Part1:
Pure economic loss could arise when there is no physical damage that results from a negligent statement, instead of a negligent action. A defendant's carelessness could give rise to a claim of Negligence in case a duty of care is established. In the Chaudhry v Prabhakar [1989] [1]case, the focus is on the duty of care. In this case, the plaintiff sued the defendant for wrongly advising her after the friend claimed to have adequate knowledge about cars. The facts are that the defendant claimed to know cars and provided help to the plaintiff to purchase a vehicle. The defendant recommended a car, and the plaintiff bought a car after she was informed that it was accident-free and thus in good condition. Nonetheless, the car had observable damage, but the defendant did not enquire about the cause. The fact is that the car was roadworthy because of the previous accident[2]. Stocker and Stuart-Smith L.J held that the volunteer owed his principal of duty of care appropriate under the circumstances. Judged objectively, the defendant had the actual degree of skill and experience needed to make a better judgment. Stuart Smith LJ stated that when putting into consideration the question of whether a duty of care arises, then the association between the involved parties is material.[3]
The decision made in the Chaudhry v Prabhakar[4] case has been criticised because it contradicts dicta in Hedley Byrne[5] that suggested a duty could only arise where the advice was sought and given in a business context. The argument made is that dusty of care applies when business advice has been sought and provided in exchange. In the case of Chaudhry v Prabhakar[6], the plaintiff and defendant were both friends, and the issue of special relationships was introduced. Nonetheless, Stuart Smith LJ contended that the gratuitous agent knew the principle of depending on judgment and skills. In addition, a standard of duty of care is required of a gratuitous agent.[7] Conversely, May L.J stated that it is doubtful if the duty of care existed as rightly made in law. For the principle to be applicable, a duty of care must emerge in cases where a party provides gratuitous advice based on their skill and knowledge. In addition, an agent must be reasonable enough when giving the required advice to a client because they have a duty of care.
Stocker L. J adopted the facts contained in Stuart-Smith L.J.'s judgment. In line with Stuart-Smith L.J.'s facts, the question of whether a duty of care was owed or not arose because the defendant in the case was a gratuitous agent and owed the applicable duty.[8] However, the issue of duty of care could be a matter of dispute even when it existed. A special relationship only emerges in cases where the defendant can give a response to an inquiry made by the claimant, and not where advice has been volunteered. For example, the House of Lords in Caparo Industries plc v Dickman 1990) held that a proximate relationship has to exist between defendant and claimant before liability in negligent misstatement arises. Thus, the case Chaudhry v Prabhakar[9] has been criticised because the defendants owed no duty of care to the claimant, as the relationship was not adequately proximate. Thus, the tort of negligence must be founded incrementally and not by means of a single general principle.
Part 2:
Misrepresentation and nondisclosure are the two important bases for actions under tort law. Where there is hidden or false information, misrepresentation, and nondisclosure play a vital part and imply a standard of care, a reflection of negligence is addressed by tort. When information is directly withheld or misrepresented, a tort of negligence is presented.[10] Key information was held by Safety Boots GmbH regarding the resignation of Jane, and therefore, nondisclosure occurred. If a party is found to have not disclosed all the information, the party runs the risk of committing tortious negligence. The purpose of the case analysis is to provide advice to Safety Boots GmbH as regards who should be paid the commission from the 10 large orders from Scotland and on any future commission on orders from Scotland.
Facts
The following are the facts about the case: Ali was contracted by Safety Gear GmbH on 1 January 2016 to sell its safety clothing to large and medium-sized construction and manufacturing businesses in England. The agreement was 30% commission on all orders that Ali placed. Safety Gear GmbH confirmed the 10 large orders made by Ali and dispatched the goods. After the time of payment, Ali realized that the commission on the Scottish orders had not been included, and upon asking, he was informed that the area was covered by Jane, hence no payments.
Issues
1) At the time Ali placed the 10 large orders, Scotland was not covered by Jane, because she had already resigned as an agent to go and work for another business.
Case Analysis
In business law, a contract exists between two or more parties in an agreement, and failure to fulfil the agreed terms and conditions and a breach of contract.[11] A contract can be binding, either written or verbal. Violation of the standard of care emerges when there is nondisclosure or misrepresentation of information. When entering into a contract, verbal or written, parties are required to act in the utmost good faith and ensure that there is full and fair disclosure of all material facts.[12] This is necessary to avoid fraud liability resulting from the non-disclosure by the fiduciary and standard care. In addition, under tort, a person should not be induced to enter into a contract by using misleading information or withholding important information, and such acts result in nondisclosure.[13] Under the common law, neither of the contracting parties has the overall duty to disclose relevant facts to the other. Thus, by itself, a nondisclosure does not automatically result in misrepresentation, but it amounts to actionable only when a breach of duty of care emerges. The rule, under which non-disclosure gives rise to an action in damages, provides three exceptions:
“(i) Where nondisclosure cannot give rise to an action in damages, suffers some exceptions; (ii) in contracts requiring uberrima fides; and (iii) in fiduciary relationships between the contracting parties.[14]
In the case of Ali vs Safety Gear GmbH, there was a fiduciary relationship between both parties. There was no fraudulent misinformation, but Safety Gear GmbH, but there existed a fiduciary relationship where the contracting parties were to inform each other about all necessary information. When Ali placed 10 large orders for clothing to large and medium-sized construction and manufacturing businesses in England, Safety Gear GmbH confirmed the orders and dispatched the goods because it was highly delighted with the sale. Nonetheless, it breached the fiduciary duty owed to Ali under the third exception under which non-disclosure gives rise to damages. It can be argued that Ali entered into a contract with Safety Gear GmbH in believe he would make £100,000 from all orders sold. In addition, Ali entered into a contract, and he was to receive 30% of all orders he placed; therefore, the contracting company is liable for non-disclosure and breach of contract. There was an agreement between the two parties involved and Safety Gear GmbH. In this case, Safety Gear GmbH did not have a policy of nondisclosure, but failed to fulfill its obligation to ensure that key information was not withheld.
In accordance with Doyle v Obly [1969][15], the defendant is liable for all the damages created as a result of misrepresentation and non-disclosure. In this case, the defendant made a promise and broke it, and for the damages, it was necessary to put the plaintiff in a good financial position as before. In the case judgment, the case of Safety Boots GmbH and Ali, the defendant broke the contract and promise to pay 30% commission on all sales made from the 10 large orders. The defendant did not question where the orders were to be sold, and therefore, a failure to acquire all the necessary information from Ali. As explained under Doyle v Obly[1969][16], Safety Boots GmbH is liable for all the damages created as a result of misrepresentation and non-disclosure. Therefore, the defendant is expected to pay Ali £100,000 in the form of compensation to ensure that he’s back to his previous financial position before selling the products. There is no evidence that fraud existed, but the defendant is required by law to make reparation for all the damages that resulted from the non-disclosure. Moreover, in a more recent case, Lord Denning MR in Esso Petroleum Co Ltd v Mardon[[17] emphasised that knowledge of facts was vital in being liable for a misrepresentation. Duty of care should be observed when making presentations and entering into contracts with other parties.
In conclusion, based on the case analysis and the applicable law, Safety Boots GmbH should pay the commission to Ali and not Jane because he ordered the 10 large orders from Scotland and made the sales. The principles of nondisclosure and duty of care, and fiduciary representation arise in this case. Jane was no longer working for Safety Boots GmbH, an indication that she had no valid contract. On the other hand, Ali was under contract with Safety Boots GmbH, and by not being paid, he would suffer economic loss as a result of negligence. In reference to any future commission on orders from Scotland, Ali should be paid because there is no other agent. Moreover, Ali already had a contract with Safety Boots GmbH to supply in Scotland, but the plaintiff did not perform the duty of care, resulting from the nondisclosure of information. The company had a duty of care to inform Ali in advance of the withheld information related to the resignation of Jane. Under the law, all parties entering into a contract have a fiduciary representation and therefore, its absence results in paid damages.
Bibliography
Books
Bar, Christian von, and Ulrich Drobnig. The Interaction of Contract Law and Tort and Property Law in Europe: A Comparative Study. München: Sellier European Law Publ, 2004
Baskind, Eric, Greg Osborne, and Lee Roach. Commercial Law. London: Thomson, 2016.
Top of Form
Burrows, A. S. Principles of the English Law of Obligations. United Kingdom: Oxford University Press, 2015.Bottom of Form
Rush, Jon, and Michael Ottley. Business Law. London: Thomson, 2006
Cases
Chaudry v Prabhakar [1989] 1 WLR 29 (CA).
Doyle vObly [1969] 2 QB 158.
Esso Petroleum Co Ltd v Mardon[ [1976] QB 801
Hedley Byrne & Co Ltd V Heller & Partners Ltd (1964) AC 465 (HL)
[1] Chaudry v Prabhakar [1989] 1 WLR 29 (CA).
[2] Jon Rush and Michael Ottley. Business Law. London: Thomson, 2006), 327.
[3] Chaudry v Prabhakar [1989] 1 WLR 29 (CA).
[4] Eric Baskind, Greg Osborne, and Lee Roach. Commercial Law. (London: Thomson, 2016). 118
[5] Hedley Byrne & Co Ltd V Heller & Partners Ltd (1964) AC 465 (HL)
[6] Chaudry v Prabhakar [1989] 1 WLR 29 (CA).
[7] Ottley. Business Law. London: Thomson, 2006), 327.
[8] Ibid, 327
[9] Chaudry v Prabhakar [1989] 1 WLR 29 (CA).
[10] Doyle vObly [1969]
[11] As Burrows. Principles of the English Law of Obligations. (United Kingdom: Oxford University Press, 2015)Bottom of Form 60[12] Burrows, Principles of the English Law of Obligations. Bottom of Form 60
[13] Ibid. 61
[14] Bar, Christian von, and Ulrich Drobnig. The Interaction of Contract Law and Tort and Property Law in Europe: A Comparative Study. (München: Sellier European Law Publ, 2004) 278
[15] Doyle vObly [1969] 2 QB 158.
[16] Doyle vObly [1969] 2 QB 158.
[17] Esso Petroleum Co Ltd v Mardon[ [1976] QB 801
