Pre-contract statements about machine capacity

The statements about capacity, servicing and 'no known faults' are statements of existing fact, not mere sales puffery. They are specific, measurable and calculated to induce the contract. Clover's production director made clear that capacity of at least 11,000 units an hour was critical, and the sales manager responded 'you can take my word for it'. That exchange strengthens the inference that the statements were intended to be relied on and were in fact relied on. Clover can therefore treat the statements as representations. The representation about capacity is false. The representation about 'no known faults' is also false because Rigby knew of the overheating history. Because Rigby knew the truth, this is at least a fraudulent misrepresentation; alternatively it is a negligent misrepresentation at common law. The statement about servicing may be a separate representation. Clover can rely on the false statements unless Rigby can show that Clover did not rely on them or that the written contract validly excludes them.

A fraudulent misrepresentation gives the representee a right to rescind the contract and to claim damages in the tort of deceit. A negligent misrepresentation may give a right to rescind and to damages under Hedley Byrne v Heller principles. An innocent misrepresentation generally gives rescission only. Rescission restores the parties to their pre-contract positions, subject to bars such as affirmation, lapse of time, third-party rights or impossibility of restitution. Damages aim to put Clover in the position it would have occupied had the representation been true. The entire agreement clause and the exclusion of liability for representations are not automatically decisive. Such clauses are construed strictly. Clear words are needed before they will exclude liability for misrepresentation, and they cannot exclude liability for fraudulent misrepresentation as a matter of public policy. An entire agreement clause may prevent reliance on a collateral warranty, but it does not necessarily defeat a claim based on a false statement of fact that induced the contract. Clover therefore has a strong argument that the clause does not bar its fraudulent misrepresentation claim.

It matters significantly. A statement is more likely to be a representation, and reliance is easier to establish, where the representee has made the importance of the matter clear. By stating that Clover needed at least 11,000 units an hour, the production director put the sales manager on notice that capacity was a deal-breaker. The sales manager's response 'you can take my word for it' was an assurance directed at that concern. This makes it difficult for Rigby to argue that the capacity statement was merely casual or that Clover did not rely on it. It also supports an argument that the statement became a term of the contract, although that is not necessary for a misrepresentation claim. If the statement were a term, Clover could sue for breach of contract as well as misrepresentation. The statement does not, however, remove the need to consider the entire agreement clause; it strengthens Clover's case on inducement and on the seriousness of the falsehood.