work, but account of profits) - Salt v Stratstone Specialist Ltd (2015) (misrep on car’s newness; Longmore said depreciation and intermittent use should not be reason to bar rescission)
It is still always impossible to have partial rescission, leaving some obligations in place - TSB Bank plc v Camfield (1995) (loan misrep limited liability; not even valid up to limit)
v Rescission is barred where innocent third party would be made worse off; right to rescind is equitable, cannot be asserted against BFP for value with notice who takes title free (before rescission) (cf. if rescinded before BFP buys, no good title – V can sue in conversion, CL claim (not equitable) so BFP for value without notice ≠ defence) - Car & Universal Finance Co Ltd v Caldwell
v Completion? Angel v Jay (1911) suggested once contract is executed, rescission is lost; Denning disagreed in Leaf; 1967 Act, s 1(b), confirms executed contracts can be rescinded
Damages in Lieu of Rescission
Misrepresentation Act 1967, s 2(2): “Where a person has entered into a contract after a misrepresentation has been made to him otherwise than fraudulently, and he would be entitled, by reason of the misrepresentation, to rescind the contract, then, if it is claimed, in any proceedings arising out of the contract, that the contract ought to be or has been rescinded, the court or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of opinion that it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract were upheld, as well as to the loss that rescission would cause to the other party.”
If the representation is fraudulent, entitled to rescission – s 2(2) does not apply. 2(2) allows court to reconstitute rescinded contract. 2(2) does not include extra remedy for damages.
This is not an alternative to where rescission is barred – if rescission barred, no damages either. Salt v Stratstone Specialist Ltd (2015): “the words ‘in lieu of rescission’ must … carry with them the implication that rescission is available.” Before Stratstone, debate (Treitel thinks meant to be alternative; Witter (Thomas) Ltd v TBP Industries Ltd 91997) said alternative; Government of Zanzibar v British Aerospace (2000) said rescission must be possible), but this is settled law now.
Damages in lieu might be appropriate where great disparity between loss caused by misrep and loss rescission would cause. If damages awarded, should not exceed award as if misrep were a warranty. - William Sindall Plc v Cambridgeshire CC (1994) (obiter – no actual misrep; if there was rescission, D would lose £6 million, but feature in question only reduced property value by £18 thousand)
Remedies: Damages for Misrepresentation
Tort of Deceit Toulson (Zurich Insurance Co): “The defendant dishonestly made a material false representation which was intended to, and did, induce the representee to act to its detriment.” Fraud also includes where D is reckless as to truthfulness (aware he does not know if true or false, but makes statement anyways).
D of fraudulent misrepresentation is liable for “all the actual damages directly flowing from the fraudulent inducement”; it is not a defence that loss could not reasonably have been foreseen (Denning, Doyle v Olby (Ironmongers) Ltd (1969)). - Smith New Court Securities Ltd v Citibank NA (1997) (approved Doyle; party induced to bid more by fraudulent misrep could recover for excess and drop in market value from separate fraud because party ‘locked in’ to the shares by the original fraud)
v This includes ‘lost opportunity’ damages; it does not need to be a specific hypothetical opportunity, but must not be wholly speculative (Parabola) - East v Maurer (1991) (hair salon, competition – operation of other profitable business) - 4 Eng Ltd v Harper (2009) (fraudulent inducement to invest; damages for 80% chance of acquiring a different specific company) - Parabola Investments v Browallia Cal Ltd (2011) (fraudulent overstatement of fund performance, lost chance to withdraw funds and invest in rising stock market) § Arguably this case was over-speculative – has been criticised
Can rescind and claim in tort of deceit – tort is damages for loss, not breach of contract damages. Deceit does not allow CN as a defence (but is defence under Misrep Act – only distinction between remedies), and deceit liability cannot be excluded by contract (cf. liability for innocent or negligent misrep).
Tort of Negligence Historically, no compensation for negligent misstatement until Hedley Byrne v Heller (1964). This duty is confined to ‘special realtionships’. Not much advantage to bring tort of negligence when Misrep Act can be used instead – no need for special relationship, and remedy for generous.
Misrepresentation Act 1967, s 2(1) S 2(1): “Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made the facts represented were true.”
The misrepresentation does not need to be negligent/in breach of a duty of care (Bridge, Howard Marine & Dredging Co), C just needs to prove one was made.
The damages owed will be the same as if the misrepresentor had acted fraudulently - Royscot Trust v Rogerson (1991) (confirms meaning of statute; Balcombe; sale of car on credit) - Cf. Smith New Court Securities Ltd v Citibank NA (1997) (not necessary to decide the point, but HOL/Steyn went out of way to suggest Royscot not last word – point open)
Royscot criticism – odd to deem fraudulent those who cannot prove they acted carefully. Penalties for fraudulent misrep are harsh (esp considering burden on D to show reasonable ground for belief under Act). Hooley notes the section says ‘liable to damages’ but not the quantum – might not necessaril mean liable in fraud; however, Royston CA did not endorse this.
Under Hedley Byrne, Parliament did not need to assume damages had to be for fraud (could be for negligence) – so why say it if that isn’t what they meant? Debates in Hansard show parliament was aware of the drafting issue. Handley defends Royscot – ‘so liable’ must mean liable in deceit, which is supported by use of ‘notwithstanding’.
Rix J (Avon Insurance v Swire Fraser (2000)) commented that since “any misrepresentation provides damages upon the fraud basis … where there is room for an exercise of judgement, a misrepresentation should not be too easily found.” Hamblen J (Cassa di Risparmio v Barclays Bank (2011)) said Rix’s approach was “questionable in principle”.
The burden of proof to show reasonable ground for belief falls on D - Howard Marine v Ogden (1978) (Lloyd’s had wrong figures, shipping documents correct = no reasonable ground; see Denning dissent)
Contributory negligence does apply as a defence, but b/c of Redgrave v Hurd unclear how much scope - Gran Gelato v Richcliff Ltd (1992) (Nicholls confirmed CN applies; did not succeed on facts)
Where a misrepresentation is made by a third party, 2(1) will not apply considering “by another party [to the contract]” - Taberna Europe CDO II Plc v Selskabet (2017) (at QB, held misrep by a third party did fall within; CA confirmed 2(1) only applies where representor was party to contract)
Misrep made by third party is relevant in the mortgage case where bank has actual or constructive notice (Etridge (no 2)).
Damages for breach of contract If the false statement is a warranty, damages for breach of contract (‘loss of bargain’ damages – difference between what you got and what D represented you would get). Liability in contract is usually strict. - Esso v Mardon (1976) (C claimed warranty, but court said D not guaranteeing; however, representation number was arrived at through reasonable care and skill, negligence in failure; C received reliance damages (loss suffered) rather than expectation measure)
In Esso, Denning said courts used to “[elevate] the innocent misrepresentation into a collateral warranty” to “[do] justice,” before Hedley Byrne liability at CL and the Misrep Act; this may mean statements in negotiations are now less likely to be found to be terms of contract. Esso confirmed HB can apply to pre-contractual negotiations.
Possible to have concurrent liability (1967 Act s 1(a)) – C can choose to sue/rescind in misrepresentation or sue for breach of warranty. Cannot rescind for misrepresentation and claim for breach in contract, since rescission means contract does not exist.
Non-disclosure Where the misrepresentation is not positive statement, but omission to disclose, this generally is not misrepresentation (no duty to disclose/duty of good faith) – mere silence ≠ misrepresentation - Smith v Hughes (1871) (Cockburn: “passive acquiescence of the seller in the self-deception of the buyer will not entitle the latter to avoid the contract”; old oats) - Turner v Green (1895) (crucial outcome of case)
Misrepresentation can be inferred from conduct, or implicit in explicit true statement - Casa di Risparmio v Barclays Bank (2011) (Hamblen – “Silence by itself cannot found a claim in misrepresentation. But an express statement may impliedly represent something.”) - Dimmock v Hallett (1886) (implied farms had continuing tenants) - Nottingham Patent Brick and Tile Co v Butler (1886) (solicitor had not read papers, but when said ‘not that I am aware’ implied he had taken reasonable care to check)
For the sale of land/homes, caveat emptor is still an active principle as long as there is no fraud (but note law now changed for sale of goods) - Robbins v Jones (1863) (Erle: “fraud apart, there is no law against letting a tumble-down house”) - Sykes v Taylor-Rose (2004) (did not disclose murder house; CA said no duty for vendor to speak when asked if anything buyer should know; note if they’d asked whether anything affects value of property, would have had to speak)
Exceptions
v Contracts of the utmost good faith (uberrimae fidei) require disclosure of relevant information.
Primary example is insurance – since premiums assessed on knowledge provided by the insured party, there is duty to disclose all material facts - Carter v Boehm (1766) (Mansfield confirms concealment/non-disclosure voids contract) § The insured does not need to mention what the underwriter knows, ought to know, or has waived right to be informed of; does not need to be told of general topics of speculation (eg safety, natural peril risks, political peril risks)
This used to be a strict duty – consumer must disclose every circumstance he knew or was deemed to know a prudent insurer would consider material - Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd (1994) (circumstance material if prudent insurer would consider in setting premium, even if it did not affect outcome) - Lambert v Co-operative Insurance Society Ltd (1975) (W didn’t disclose H’s conviction; irrelevant she did not realise material or thought duty only to answer questions asked)
Now, softened by Consumer Insurance (Disclosure and Representations) Act 2012, s 2: consumers must take reasonable care not to make misrep to insurer; failure to comply with request to confirm or amend previous info can be misrep.
For non-consumer insurance, the duty of disclosure for businesses is now a duty to make fair presentation of risk to insurer; must disclose every material circumstance they (ought) know, or give insurer sufficient information to know it must make further enquiries – Insurance Act 2015.
v There also may be express statutory duties; eg Financial Services and Markets Act 2000, s 80(1) (listing particulars must contain all information investors and advisors would require and reasonably expect to find there to assess issuer of securities and rights attached to securities)
Remedies There are no general principles/duty of remedies for non-disclosure – do not necessarily get misrep remedies. Principles are instead specific to the circumstance.
v Insurance contracts – no tort or breach of contract, so insurer can rescind but cannot get damages (Banque Financiere de la Cite v Westgate Insurance Co (1990))
CIDRA 2012 limits remedy of rescission only where consumer breaches s2(2) duty and the insurer can prove that without the misrep, they would not have entered contract at all or would have done so on different terms (s 4). Sched 1 lists remedies: - if the misrep was deliberate or reckless, insurer can void contract, refuse all claims, and keep all premiums except to the extent it would be unfair to keep - if careless: § if insurer would not have entered on any terms, can void contract, refuse all claims, and return premiums § if would have entered on different terms (not incl. terms relating to the premium), contract treated as if entered on those terms § if would have entered with higher premium (whether other terms same or different), insurer can proportionately reduce amount paid on a claim
v Financial Services and Markets Act 2000, s 90 (breach of s 80 = liable to ‘pay compensation’)
Exclusion of liability for misrepresentation
For business-to-business contracts, Misrepresentation Act 1967 s 3(1): “if a contract contains a term which would exclude or restrict – a. Any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made; or b. Any remedy available to another party to the contract by reason of such a misrepresentation, That term shall be of no effect except in so far as it satisfies the requirement of reasonableness as stated in section 11(1) of UCTA 1977; and it is for those claiming that the term satisfies that requirement to show that it does.”
If C brings claim for rescission for innocent misrep or 2(1) damages, D cannot rely on exclusion unless fair and reasonable to include in the contract. S 3 only applies to non-fraudulent misrepresentation – CL rule that person can never exclude liability for fraud.
For consumer contracts, 3(1) doesn’t apply (3(2)); s 62 CRA 2015 does (unfair terms not binding on C).
Entire Agreement Clauses EACs acknowledge that the contract document itself is the ‘entire agreement’ – things said in negotiations are not terms of the contract. The purpose is to strip what would otherwise be collateral warranties of legal effect, precluding court from looking through negotiations (Inntrepreneur v East Crown ltd (2000) – Lightman). Not exclusion of misrep liability – does not fall within s 3.
Jacob (Thomas Witter v TBP (1996)) said these clauses do “not operate to exclude remedies for pre- contractual misrepresentations … if a clause is to have [that] effect … [the party] cannot be mealy- mouthed … he must bring it home that he is limiting liability for falsehoods he may have told.” - AXA Sun Life Services v Campbell Martin (2011) (confirmed EAC not exclusion of liability; s 3 does not apply because it is not an exclusion clause)
Non-reliance clauses There is a debate over whether NRCs (“the parties agree no statements/representations have been relied on in entering contract”) exclude misrep liability or prevent it from arising at all. - Watford Electronics Ltd v Sanderson CFL Ltd (2001) (Chadwick argued if parties have not relied, as NRC says, misrep liability does not arise so no question of exclusion – statutory control NA) - Cf. Peekay Intermark Ltd (2006) (Moore-Bick suggested party who signs such clause should be estopped from denying its effect because of L’Estrange) - AXA Sun Life made clear clause seeking to deny representation occurred would have to state so very clearly before contractual estoppel arises - Raiffeisen Zentralbank Osterreich AG v The Royal Bank of Scotland plc (2010) (Clarke concerned NRCs are unreasonable attempt to re-write history, as there is representation and reliance in fact; notes that for sophisticated commercial parties, perhaps should be given effect) - Springwell Navigation v JP Morgan Chase Bank (2010) (two sophisticated commercial parties; CA said NRC retrospective attempt to alter what has occurred, in substance an attempt to exclude) - Followed in First Tower Trustees Ltd v CDS (Superstores International) Ltd (2017) - Lloyd v Browning (2013) (clause that buyer entered solely on inspection and terms, not in reliance on statements; CA held feel within s 3) - Taberna Europe v Selskabet (2017) (two sophisticated commercial parties; suggests can prevent liability from arising by putting disclaimers in the statements, but statutory controls apply to NRCs trying to exclude misrepresentation liability after the event) - Did not discuss Springwell, so maybe per incuriam – CA bound by itself
After doubt, seems to be treated in substance as exclusion clauses – caught by s3.
Cf. clauses which say no representation was made or deny liability for them – also caught by s 3 - Cremdean Properties Ltd v Nash (1977) (attempt to exclude rescission/damages caught by s3)
Reasonableness? Where D is fraudulent, CL rule that there can be no exclusion.
Where parties are of equal commercial power, it is likely to be reasonable to exclude liability (just because caught by s 3 does not mean not allowed!) - E A Grimstead & Son Ltd v McGarrigan (1999) (Chadwick notes two reasons for equal parties to exclude liability – certainty, and reasonable to assume price paid reflects commercial risk each party willing to accept) - Springwell Navigation v JP Morgan Chase Bank (2008) (Gloster said dealings reasonable because substantial contracts between equal commercial parties; no term intrinsically unfair/ unreasonable; many terms standard market terms – certain presumption of reasonableness) - Cleaver v Schyde Investment Ltd (2011) (Etherton: nothing “self-evidently offensive” in a term restricting right to rescind in event of misrepresentation to cases of fraud, recklessness, etc; “perfectly rational and commercially justifiable apportionment of risk” in interest of certainty)
Fact that both are equal commercial parties with solicitors is not conclusive of reasonableness - First Tower Trustees Ltd v CDS (Superstores International) Ltd (2017) (NRC not reasonable, would have allowed landlord to say anything to pre-contractual inquiries)
Trial judges have significant power to determine reasonableness; once they do, hard to persuade appellate court to intervene (eg George Mitchell (Chesterhall) – CA felt unable to disagree).