QUESTION THREE

Sam owned a hotel called Leaning Spires in the centre of Bristol. He wanted to sell it and retire overseas. On 15 May, he had a meeting with Cara, who was interested in buying the business. During this meeting, Sam said the following:

(1)He described Leaning Spires as "the most luxurious hotel in Bristol".

(2)He said that the building was well-maintainedand would not need any major repairs for the foreseeable future; this was particularly important to Cara as she wanted to keep future expenditure to a minimum.

(3)He said that the hotel had been booked for a number of wedding receptions during the month of July, which would give a guaranteed minimum income for the month of 40,000. This statement was true at the time Sam made it.

Following the meeting, Cara inspected the accounts, which showed that Leaning Spires had made a healthy profit over the last 12 months - healthier than those of another hotel called The Beeches, which Cara had also looked at.

On 25 May, one of the July wedding reception bookings was cancelled. Sam did not inform Cara about this.

On 30 May, Cara commissioned a structural survey of the hotel. Upon seeing that survey and being satisfied with it, she signed a written contract with Sam on 15 June, under which she purchased Leaning Spires from him for 500,000. The contract did not contain any of the statements referred to above.

On 20 June, Cara discovered that a number of the interior walls in the hotel were damp, owing to leaking pipes. However, this had not shown up on the structural survey, because Sam had painted the walls with special damp-proof paint. It cost Cara 15,000 to repair the pipes and the walls.

On 21 June, Cara found out about the cancelled July wedding reception booking. This caused the hotel to lose out on 10,000 worth of income. In order to make up the shortfall, Cara had to increase her rates from the start of July.

Advise Cara on her chances of suing Sam for misrepresentation and, briefly, for breach of contract, in respect of the losses she has incurred. You should also advise her which remedies she might obtain, if either action is successful.