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Essay: Law problem scenario between Dr Anson and Dr Chitty

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  • Subject area(s): Law essays
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  • Published: 22 September 2015*
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  • Words: 818 (approx)
  • Number of pages: 4 (approx)

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In the case scenario involving Dr. Anson and Dr. Chitty, the legal question that arises falls in the area of contract law. Dr. Anson and Dr. Chitty enter into a contract where Anson sells his private medical practice to Chitty. Subsequently, it is apparent that there was a misrepresentation of facts by Dr. Anson that induced Dr. Chitty to purchase the medical practice in the anticipation of profits. It is not in doubt that Chitty would not have agreed to the contract had he known the exact situation of the medical practice before purchase.
This case perfectly fits the definition of misrepresentation that entails a false statement of fact from one person to another that influences their decision to enter a contract (Collins 2003). The misrepresentation in this case can be classified as fraudulent misrepresentation that has also been acted upon by the injured party. In the old English case of Derry vs. Peek (1889) 5 T.L.R 625 applicable in Singapore, fraudulent misrepresentation involves the making of a false statement with the knowledge that it is false, or without believing it is true, or being reckless as to whether it is true or false. Here, Dr. Anson clearly knows that the statement is false hence fully satisfying the first requirement. Since misrepresentation must be material in nature to result in an inducement, this condition is satisfied because Dr. Anson gives false financial statements as to profits he had made that significantly influences Dr. Chitty’s decision to buy the practice. The fact that Dr. Chitty had the opportunity to examine the accounts but did not is immaterial to decide whether he was induced.
Following the above classification, it is necessary to examine the remedies available to Dr. Chitty for the inducement to enter the contract due to the misrepresentation. It is advisable for Dr. Chitty to seek to rescind the contract even though he could also affirm it. Rescission would be the best option for Dr. Chitty as he would be discharged of all the obligations under the contract and indemnified against all expenses incurred thus he would return to his previous financial position before the contract was entered into. Dr. Chitty is still within the parameters to rescind the contract as he has not affirmed it and a third party has not acquired rights under the contract that would make it impossible to rescind the contract. Moreover, it is not impossible to return both parties to their former financial positions before the contract.
Apart from fraudulent misrepresentation, the principle of unjust enrichment also applies to the case. Dr. Anson is set to benefit by unlawfully misrepresenting material facts that influence Chitty to buy his practice which is unsustainable. Profiting from a contract of this nature would amount to unjust enrichment. Consequently, Dr. Chitty has the option to sue to recover damages under the law of unjust enrichment by making an application for restitution of the contract. The case scenario satisfies all the necessary elements of unjust enrichment. The first element is that the unjust enrichment is at the detriment of the plaintiff. In this scenario, Dr. Anson becomes unjustly enriched at the expense of Dr. Chitty by misrepresentation of material facts thereby inducing Dr. Chitty to enter into the contract of sale.
For the claim of unjust enrichment to succeed, the plaintiff (Dr. Chitty in this case), must be able to prove: that the defendant got enriched at the expense of the plaintiff, that the enrichment occasioned injustice and that the defendant cannot raise any relevant and reasonable defenses to the claim of unjust enrichment (Collins 2003). These prerequisites were set out in the case of The Info-Communications Development Authority of Singapore vs. Singapore Telecommunications Ltd [2002] 3 SLR. In Dr. Chitty’s case, it is not doubtful that the defendant to be was enriched unjustly because he has evidence of purchase of the business to him. Consequently, this enrichment must have been at the expense of Dr. Chitty as he paid the consideration for the contract resulting in financial loss. Since there is expert evidence from the accountant that the $80,000 profit could not be realized in the medical facility, it locks out the possibility of Dr. Anson raising any defense. In light of the circumstances, it is more probable than not that a claim brought by Chitty on the grounds of unjust enrichment will succeed. It is therefore advisable that when instituting claims in court, Dr. Chitty should claim unjust enrichment in the alternative to rescission of the contract. However, should the claims of unjust enrichment succeed, Dr. Chitty may also have to make some payments to Dr. Anson such obligations could arise under the doctrine of restitution in intagrum- which requires both parties to be restored to their former financial status (Zheng 2003). Dr. Chitty may be required to return some property given handed over to him by the defendant to facilitate the process of restitution. Still, Chitty would benefit more.

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