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Is a contract still valid, if the conditions in which they were entered change?

Gaurav Parashar ,
  09 June 2020       Share Bookmark

Court :

Brief :
The court held that the act of respondent was to lure the appellant into the contract with the situation at the time of negotiations but since the conditions changed it is a duty upon the respondent to notify the appellant about such change before signing the contract. It implies that at the time of the signing the contract; the conditions of the contract were not the same as earlier.
Citation :
Appellant: With Respondent: O'Flanagan Citation: [1936] Ch 575

Bench: Lord Wright MR, Romer LJ

Issue:

Does A has to inform B (A and B have entered into a contract) that the conditions on which they entered the contract have changed?

Facts:

  • The appellant and respondent entered into negotiations to take the medical practice of the respondent that yields £2,000 per annum.
  • The appellant and respondent agreed to enter into a contract and the contract was entered to buy the medical practice 5 months later.
  • After that the respondent fell ill as a result the practice was declined significantly.
  • When the appellant took over the practice, it was almost non-existent.
  •  The appellant filed a suit to rescind the contract.
  • It was held that representation made 5 months ago was true and since the appellant is unable to prove that presentation was untrue or malafied, the claim was failed.
  • The appellant then filed a case before the court of appeal.

Argument raised by Appellant:

The appellant contended that the respondent misrepresented that his medical practice yields £2,000 per annum (which was true 5 months ago) but at the time of signing of contract the medical practice was near to non-existent and it was the duty of respondent to disclose the information. This is misrepresentation of facts.

Argument raised by Respondent:

The respondent argued that the representation was, at the time it was made, accurate and therefore the contract entered between them is valid.

Judgment:

The Medical Practice took £2,000 per annum. This statement was true earlier. However, subsequently the respondent became ill and many patients went elsewhere. By time the sale was completed the practice was virtually worthless.

The court held that the act of respondent was to lure the appellant into the contract with the situation at the time of negotiations but since the conditions changed it is a duty upon the respondent to notify the appellant about such change before signing the contract. It implies that at the time of the signing the contract; the conditions of the contract were not the same as earlier.

 
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