Ch.11 Failure to Create an Enforceable Contract

Question 1

Requirements for a valid contract:

Answer 1

-Offer and acceptance
-Capacity
-Consideration
-Legality of object
-Intention
-Form and writing

These may all exist but contract may still not be enforceable

Question 2

Four situations which may render agreement unenforceable:

Answer 2

Mistake
Misrepresentation
Undue influence
Duress

Also determines who bears the brunt of a given loss

Question 3

Mistake

Answer 3

state of affairs in which a party (or both parties) has formed an erroneous opinion as to identify of subject matter, or some other important term
-Contract does not express their true intentions

Question 4

Types of mistakes:

Answer 4

Mistake of law
Mistake of fact

Question 5

Mistake of law:

Answer 5

Presumed to know the law

Usually no relief provided by court

Question 6

Mistake of fact

Answer 6

mistake as to the existence of the subject matter of a contract or the identity of a party
- Court may provide relief depending on if mistake was in subject matter of contract or in identity of parties

Question 7

Non Est Factum

Answer 7

defence that may allow illiterate or infirm persons to avoid liability on a written agreement if they can establish that they:

• Were not aware of the true nature of the document, and
• Were not careless in its execution

Narrow form of mistake

Applies only to type of agreement being signed not to the terms of the agreement

Question 8

Mistake may take one of two forms:

Answer 8

1. Unilateral mistake
2. Mutual mistake

Can be same mistake or different mistakes

Courts will not enforce agreements when the other party is aware of the mistake being made

Question 9

Unilateral mistake

Answer 9

mistake by one party to the agreement

Question 10

Mutual mistake

Answer 10

mistake where both parties have made mistaken assumptions as to the subject matter of the agreement

Question 11

Rectification

Answer 11

correction of a mistake in an agreement that would have rendered the agreement impossible to perform
- Used to correct typos or editorial errors that distort the intention of the parties

Question 12

Misrepresentation

Answer 12

Statement or conduct that may be innocent or fraudulent that induces a person to enter into a contract
- Must be about a material matter
- False statement must be a statement of fact and not opinion
- Statement made before contract entered into

Question 13

Result of misrepresentation:

Answer 13

Voidable at the option of the injured party

Must rescind or lose the right if they accept benefits under the contract

Question 14

Rescission

Answer 14

revocation of a contract or agreement
- Only possible if innocent or injured party relied on false statement

Question 15

Three types:

Answer 15

1. Innocent - recission only
2. Negligent - recission and damages
3. Fraudulent - recission and damages

*remedy depends on type of misrepresentation

Question 16

Innocent Misrepresentation

Answer 16

false statement of a material fact made by a party that honestly believed the fact to be true
- Courts attempt to return parties back to original position before they entered into the contract

Question 17

Negligent Misrepresentation

Answer 17

Statements that are sufficiently reckless but not quite innocent nor fraudulent

Question 18

Fraudulent Misrepresentation

Answer 18

• false statement of fact made by a person who knows, or should know, that is false
• Made with the intention of deceiving another

Question 19

Deceit

Answer 19

tort that arises when a party suffers damage by acting upon a false representation made by a party with the intention of deceiving the other

Question 20

Contractual vs. tort remedy:

Answer 20

Contract - rescission is a contractual remedy and used if courts can restore parties to position they were before entering into the contract

Tort of deceit - allows for damages and can award punitive damages
- Deceit:
– Made knowingly
– Without belief in its truth
– Recklessly or carelessly without regard for its truth

Question 21

Misrepresentation by Non-Disclosure

Answer 21

Contracting party under no obligation to disclose material facts to other contracting party

Question 22

Exceptions by Non-Disclosure

Answer 22

Certain types of relationships or contracts i.e. contracts of utmost good faith - contracts with special trust or confidence between the parties

Active concealment of facts

Partial disclosure of facts has effect of rendering the part disclosed as false

Question 23

Undue Influence

Answer 23

state of affairs whereby a person is so influenced by another that the person’s judgement is not his or her own
- Not in a fair bargaining position
- Contract voidable, if dominated party acts to avoid contract as soon as they are free of dominating influence
- Two different scenarios - special relationship exists OR special relationship does not exist

Question 24

If special relationship exists, undue influence onus shifts to dominant party to prove otherwise

Answer 24

Examples: lawyer/client; doctor/patient; trustee/beneficiary; parent-child; spiritual advisor/faithful adherent

Does not apply to spousal relationship

Question 25

No undue influence if:

Answer 25

Agreement was fair and reasonable given circumstances

Full disclosure made prior to the formation of contract

Weaker party was free to seek independent legal advice

Contract is voidable at option of weaker party

Question 26

Duress

Answer 26

threat of injuring or imprisonment for the purpose of requiring another to enter into a contract or carry out some act

-Threat can be to person directly or to persons family
-Threat of violence to person and not person’s goods
-Contract is voidable at option of person once they come out from under duress