With v O'Flanagan
A statement that was true when made becomes a misrepresentation if circumstances change before the contract and the change is not disclosed.
Facts
Dr O'Flanagan agreed to sell his medical practice to Mr With. During negotiations in January 1934, he told Mr With that the practice brought in an income of about £2,000 a year, which was then true. Dr O'Flanagan then became ill, and during the following months many of his patients left, and the practice was looked after by other doctors. By the time the contract was signed in May 1934, the practice was worth almost nothing, but Dr O'Flanagan did not tell Mr With of the change. When he took over, Mr With found that there were hardly any patients left.
Legal principle
The Court of Appeal held that Mr With was entitled to rescind the contract. A representation made to induce a contract is treated as continuing until the contract is made. If, before then, the representor discovers that the statement has become untrue because of a change of circumstances, he is under a duty to disclose the change, and failure to do so is a misrepresentation. Dr O'Flanagan's statement about the practice's income had become false by the time the contract was made, and he should have corrected it.
Related cases on misrepresentation
- Attwood v Small (1838) 6 Cl & F 232
- Bisset v Wilkinson [1927] AC 177
- Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 525
- Derry v Peek (1889) 14 App Cas 337
- Dimmock v Hallett (1866) LR 2 Ch App 21
- Edgington v Fitzmaurice (1885) 29 Ch D 459
- Esso Petroleum Co Ltd v Mardon [1976] QB 801
- Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
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