Attwood v Small [1838] UKHL J60.
Rule of thumb:Where a party makes a false statement to the other party, but the party does not rely upon this false statement at all to enter the contract, then this is not by law a misrepresentation. .
Background facts:Attwood underwent extensive negotiations to sell mines to Small. Small looked at everything Attwood had himself, and instructed many experts and agents to look at the mines closely. After assessing everything in very close detail Small then bought the mines from Attwood. After Small purchased these mines and actually was starting operations he discovered the potential profits were exaggerated by Attowod. Small then sought to reduce the contract with Attwood and get his money back. Attwood refused to do this and so the matter went to Court.
Parties argued: Small argued that this was a clear misrepresentation about the size of the profits by Attwood and sought his money. He clearly showed the exact dimensions and showed how the forecasts of Attwood were indeed wrong. Attwood argued that Small did not rely on representations made by him. Attwood argued that Small looked at everything himself and instructed all his own engineers, agents and experts as well.
Judgment:
The Court upheld the arguments of Attwood. The Court affirmed that where there has been a misrepresentation but that one of the parties did not rely on this, then this misrepresentation cannot be used to rescind the contract. Small was not entitled to his money back that he paid to buy mines.
Ratio-decidendi:'when we apply to this case the principles I stated at the outset, we find the facts are wanting; we find there is no misrepresentation, which gave rise to the contract; we find that the purchasers did not rely upon the representation, but said, we will inquire ourselves; that they began this treaty by saying, we will inquire; and from the 6th of June 1825 downwards, they constantly proceeded upon the plan satisfying themselves, first by sending their agents, then by going down themselves, then by inquiring themselves, then even afterwards by sending other agents to inquire, and those agents reporting that the representation was true, and that those finding by their own inquiries that the agents had reported accurately, and that the representation was corroborated by the result of the inquiry, and that even when their own interest, when everything in the commercial world was down, when shares were falling, when money was not to be had, when they were asking for a prolongation of the term of payment to Mr Atwood, and when it was their interest to discover a flaw in the contract, they then inquire again and send a new agent to inquire, Mr Forster, an engineer, and they state to him their opinion to be in favour or Mr Atwood's representations; and Mr Forster, in answer as late as the 26th of April, less than a month before the bill was put on file, reports in favour of Mr Attwood's representations. Such being the facts, even if no observation arose as to the delay, as to the adoption and affirmance of the contract, purging it of all objections which might be made, and supposing that they had come in time, instead of delaying so many months; then I ask myself this question, in these circumstances have these parties a right to be released from their contract, by the interposition of a Court of Equity, according to those principles which I have stated? When I asky myself that question, upon which alone my judgement must turn, I am bound to say, no; and I am bound therefore to give my opinion to your Lordships, that the case of the plaintiffs has failed and that I am of the opinion that the Judgement of the Court blow ought to be reversed', Lord Brougham
'we find that there is no misrepresentation ... the purchasers did not rely upon the representation, but said, we will inquire ourselves ... upon which alone my Judgement must turn', Lord Brougham,'
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