Summary
Summary Contracts Case Summaries (Topic 4-9)
- Course
- Contract law 371
- Institution
- Stellenbosch University (SUN)
Case summaries for all prescribed cases for topics 4 to 9. Created in 2018.
[Show more]
Content preview
Law of Contract: Case SummariesTopic 4
National Stevedores v MV Afris Pioneer 2004 (N)
Facts
National Stevedores operated a crane on MV Afris (a ship), while operating the crane, it was damaged.
Negotiations then ensued about compensating the vessel owners for the harm, this culminated in an agreement
to pay a certain amount – this was concluded before it had been proven that the plaintiff was responsible for the
harm caused – the defendant’s shipping line was a big client of National Stevedores and the plaintiff’s policy was
to work with clients where there is a possibility that National Stevedores may have caused damage
- It was unequivocally proven that the plaintiff agreed to pay the repair costs
National Stevedores then wanted to rescind the contract on the basis of misrepresentation (material non-
disclosure) this misrepresentation was supposedly based on a nondisclosure by MV Afris about a supposedly
similar problem relating to the cranes on other vessels which was caused by inherent defects in those cranes
National Stevedores argued that had it not been for the misrepresentation in question, it would not have
concluded the contract, and therefore that it was induced to contract, and that it was the intention of MV Afris
that the misrepresentation would have this effect (i.e. alleged fraud)
Telexes were sent between the Captain of a sister ship on which this problem was experienced and an official of
the MV Afris, these explained the problem experienced with the crane and the damage which had been caused,
the official of the MV Afris responded and stated that they had discovered some issues with the crane on board
and had repaired them and that so far no troubles had materialized
- But, the cause of the problems were not disclosed as to the sister ship, the intention of the telex was to
alert the MV Afris of a possible problem
Legal Question
Was there a duty to disclose the problems experienced by the other ships? And did this non-disclosure amount
to misrepresentation by silence?
Ratio & Judgment
The court couldn’t conclude that the telexes established the similar damage and probable cause of the damage
being an inherent defect – but, it continued to consider whether the defendant ought to have disclosed to the
plaintiff the mere knowledge of the facts acquired ex facie the telexes
The court outlined the essential principles pertaining to non-disclosure and the duty to speak:
- (1) “The obligation to make disclosures in a precontractual setting will arise only if there is a duty to
disclose”
- (2) “That duty arises only in certain specific circumstances. The most notable are the contracts which
were formerly termed uberrimae fidei. The best example is a contract of insurance where the law
recognises the insurer's reliance on disclosure by the proposer for insurance of all material facts bearing
on the risk to be undertaken by the insurer.”
- (3) “… the duty to disclose may arise in any other contractual setting and this will be judged having
regard to the particular circumstances of the case. An example of such a duty arising is illustrated by the
cases which refer to an ‘involuntary reliance’ by one party on the other for information material to
making his decision to contract or not. The obligation to disclose latent defects in the merx in the law of
sale is but one illustration of parties’ involuntary reliance on the other to disclose material information.
In other contracts after the examination of the circumstances one may find as has been put by Millner …
‘Such an examination may reveal the involuntary reliance of the one party on the frank disclosure of
1
, certain facts necessarily lying within the exclusive knowledge of the other such that, in fair dealing, the
former's right to have such information communicated to him would be mutually recognised by honest
men in the circumstances.’ … ‘Whether there is, in a particular case, that special relationship of
dependency or trust which gives rise to a duty of disclosure must rest ultimately on judicial
interpretation of the norms of social behaviour.'”
- (4) “The nondisclosure must in the circumstances have been material, that is to say that a reasonable
person in the position of the contracting party would not have concluded the contract if he/she had
known those facts”
- (5) “A person who knowingly withholds information which he/she is under a duty to disclose is said to be
fraudulent and his concealment or silence is 'designed' and calculated to induce the other to conclude
the contract”
- (6) “It is now established by our authorities that a nondisclosure can occur in circumstances where a
person can be said to be negligent as opposed to fraudulent … Here we postulate that in the
circumstances as outlined above a duty to disclose has arisen and one of the contracting parties in
breach of his aforesaid duty negligently fails to make the disclosure to the other party. To decide
whether negligence is present a court … ask the question whether the reasonable man in the
circumstances that the particular contracting party found himself in would have made the disclosure …
In addition … I must not disregard the fact that [the official who failed to disclose the information on the
telex] had special skills and knowledge in the particular field so that his conduct is to be tested against
that of the hypothetical, reasonable 'expert' in his position. If the answer is in the affirmative then a
failure to disclose is negligent and therefore unlawful.”
The official came to the MV Afris when he heard of the damage and inspected it, he came to the conclusion that
the damage was probably caused by the negligence of the crane operator, the Stevedores at no point objected
to liability and accepted that they would have to pay for the damages and the expenses incurred in the
temporary replacement crane
It was suggested that the official had acted reasonably in failing to disclose the issue experienced by the sister
vessel – in the plaintiff’s opinion the reasonable person in the position of the official would have remembered
the problem described in the telexes and made it known to the plaintiff, and the fact that certain adjustments
had been made to the crane on the MV Afris in an attempt to avoid a similar issue
- The court could not agree with this finding, it held that the reasonable person would not have cause to
remember the telex exchange nor would he have thought that they were relevant given that it was the
unanimous view of all involved that the operator was to blame
“The reasonable man in the position of [the official] would undoubtedly have remembered the
recent maintenance checks on the operation of the [crane]. This would have reinforced his view
that the damage … was a result of operator negligence.”
Lastly, the court considered the issue of materiality – that the plaintiff would not have entered into the contract
if it had known about the telexes
- The court concluded that this was an afterthought of the plaintiff
- If it had been known to the plaintiff at the time “It is equally probable … that he would, firstly, have
asked what the relevance was of the damage to the ‘sister vessel’ and whether it was damage to the
same part. He would have been told by [the official] that it was not damage to the same part, and that
he did not consider it relevant. He would probably have consulted the plaintiff's expert, Seaman, who
may, in all probability, have said that, without knowledge of the cause of the damage to the [sister ship],
he could not say whether it was relevant. Had the cause of the damage to the [part] on the MV Afris
Pioneer still been left in doubt and had Seaman persisted in his opinion that there was a possibility that
it was caused by the negligence of the operator, it is equally possible, in my view, having regard to the
other factors that [the plaintiff] took into consideration, that he would still have authorised the repairs …
in order to control the cost and not incur the displeasure of the plaintiff's client, Afris Lines.”
2
, - Therefore, the plaintiff did not prove on a balance of probabilities, that had he known about the telexes,
he would not have authorised the repairs at his own cost
The court therefore held that there was no misrepresentation by silence, and therefore, that National
Stevedores could not rescind the contract on this basis
Feinstein v Niggli 1981 (A)
Facts
Agreement for the sale of a restaurant (the Copper Kettle), in the course of the negotiations the seller made
certain representations as to the profitability of the business – these representations included statements
regarding past turnover (performance) and whether the income of the restaurant would be sufficient to make
instalments (payments) of the purchase price, but also to provide for the subsistence of the purchaser. It
became clear that these statements were wildly unfounded, the seller knew that the restaurant did not do that
well and that the income would not be sufficient for the purposes for which it was represented to be.
Feinstein argued that these statements were not actionable as they were merely statements of opinion, not fact
Legal Question
Was the representation made by the seller a representation of fact or opinion?
Ratio & Judgment
In order for a cause of action for fraud (misrepresentation) to arise, the representation must relate to a matter
of present or past fact
- A statement of opinion about the future prospects of a business may not be actionable if it is wrong
“It is often fallaciously assumed that a statement of opinion cannot involve a statement of fact. But, if the facts
are not equally known to both sides, a statement of opinion by the one who knows the facts best often
involves a statement of a material fact, for he implicitly states that he knows the facts which justify his
opinion.”
- i.e. sometimes a statement of opinion may as well be a statement of facts to the person who does not
know enough of the actual facts – an opinion implies that there are facts which support it
Feinstein had run the business for several years and had a direct and intimate knowledge of its profitability, of
which the respondents knew nothing – therefore his statements conveyed and were intended to convey two
representations of the existing facts: (1) an implied representation that it was already profitable, and (2) an
express representation that he believed that if the business maintained its current levels of profit, it would be
enough to cover the instalments as well as provide the purchasers with enough to live off
- It is clear that he could not have believed that statement in (2) was true
- None of his projections validated these statements
The court also found that Feinstein was eager to get rid of the business, and he knew that Niggli wanted to
acquire it, but he would not allow her to serve or assist in the restaurant temporarily in order to “test drive” it,
nor did she actually know anything of its profitability – the respondents had to rely solely on the information
which Feinstein gave them in order to make their decision to purchase
The court found that his representations as to the profitability of the restaurant undoubtedly induced the Nigglis
into entering into the contract – specifically his representation that the business made enough that it would
cover the instalments and provide enough for them to live on
- Would not have entered into the contract otherwise
Alleged affirmation of the contract: did the purchaser waive the right to rescind?
- Feinstein alleged that Niggli elected to abide by the contract, thereby waiving her right to rescind it
(argued that her acts of paying the first installment and then authorizing an agent to sell the business for
her constituted a waiver of her rights to rescind)
3
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller notesgirl. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R50,00. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
72914 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy summaries for 15 years now