Smith v Land & House Property Corporation (1884) 28 Ch D 7

Whether a statement is one of opinion of a representation

Facts

The claimant put up a hotel for sale with the particulars stating that it was currently leased to a most desirable tenant. The defendant sent its representative to view the property and the report stated that the tenant could hardly pay the rent and that the town was largely dilapidated. On the basis of the report, the defendant instructed its representative to pay no more than £5,000 for the hotel and the sale was eventually agreed at £4,700. Before the sale was complete the tenant went into liquidation and the defendant refused to continue. The claimant sought specific performance. The defendant counterclaimed on the basis that the claimant had misrepresented the nature of the tenant.

Issue

The issue in this circumstance was whether the claimant’s statement as to the quality of the tenant was a statement of opinion or a representation which induced the defendant to enter into the contract and, if so, whether it was a misrepresentation which allowed the contract to be rescinded.

Held

It was held that the statement was not one of opinion. The claimant had sufficient knowledge of the tenant and its business practices to be able to state, as a matter of fact, whether it was a desirable tenant. The claimant also knew that large amounts of rent were owing from the tenant and therefore, the statement as to the tenant’s quality was false. The statement constituted a misrepresentation and the contract could be rescinded.