In Jan 1934, Dr O’Flanagan entered negotiations with the Cs for the sale of his medical practice. Dr O’F’s agent represented that the practice had annual takings of £2,000 and this was confirmed by Dr O’F. The sale took place on 1 May 1934. However, Dr O’F had been ill between January and May 1934 and the practice was looked after in his absence by various locums. The business of the practice fell away dramatically during this time: in the three weeks before completion of the sale, weekly takings averaged £5.
On 4 May, the Cs issued a writ seeking rescission of the agreement and return of the purchase money. It was argued on behalf of Dr O’F’s estate (he died in July 1934) that no representations had been made as to takings during 1934. Further, it was argued that it was not the law that where a statement which was true when made and remained true, the maker was obliged to disclose a subsequent change of circumstances.
Bennett J held that the contract was not one uberrimae fidei, and that since the representation was true when made, the Cs’ action failed. The CA allowed the Cs’ appeal.
‘If A with a view to inducing B to enter into a contract makes a representation as to a material fact, then if at a later date and before the contract is actually entered into, owing to a change of circumstances, the representation then made would to the knowledge of A be untrue and B subsequently enters into the contract in ignorance of that change of circumstances and relying upon that representation, A cannot hold B to the bargain.’
Romer LJ at 586.
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