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Derry v. Peek

House of Lords
1889 14 App. Cas. 337, HL.

Derry v. Peek


Henry William Peek (plaintiff) received a prospectus of a train company which stated that due to a new law, the company could begin to use steam or mechanical power in place of the typical horse drawn power. The prospectus predicted that this would result in great savings and profitability for the company. After reading the prospectus, Peek bought shares in the company, thinking the company had an absolute right to use steam and other mechanical power. However, unbeknownst to any of the parties at the time, the Board of Trade only permitted the company to use steam or mechanical power on certain portions of its tracks. As a result, the company folded. Consequently, Peek brought suit against William Derry, the chairman of the company, and its four directors (defendants) for fraudulent misrepresentation. The defendants testified that they believed the company would be able to obtain absolute rights to use steam or mechanical power. The trial court dismissed the claim because of that testimony. The court of appeal reversed, holding that the defendants did not have any reasonable grounds on which to base their beliefs. The defendants appealed.

Rule of Law


Holding and Reasoning (Herschell, L.)

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