Ryan (2005) defines a contract as a legally binding agreement signed by two or more people with the intention of making it have a legal effect. In case of a breach of the agreement, the law will provide a solution. The contract between Shirley (the agent) and Stanly (the client) was void from the moment it was signed. The reason for this is that the contract was made based on the misleading information. Shirley gave Stanley the false information, but later, he found it out by visiting the publisher and realizing the real value of the manuscript.
He confirmed that he was duped by Shirley in concluding the contract. This is a case of misrepresentation, in which a false statement or fact is made by one party to another one and has an effect of convincing the other party to sign a contract. From the case of Shirley and Stanly, it is evident that the client concluded the contract due to misrepresentation.
Stanly is entitled to sue the agent for the false information and tricking him to sign the contract. In the court of law, various issues need to be proven for an actionable cause: the client ought to prove a false statement of the past or existing fact which took place by showing that the defendant gave him the false information. This fact can be ascertained by the publisher, whom Stanly visited to realize that the real value of the manuscript was worth $500000. It also must be proven beyond any reasonable doubt that the statement or information was directed at the client, and that he relied on the information given by the agent, which in this case was misrepresented in order to make the client conclude the contract. In this case, Stanly used the information given to him by his agent and signed the contract, which clearly proves misrepresentation.
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A false statement of fact means that it must relate to an existing fact or a past event. In most scenarios, the statement of a fact is either said by the party or communicated through some form of medium either by email or a type of the written communication. In the abovementioned case of Stanly and Shirley, the statement of fact relates to the past event, since Shirley, who was Stanlys agent, communicated to him the false statement of fact.
A statement of opinion can be considered a statement of fact in a scenario, where the person giving the opinion knows clearly that he or she is giving the false information and still shares it. Such person has special knowledge: in other words, he or she is in a better position due to knowing certain facts that surround the subject matter of the contract. Shirley is the agent dealing with books; thus, she possesses the information regarding the actual value of the manuscript, but fails to communicate it to the client. . In reference to the case of Bisset v. Wilkinson (1927), the plaintiff purchased two blocks of land from the defendant in order to keep sheep. In that case, the defendant gave his opinion that the land would accommodate 2000 sheep. The plaintiff went ahead and bought the land convinced that it would be enough for the abovementioned amount of animals. Nonetheless, it was not the case, since the defendant was not aware of the carrying capacity of the land. Thus, the case was not actionable (Monaghan and Monaghan, 2013). In regard to the manuscript's case, the agent knew that the information she gave to the client was false, which makes her actions an actionable cause.
There are several types of misrepresentation, including fraudulent, negligent or innocent misrepresentation. Fraudulent misrepresentation occurs when one makes a representation with the intention of deceiving the other party, while knowing that it is false (Miller & Jentz, 2013). According to Hart, Roderick and Walter (2006), negligent misrepresentation arises when the defendant hastily makes a representation, not having a rational basis and expecting another person to rely on the misrepresentation, while believing it to be true. Innocent representation, on the other hand, ensues when the party has sufficient grounds for believing that his/her false statement was true. Innocent representation can be avoided by the defendant taking a socially optimal level of care (De, 2011). The case of Shirley and Stanly can be classified as fraudulent misrepresentation, because Shirley deceived her client knowing clearly that the information she gave Stanly was false.
Misrepresentation can result in an action in tort. The deceit takes place when a party makes a factual misrepresentation knowing clearly that it is false. Haupt and Rockwell (2006) define a tort as a negligent or intentional wrongful act involving a breach of a duty imposed by the law. It is committed by one person against the other person and is serious enough to merit or lead to the award of compensation to the injured party. In reference to Hedley (2011), various torts protect the claimants economic interests against the deliberate harm.
The tort of deceit provides a solution to the loss of the parties that counted on the false representation as shown in the case of Pasley v. Freeman (1789). This tort represents the ability to administer the civil law remedies for wrongful acts committed by cheats and fraudsters (Eggers, 2013). In this case, Taqhe, who was the plaintiff, sued the defendant successfully. The defendant said that a third party was creditworthy to the claimant knowing he did not have money. The claimant went ahead and loaned the third party money and lost it. The following are the elements of tort: there must be a legal damage on the part of the plaintiff. In this case, the plaintiff is Stanly meaning that some of the legal rights were violated. Thus, an individual made a representation to another party which was not true, leading to the breach be repressible by an action in the court of law. Moreover, there is a plan to deceit, which has actually been acted upon, and a loss is incurred as a result.
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Finding of misrepresentation allows for a remedy of the rescission or damage, depending on the type of misrepresentation that took place. Following Virgo (2015), rescission is a remedy that entails preventing the unjust enrichment of the defendant. The time limit for taking steps in terms of rescission varies depending on the type of misrepresentation. In scenarios of fraudulent misrepresentation, like the abovementioned case involving Shirley and Stanly, the time limits runs until the time, when the misrepresentation ought to have been discovered. The misrepresentation was discovered when Stanly visited the publisher and got to know that the actual value of the manuscript was $500000 and not the value that was given to him. Similarly, another remedy can take the form of damages.
During the processing of a contract, an agent owes to perform several principal duties, including notification, performance, loyalty, accounting, and obedience (Cross and Miller, 2009). The agents duty of Shirley should have been in the best interest of the client which includes the duty to act diligently and negotiate terms of the transaction that will give the greatest advantage to the client; such an action is called the fiduciary duty (Schneeman, 2010). The statement made by the agent should not result in the fraud or misrepresentation. All the laws relating to the transaction should be obeyed that relates to the disclosure of material facts. Shirley was not honest with the client, although she should have disclosed the real value of the manuscript to the Stanly, but she chose to lie about its value for her benefit.
The agent is also required to report to the client promptly regarding all the money and property obtained and given out on behalf of the client in order to safeguard the clients property. He/she must not act fraudulently to favour the third party or themselves (Marsh and Soulsby, 2002). Shirley did the contrary by not defending the property in question, but instead conceiving the value of the manuscript in her favour.
In accordance with Ryder, Griffiths and Singh (2012), an agent is required to exercise a due care and skill. In this case, the agent is required to disclose all the information pertaining to the transaction, which has an effect on the decision that the client makes. The information that was given to Stanly was misleading. Therefore, Shirley failed to honour the duty of a full disclosure.
Stanly is at liberty to enter into a new contract with the publisher without breaking any laws. In this regard, Beatty and Samuelson (2007) point out that the principal can terminate the contract if the agent no longer performs his or her duties. However, Stanly should ensure that the new contract contains the following elements: an offer, acceptance, consideration, capacity, the legality of the terms and conditions as well as mutuality between the parties involved to carry out the promises of the contract that is being signed.
There should be an offer which will be definite and clearly state the necessary actions. The publisher should agree to publish Stanlys manuscript at a price. The offer must be accepted as it is without any conditions. However, a counter offer can be brought forward which can either be accepted or rejected. Many offers and counter offers can be brought forward before a final one is accepted. It is the acceptance that marks an end to the negotiations by forming the terms and conditions of the contract in question. The acceptance can be in writing or speech. The parties can decide on the appropriate means either verbally or in written form. In this case, Stanly is the one accepting the offer from the publisher.
Stanly and the publisher must both intent to conclude a legally binding contract, meaning that they must be willing to be in legal relations with each other and must understand that the agreement is enforceable by the law. If by any means the parties to the contract decide not to be legally bound, then it must be clearly indicated in the contract for it not to be enforceable legally. Stanly and the publisher must be willing and ready to enter into a legally binding agreement.
A contract should have a valuable consideration for it to be enforceable. This means that one party promises to do something in return for a promise from the other party to give the value benefit a consideration. A contract is, therefore, not enforceable if only one party provides the consideration (Mettling and Cusic, 2015). It can be defined as what each party gives to the other party in the agreement as the agreed price for the others promise. The consideration is usually in the form of money, but it does not always have to be something of value. In the new contract, the publisher will issue a new valuation for the manuscript, and if Stanly is convinced of the value, they will conclude a new legally binding contract; and the publisher will publish the book.
In conclusion, the contract between Shirley and Stanly was a void contract. Shirley gave the misleading information and tricked Stanly to sign the contract. This is a case of fraudulent representation, where the agent gave the wrong valuation of the manuscript for her interest. Misrepresentation leads to an action in tort, namely the tort of deceit. Stanly should sue Shirley for misrepresentation, and the remedies will include the rescission, which is restoring the financial position of the plaintiff which he enjoyed before entering into the contract and suffering from damages. It is evident that being Stanlys agent, Shirley failed to represent the interests of her client. Stanly should conclude a new contract with the publisher while paying a precise attention to the essential elements of a contract.