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This Law Essay, advice to Mr. Manfredi has been made against Elvis Eggplant for his misrepresentation of the past and future profitability of the business. In this Law Essay, the elements of misrepresentation have been discussed in order to clarify the factors that are needed to mount an argument for damages based on misrepresentation. Relevant law case study is referred in this Law Essay. These case laws act as evidence to establish that Elvis Eggplant, the director of HappyHippie intentionally misrepresent the past and future profitability of the cafe for tempting Mr Manfredi to purchase the cafe. As Mr Manfredi bought the cafe depending on the representation, he can pursue damages against Elvis Eggplant on the ground of misrepresentation of the facts.

Law Essay

Misrepresentation is a false statement made to a party by the other for inducing the former to enter a contract.[1] If a party enters a contract based on a misrepresentation of the facts, he can take legal action against the person who misrepresented. The main elements of misrepresentation are –the aggrieved party must prove the charge made against the other party and there must be positive representation. It means that there must be a statement instead of silence. Nowadays, the plaintiff prefers to argue it under deceptive or misleading conduct, if the misrepresentation happens in a business context. By doing so, the plaintiff has the chance to be compensated under Australian Consumer Law (ACL).  In this context, no action can be taken for the breach in contract, as misrepresentation is not a term of the contract. In accordance with the general law, if one of the parties enters a contract based on misrepresentation, he may be given the chance to rescind the contract. It means that the parties will be restored to the original positions as they were before entering the contract. The damages suffered by a party due to the misrepresentation may be recovered if the plaintiff establishes the tort of deceit or negligence.

It is evident from the elements of misrepresentation that Mr Manfredi may seek relief for his financial loss. Based on the representation of Elvis Eggplant, he purchased the cafe with a considerable amount of money. After purchasing the cafe, it was discovered that the business was not as profitable as shown by the former owner of the cafe. There is a clear misrepresentation of the statement made by Elvis Eggplant. The inspection done by Mr. Manfredi is enough to prove the charge of misrepresentation against Elvis Eggplant. All the documents discovered by Mr Manfredi are enough to prove that the historical figures presented to him were inflated by 60%. Therefore, the Representee, Mr. Manfredi can take legal action against Elvis Eggplant under deceptive conduct.

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In The Australian Consumer Law (ACL), it is clearly mentioned that a person must not make a representation that is misleading in a material particular and concerns the profitability. In Henjo v Collins Marrickville, the Federal Court found that Henjo was guilty making misleading conduct. Henjo was the owner of a restaurant. In the licence of the restaurant, it was clearly mentioned that the maximum sitting capacity of the restaurant is 84. Collins Marrickville purchased the restaurant depending on the representation of Henjo that the maximum sitting capacity of the restaurant is 128. The true situation regarding the original sitting capacity was revealed to Collins Marrickville after he made the purchase. The Federal Court made the verdict that as Henjo did not disclose the licence details to the purchaser; it was an act of misleading conduct.[2] Henjo was held liable for this. In this case, Henjo was well aware of the sitting capacity of his restaurant. He intentionally misrepresented the fact by advertising that the sitting capacity is 128. Likewise, Elvis Eggplant intentionally misrepresented the past and future profitability of the cafe. Due to this similarity between these two cases, it can be easily assumed that Elvis Eggplant will be held liable if Mr. Manfredi takes legal action against him.

In Collection House Limited v Taylor, an employee of Collection House contacted Taylor about a debt that was incurred in the year 1992. Taylor was contacted in 2001. The employee informed Taylor that in case the debt was unpaid, legal action would be taken against Taylor. Depending on this statement made by the employee, Taylor agreed to pay $5,000 in order to avoid the complexity.[3] On the next day, Taylor sought the advice of a financial management counsellor. The financial counsellor informed Taylor that the debt was statute barred. At that time, Taylor was under tough financial management and personal circumstances and Collection House knew these. The Victorian Supreme Court held Collection House responsible for this by stating that Collection House was involved in the misleading conduct and took advantage of Taylor’s lack of knowledge of the matters.

Another case may also be referred in this context. In Commercial Bank of Australia v Amadio, the act of misrepresentation took place. Mrs. and Mr. Amadio were aged 71 and 76 respectively. Both of them were from Italy and had been living in Australia for more than 40 years. Neither Mrs. nor Mr. Amadio had received too much formal education. Their English speaking skill was not very good. Mrs. Amadio did not have any business experience but Mr. Amadio was involved in some land transactions. Their son, Vincenzo Amadio assisted his father in most of the land transactions. The respondents were induced for entering into a transaction by the misrepresentations of their son, Vincenzo Amadio. Their son was very successful in his businesses.  Vincenzo knew the branch manager of the appellant bank, Mr. Virgo very well, as the Vincenzo’s company had an account in the appellant bank. The bank showed a tolerant attitude towards Vincenzo because not only he himself was an important customer but also his business was important to the appellant bank.

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The respondents executed a guarantee and mortgage in favour of the appellant bank. The main purpose behind this action was to guarantee debts of Vincenzo’s company. As Vincenzo Amadio lived a very opulent lifestyle, Mr. and Mrs. Amadio believed that his company was very successful. However, in fact, their son had many debts. He arranged with Mr. Virgo to nourish cheques in order to run his company. It was advised by the appellant bank that Vincenzo could continue doing so, if his parents give the security. Considering this advice, Vincenzo asked his parents to provide security and guarantee the account.  It was informed to Mr. and Mrs. Amadio that the guarantee was for $ 50,000 and would be for 6 months. In fact, the liability was not limited in this way. Mr. Virgo gained the signature of the respondents on the mortgage but did not explain the document to them. Within a few days, the appellant bank paid many cheques to Vincenzo that amounted to $270,000. After some days, the financial condition of the company degenerated and the company went into bankruptcy.  The bank demanded payment from the Amadio’s.  When they failed to pay that, the appellant bank served the notice that they would exercise the power of sale under the mortgage. The judge found at the trial that at the time of signing the document, the Amadio’s believed that the guarantee was limited only for 6 months and for $ 50,000. The main reason behind such belief was their son’s misrepresentations. They would not have signed the document if they knew the facts. The High Court of Australia held that it was unconscionable for the appellant bank to rely on such guarantee in all the circumstances. The circumstances that were considered by the High Court include–the respondents’ limited understanding of English, lack of the benefit of independent advice (such advice was not provided by the appellant bank)., the appellant bank’s awareness of Vincenzo’s true financial condition, hiding of the fact that there were hardly any limit on the liability under the guarantee. [4]

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All the cases discussed above in Law Essay are relevant in this context as in every case, false information was provided to a party to induce him or her for entering a contract. In all the three cases, a contract was signed or a deal was finalised between two parties depending on the representations provided by one of the parties. The other party would not have involved in the contract if he or she had access to the right information. In some of the case study help, the one party used the ignorance of another party for misrepresenting the facts. Except for the case of Commercial Bank of Australia v Amadio, no third party no third party was involved. The case of Commercial Bank of Australia v Amadio has relevance in this context, as it was a case of misrepresentation. Considering the similarities between these cases with the case of Mr. Manfredi v Elvis Eggplant, it can be easily assumed that Elvis Eggplant will be held liable by the court and Mr. Manfredi will be compensated for his financial loss.

In this Law Essay, the factors required for arguing a case study help against Elvis Eggplant for misrepresentation have been established with reference to several relevant case law. The main elements of misrepresentation have also been discussed for further clarity.