Contract law - help neededWatch
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Amity Luxury Marriage Services (Amity) was established in 1997 offering wedding planning services in the South West of England. It was owned by Claire. In August 2013 Claire decided to sell her business and placed the following advertisement in Wedding Planner magazine and on the internet:
FOR SALE: Amity Luxury Marriage Services - £90,000. Sale includes office premises, office stock and machinery and affiliated photography services, as well as 35 booked weddings over the forthcoming 20 months.
Lucy saw the advertisement in Wedding Planner magazine and decided to visit Claire at her offices in Newport. Claire pointed out that Amity was the recognized local market leader in wedding services, 2010-13, and had been featured in Wedding Planner magazine as having this accolade on a number of occasions - Lucy already knew this as her friend had used Amity for her own wedding held in March 2011. Claire also told Lucy that the average price of weddings organised by Amity was £27,000 and that Amity charged 15% of the wedding price to their clients as her fee.
During subsequent negotiations Claire informed Lucy that: (i) Amity also made a profit from using its affiliated photography services at weddings; (ii) she had established deals with major venues that ensured an 8% discount when Amity used them for wedding receptions - Claire advised Lucy that these ‘deals’ would be available to any new owner of Amity; (iii) the average profits of the business over the past five years had been £100,000 per annum, and (iv) she had already received seven enquiries regarding the business. Consequently, Lucy needed to make up her mind quickly if she wanted the business.
On her return home to Bristol, Lucy spoke to her boyfriend, Rory, who was keen to take over the affiliated photography business. They wished to inspect Amity’s accounts, to which Claire agreed, but owing to Claire’s holiday commitments this was not possible for two weeks. Eager to secure the purchase of Amity, on 1st September 2013 (not yet having inspected the Amity’s accounts) Lucy signed a contract agreeing to pay £215,000 for Amity. The contract between the parties made no reference to prior discussions between the parties and included the following clause:
“The contract represents the entire agreement between the parties and accordingly they agree that all liabilities for and remedies in respect of any representation made are excluded save in so far as provided in this contract. The parties further agree that neither party has placed any reliance whatsoever on any representations, agreements, statements or understandings whether oral or in writing made prior to the date of this contract other than those expressly incorporated or recited in this contract.”
By March 2014 it had become obvious to Lucy that Amity had no longer been the well-regarded and profitable business that Claire had represented to her at the time of sale. In fact Claire had only purchased the business from the original owners in March 2012, since which time Amity had made a loss of £30,000. The 35 clients Claire had boasted about had been reduced to 15 by the time the sale went through (owing to Amity’s poor reputation in the community). The 8% discount offered by the venues to Claire was no longer being offered by many of them as such deals had only been agreed on an annual basis.
In May 2014, Dervla, from a rival wedding planning business, knowing of Lucy’s financial difficulties, offered Lucy £40,000 for her business. Lucy rejected the offer. In July 2014 Lucy realised that she would have to sell the business. By this time, Dervla had reduced her offer to buy Lucy’s business to £15,000.
Lucy wishes to pursue an action against Claire to recover as much money as is possible in respect of her failed business venture. She seeks your advice. You must explain to her that you believe her best course of action is to pursue an action in misrepresentation.
1. On what grounds can Lucy argue that Claire has been guilty of an actionable misrepresentation? (Approx 1000 words)
2. Leaving aside Clause 7, explain to Lucy the remedies that will be available to her if she is able to establish an actionable misrepresentation. (Approx 600 words)
3. Consider the effect, if any, of Clause 7 and explain the way in which such clauses are regulated. (Approx 400 words)
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