Derry v Peek, Facts, Key Point, Fraudulent Misrepresentation

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This case is concerned with fraudulent misrepresentation in the misrepresentation chapter of contract law

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Facts of Derry V Peek

The Prospectus was released of the defendants company in which it was written that the company had the permission to use trams, which are powered by steam, rather than horses.

But infact that was not true at that moment, because to use trams that run of steam it was subject to the approval of the Board of Trade. And this approval was later rejected.

The claimant bought the shares of the company by relying on their statement of trams . He then sued the company for fraudulent misrepresentation

Issue:

The issue in this case was whether the Defendant made a fraudulent misrepresentation or his statement was simply incorrect

Decision

As the decision came into the favour of the defendant that his statement was not fraudulent but he honestly believed that he would get the approval

Key Point to remember of Derry v Peek

Lord Herschell established the following three propositions to prove fraudulent misrepresentation

1- There must be proof of fraud and nothing short of that is sufficient.

2- The fraud is proved when it is shown that a false representation has been made

  •              a) Knowingly
  •              b) Without belief in its truth
  •              c) Recklessly, careless whether it be true or false

3- If fraud is proved the motive of the person is irrelevant

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