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East v Mauer [1991] 1 WLR 461

Facts:

Seller sold one of his salons to Buyer, that he would not work in his other salon regularly.
Despite expenditures and input, the purchased salon business fell rapidly and was unable to make profit.
Then Buyer discovered Seller continued working at the other salon, where clients would depart to.
Buyer sued.

Ratio:

Fraudulent misrepresentation can be remedied by damages through tort law.

Foregone profits: recoverable via tort where C might be expected to make them in a SIMILAR hairdressing business.
To recover profits that would have been particular to THIS business, breach of a contractual warranty needed to be shown.

Holding:

Judgement in favour of C.

(Court of Appeal: appeal amount of 'loss of profit', not on judgement that C was entitle to damages.)

Comments:

Worth investigating way courts apply Deceit Rule (under s.2(1) Misrepresentation Act or for fraud) to avoid unjustifiable recovery of expectation losses in law of misrep.
Damages for 'loss of profits' do not always = 'loss of expectation'. 'Loss of profits' can be recovered via tort law.

Entitled to profits that could've been earned by investing in a SIMILAR business, not profits that would've earned from THIS business.
Entitled to profits expected from some OTHER contract that was lost/turned away due to reliance on misrepresentation, not profits expected under THIS contract.

"The Court of Appeal held that East could recover the [price paid] - [selling price] + [trading losses] + [expenses of buying, selling, improvements] + £10,000 in foregone profits.
Foregone profits: recoverable via tort where C might be expected to make them in a SIMILAR hairdressing business.
To recover profits that would have been particular to THIS business, breach of a contractual warranty needed to be shown."


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