Citation(s) [1936] Ch 575 | ||
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Court Court of Appeal of England and Wales Similar Edgington v Fitzmaurice, Smith v Land and House Pr, Whittington v Seale‑Hayne, Esso Petroleum Co Ltd v, Gordon v Selico | ||
With v O’Flanagan [1936] Ch 575 is an English contract law case, concerning misrepresentation. It holds that there is a duty to disclose material changes in circumstances that were represented to be true in negotiations.
Contents
Facts
Dr O’Flanagan said truthfully in January 1934 that his medical practice had takings of £2000 pa. However, in May the takings were only £5 a week because O’Flanagan had become ill. The contract was signed with Mr With to buy the medical practice, but Mr O'Flanagan did not disclose the change in circumstances.
At trial the judge held that because the contract was not made uberrimae fidei. Where a statement is rendered false by a change in circumstances there is a duty to disclose the change. A failure to do so will result in an actionable misrepresentation
Judgment
Lord Wright MR held that Mr With could rescind either because there was a duty to point out the change in circumstance or because the representation continued till the point when the contract was signed. He referred to Fry J in Davies v London Provincial Marine Insurance that there is no duty to disclose, even when someone believes facts to be operating on another’s mind. He noted fiduciary relationships can bring an entire duty of disclosure. Uberrimae fidei contracts, including partnership and marine insurance, do too. But also where in negotiations a statement is false and then the representor discovers it, though if he had said nothing he is entitled to hold his tongue throughout. He noted that a ‘representation made as a matter of inducement to enter a contract is to be treated as a continuing representation.’
Romer LJ stated,
Clauson J concurred.
Significance
This affirms a general principle that any change to a fundamental reason for contracting (supervening falsification) must be communicated, where it is known to one party. It does not matter what the reason or motive is for not communicating is, it need not be malicious or fraudulent, but merely known to the representor.