BUSINESS LAW

Case Study: Negligent Misstatement

Case Study: Negligent Misstatement

Introduction

We often face situations where we significantly rely on other people's statement. People face losses because of those misstatements given by others and fraud individuals were taking advantages because there was no proper law to punish them. In contract law, a misrepresentation is when a party to a contract makes a representation by words or conduct which gives a false or misleading arrangement which has the effect of inducing a part in writing the contract (Ellen, ,2012, 51). For example, in certain circumstances, reports or false promises made by a seller of goods regarding the quality or nature of the product that the seller may be the misstatement. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation (David, 1998, 33). Misrepresentation is probably the most common type of fraud. Law authorities came up with law of Negligent Misstatements after some time, keeping in mind the loss faced by people due to fraud individuals. An allegation of fraud may also occur if the defendant concealed or failed to disclose a material fact in a transaction, causing damage to the victim. The law states that if one person gives information, opinion, or advice to other person in situations where the other person fully rely on the information, advice, or opinion of the first person and the other person faces loss of damage because of first person's negligible information, opinion, or advice than we can say that the first person is liable for the damage (Vidmar, 2011, 705).

Background

Thus in this paper we are going to cover a similar case law in which a person named as Charlie wants to purchase a restaurant Bruno's located on king's avenue which is around the corner from his friend's (Max) restaurant. Charlie told his friend Max about his plan to purchase the restaurant and he also told him that he is very keen to buy the business and he is new to this field so he needs Max's advice and guidance. Max being his friend told him that Bruno's is a very good restaurant and Max almost guaranteed him that Bruno's is definitely going to make profit in its first 12 months. Fully relying on Max's opinion and advice, Charlie and his brother (Harley) purchased the restaurant. Immediately after a year, Charlie and his brother Harley were on the edge of bankruptcy. They found out that the restaurant was not that popular which further declined its turnover as they took over the business. Now the question here is that whether Max is liable for the damage cause by his advice and can Charlie and Harley takes any action against him under law of Negligent Misstatement.

Analysis

Historically we have seen that under law of negligent misstatement when someone's negligent action caused damage of loss to other person, he/she has possibly claimed for compensation. However it is important for the claimer to show some previous relationship with the person causing damage to ...