## Facts

- A U.S. avian flu epidemic in 2015 sharply reduced egg supply; Rembrandt Enterprises, Inc. (a U.S. egg producer) sought alternative dried egg products.
- Rembrandt contracted with BV Nederlandse Industrie Van Eiprodukten (NIVE), a Dutch supplier, for 4,200 metric tonnes of dried whole egg, yolk, and white over two years, subject to U.S. regulatory approval of the Dutch production process.
- Before confirming U.S. import procedures were satisfied, NIVE told Rembrandt that “unforeseen additional regulatory costs” required a higher price and supplied a cost breakdown.
- Rembrandt agreed to a €2.50/kg price increase, forming a revised price arrangement (the “second contract”).
- NIVE later stated that some supply would come from its sister company, Henningsen van den Burg (Henningsen), whose facilities were also approved by U.S. authorities.
- After market prices fell and disputes arose about regulatory compliance, Rembrandt suspended performance; NIVE sued for lost profits.
- During litigation, it emerged that NIVE’s stated basis for the price increase was false: the increase included an increased profit margin and was not limited to additional regulatory costs.
- Rembrandt defended principally on (1) breach of warranty regarding regulatory compliance and (2) fraudulent misrepresentation inducing assent to the higher prices; it sought rescission of the second contract.
- At first instance, the court found fraudulent misrepresentation, inferred inducement, allowed rescission of the second contract, and limited NIVE’s recovery to its own losses (excluding Henningsen’s profits).

## Issues

1. In fraudulent misrepresentation, must the representee prove inducement to obtain rescission, and what level of causal connection satisfies inducement?
2. Can a contracting seller recover damages for lost profits suffered by a non-contracting third party that performed part of the supply with the buyer’s consent (transferred loss)?

## Decision

- The Court of Appeal dismissed NIVE’s appeal and upheld rescission of the second contract.
- The court held that inducement remains an element even in fraud, but it is satisfied where the misrepresentation materially influenced the decision to contract and need not be the sole cause.
- Given a fraudulent and material misrepresentation, the court accepted a strong inference (evidential presumption) that the representee was induced, absent clear evidence the statement played no part.
- On the facts, Rembrandt was induced by the dishonest statement that the increase was required only by regulatory costs.
- The court rejected NIVE’s attempt to recover Henningsen’s loss of profits under transferred loss; NIVE’s recovery was limited to its own losses.

## Legal Principles

- Rescission for fraudulent misrepresentation requires proof of inducement; fraud does not remove that requirement.
- Inducement in fraud is met if the representee was materially influenced: the statement must be an inducing cause, not necessarily the sole or predominant cause.
- In fraud cases, once a fraudulent and material representation is proved and communicated, courts will ordinarily infer inducement unless rebutted by clear evidence that the representation had no effect.
- It is sufficient that, absent the misrepresentation, the representee might have acted differently (e.g., negotiated or reconsidered); strict “but for” proof that it would not have contracted is not required.
- Transferred loss is a narrow exception: a contracting party generally cannot recover a nonparty’s loss merely because the nonparty assisted performance; it applies only in limited settings to avoid a remedial gap where otherwise no claimant could recover.

## Conclusion

The court reaffirmed that inducement remains an element of fraud-based rescission but is established where a dishonest, material statement materially influenced the contract decision, with a strong inference of reliance once fraud is shown, and it refused to extend transferred-loss doctrine to permit recovery of a related nonparty supplier’s lost profits.


BV Nederlandse Industrie Van Eiprodukten v. Rembrandt Enters., Inc., [2019] EWCA (Civ) 596 (Eng.)