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Mary, a hardworking and industrious lady, lives in and does business in Canada. Due to her industry, she has bought several houses in Lang'ata, Nairobi, three of which she has been leasing to the Kenya Wildlife Services to house their senior managers. John, a young man with great ambitions, has always desired to purchase a house in Lang'ata, but had been unable to do so due to the high prices of property in Lang'ata and his inability to secure financing from banks and other financial institutions. John has learnt of Mary's ownership of the three houses being rented by KWS and has designs to purchase one of them by hook or crook. He sends Mary an email detailing the poor condition of one of the houses due to poor maintenance by the tenants, the KWS. He further states that the said house has been earmarked for demolition by the Kenya Airports Authority (KAA) for being in the flight path and posing a security risk to the planes at Wilson Airport. In the email, John offers to purchase the "condemned" house from Mary at Kshs. 7 million, way below the market price of the house, which was then valued at Kshs. 20 million. Mary questions the low asking price, but John tells her that property prices have considerably fallen in Nairobi due to the security threats posed by the terror group Al-Shabaab. Taking into account all the circumstances as per John's email, Mary agreed to sell the house to John at the proposed price and a Sale Agreement was prepared and signed by both parties, though the transfer documents had not yet been prepared. Mary came back into the country to complete the transactions, but her inspection of the house revealed that it had been perfectly maintained by the KWS and that it was in good condition. She also discovered that the house had not been condemned for demolition as was stated by John; and that the terror threats from Al-Shabaab have in no way led to the reduction in property prices in Nairobi. Based on her findings, Mary refused to sell the property to John and repudiated the Sale Agreement. Five years after Mary's repudiation of the Sale Agreement, John files a suit in court demanding for the specific performance of the Sale Agreement and the transfer of the house to him. John is, however, unwilling to pay the proper market price for the house, which has now appreciated to Kshs. 50 million, insisting on paying the previously agreed price of Kshs. 7 million. You are the judge at the Milimani Law Courts and the matter has been argued in your court. Decide the case, supporting your decision with the relevant principles and case law

Question

Mary, a hardworking and industrious lady, lives in and does business in Canada. Due to her industry, she has bought several houses in Lang'ata, Nairobi, three of which she has been leasing to the Kenya Wildlife Services to house their senior managers. John, a young man with great ambitions, has always desired to purchase a house in Lang'ata, but had been unable to do so due to the high prices of property in Lang'ata and his inability to secure financing from banks and other financial institutions. John has learnt of Mary's ownership of the three houses being rented by KWS and has designs to purchase one of them by hook or crook. He sends Mary an email detailing the poor condition of one of the houses due to poor maintenance by the tenants, the KWS. He further states that the said house has been earmarked for demolition by the Kenya Airports Authority (KAA) for being in the flight path and posing a security risk to the planes at Wilson Airport. In the email, John offers to purchase the "condemned" house from Mary at Kshs. 7 million, way below the market price of the house, which was then valued at Kshs. 20 million. Mary questions the low asking price, but John tells her that property prices have considerably fallen in Nairobi due to the security threats posed by the terror group Al-Shabaab. Taking into account all the circumstances as per John's email, Mary agreed to sell the house to John at the proposed price and a Sale Agreement was prepared and signed by both parties, though the transfer documents had not yet been prepared. Mary came back into the country to complete the transactions, but her inspection of the house revealed that it had been perfectly maintained by the KWS and that it was in good condition. She also discovered that the house had not been condemned for demolition as was stated by John; and that the terror threats from Al-Shabaab have in no way led to the reduction in property prices in Nairobi. Based on her findings, Mary refused to sell the property to John and repudiated the Sale Agreement. Five years after Mary's repudiation of the Sale Agreement, John files a suit in court demanding for the specific performance of the Sale Agreement and the transfer of the house to him. John is, however, unwilling to pay the proper market price for the house, which has now appreciated to Kshs. 50 million, insisting on paying the previously agreed price of Kshs. 7 million.

You are the judge at the Milimani Law Courts and the matter has been argued in your court. Decide the case, supporting your decision with the relevant principles and case law

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Solution

As the judge presiding over this case, I would rule in favor of Mary. The principle of contract law that applies here is misrepresentation. Misrepresentation is a false statement of fact made by one party to another, which, whilst not being a term of the contract, induces the other party to enter the contract. The misrepresentation must be material and must have induced the contract.

In this case, John misrepresented the condition of the house, the threat of demolition, and the state of the property market in Nairobi to Mary. These false statements induced Mary to enter into the contract to sell the house at a price significantly below its market value.

The case of Redgrave v Hurd (1881) supports this decision. In this case, a solicitor misrepresented the income of his practice to a prospective partner. The prospective partner did not investigate the claim and entered into the contract. When he discovered the truth, he sought to rescind the contract. The court held that he was entitled to rescind the contract due to the misrepresentation, even though he had the opportunity to discover the truth.

Therefore, Mary is entitled to rescind the contract due to John's misrepresentation. John's claim for specific performance is denied, as he is not willing to pay the current market price for the house. The contract is voidable due to the misrepresentation, and Mary is not obliged to perform her part of the contract.

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