Witter Ltd v TBP Industries [1996] 2 All ER 573

• Plaintiff sold Defendant Plaintiff’s business but represented:

  1. That all the accounts were audited under the same audit rules (they weren’t) and

  2. That a large expense recorded was a one-off (it wasn’t).

• In the contract were clauses stating that the entire agreement was to be found in the written contract and not in warranties etc outside the document. There was another clause stating that Defendant was not induced by any representation or warranty outside the contract.

• Plaintiff sued Defendant. 

CA

• Held:

  1. Rescission was impossible due to changes that had occurred within the business + effect on TPs etc;

  2. That damages awarded under s.2(2) did not require that Plaintiff had an effective right of rescission, but merely that Plaintiff had at some point in the past had one;

  3. For an exclusion clause to be effective in excluding liability for misrepresentation, it had to comply with s.3 of the 1967 Act and had to make it “manifestly clear that the purchaser had agreed only to have a remedy for breach of warranty and that the vendor's liability for damaging untrue statements was excluded” (Jacob J);

  4. The misrepresentations had become warranties, breach of which entitled Defendant to damages.

• In conclusion, damages here could be based either on negligent misrepresentation or breach of contract.

• However there was no tort of fraud since the misrepresentation had not had the sufficient degree of intent/recklessness as demanded by Lord Herschell (see above). 

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CW: This case demonstrates the courts’ unwillingness to accept exemption clauses that deny statements of fact 

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