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PRACTICE FINAL EXAM ANSWER GUIDE APRIL 2013 Question 1 a) 10 marks George has committed misrepresentation when he presented the audited statements to Paul as representing the financial position of the business– a false assertion of fact that induces a party to enter into a contract. The misrepresentation is probably innocent in that George probably believed that the statements were accurate and relied on the auditors in that regard. The only remedy for innocent misrepresentation is rescission, which must be asked for promptly. It must be possible to restore the parties to their original positions. It is unlikely that a court would grant rescission of the contract when Paul has been running the business for several months, and so Paul would get no remedy from George. b) 10 marks Paul could sue Ace Accountants for negligent misstatement. Although according to Hedley Byrne a person who provides gratuitous advice, possesses special skill and knows that the advice is being relied on can be liable to a third party, there must be a special relationship between that person and the person relying on the advice. The person giving the advice must be aware of the purpose for which the advice was used. According to the Hercules case, statements audited for the AGM are so that shareholders can assess the performance of the board, and auditors will not be liable to those who rely on the audit for some other purpose, even though the audit was careless. c) 10 marks An employer is vicariously liable for the torts of employees committed within the scope of the employment. Never Too Much Chocolate Ltd. will be liable for the negligence of its employee in the making of the chocolate. According to Donoghue v. Stevenson a manufacturer owes a duty of care to a consumer because it is reasonable to foresee that the consumer might be injured by the manufacturer’s actions. It makes no difference that Mabel did not buy the chocolate at the store. If the manufacturer’s actions fall below a reasonable standard and a
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  • Spring '10
  • elaine
  • Contract Law, Practice Final Exam, Chocolate Ltd.

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