Chapter 4: Validity, termination and remedies of contracts

Question 1

vitiating factors

Answer 1

reasons to have a contract set aside

Question 2

invalid contract

Answer 2

something was wrong with the contract from outset (a defect)

Question 3

void contract

Answer 3

a contract that has never been valid and has no rights or obligations as such

Question 4

voidable contract

Answer 4

contract is legally enforceable, unless the innocent party does not want to go through with the contract

Question 5

representation

Answer 5

induces the contract but is not a term of the contract

Question 6

misrepresentation

Answer 6

untrue representation

Question 7

Conditions to sue for misrepresentation

Answer 7

1. when an opinion is stated as if it was a fact
2. the opinion must have been made before or at the time of the contract
3. representation must have induced the other party to enter into the contract

Question 8

innocent misrepresentation

Answer 8

the maker had reasonable grounds for believing it to be true

Question 9

negligent misrepresentation

Answer 9

no reasonable care was taken in making the statement –> tort of negligence

Question 10

fraudulent misrepresentation

Answer 10

person making the statement knew it was untrue –> tort of deceit

Question 11

remedies for misrepresentation

Answer 11

1. equity: innocent party can cancel the contract –> principles of fairness must apply (indemnity may be required to recover parties to original positions)
2. sue for tort (tort of deceit or tort of negligence)

Question 12

uberrimae fidei

Answer 12

duty of full disclosure

Question 13

in lieu of

Answer 13

instead of

Question 14

duress

Answer 14

entering a contract due to violence

Question 15

undue influence

Answer 15

when improper pressure is put on someone to enter into a contract

Question 16

non est factum

Answer 16

when the written contract is different from the one the signatory believes to be signing –> signatory must have taken reasonable care in signing the contract and fraud must have been used to sign the contract

Question 17

mistaken identity

Answer 17

when one party is mistaken as to the identity of the other party

Question 18

common mistake

Answer 18

when both parties are mistaken about the same thing

Question 19

mutual mistake

Answer 19

when parties have misunderstood eachother

Question 20

prima facie void

Answer 20

contract that restricts the freedom of trade

Question 21

discharge by performance

Answer 21

the contract ends because the parties have done what they had promised to do

Question 22

lump sum contracts

Answer 22

nature of the contract excludes the possibility of part payment

Question 23

exceptions to the discharge by performance rule

Answer 23

1. substantial performance

2. divisible contract: a contract can be divided into a number of separate, specific parts

Question 24

discharge by agreement

Answer 24

contract ends automatically

Question 25

bilateral discharge

Answer 25

decision not to comply with the original contract –> each party discharges the other

Question 26

unilateral discharge

Answer 26

decision not to comply with the original contract –> one party discharges the other

Question 27

discharge by breach

Answer 27

party has failed to adequately perform its contractual obligations (termination)

Question 28

fundamental breach

Answer 28

(material breach in the US) breach of condition

Question 29

anticipatory breach

Answer 29

refusal to perform announced before the date due for performance

Question 30

an intitio

Answer 30

contract is destroyed as if it never existed

Question 31

discharge by frustration

Answer 31

when through no fault of the parties event after the formation of the contract make it impossible to perform the contract (doctrine of impossibility in the US)

Question 32

force majeure

Answer 32

events considered beyond the control of parties

Question 33

reasons for discharge by frustration

Answer 33

destruction
inability
law changes or governmental actions
death or permanent illness

Question 34

quantum meruit

Answer 34

claim for reasonable sum ‘as much as earned’

Question 35

reliance loss damages

Answer 35

expenses incurred because the innocent party relied on the contract being performed

Question 36

expectation damages

Answer 36

when a claimant expected profit but did not incur it because the contract was not performed properly

Question 37

direct cost

Answer 37

the harm suffered must arise naturally from the nature of the contract

Question 38

indirect costs

Answer 38

could be reasonably foreseen by the contract breaker because he was aware of special circumstances which would lead to additional loss

Question 39

contra proferentem rule

Answer 39

all ambiguous terms are interpreted against the one relying on it

Question 40

liquidated damages clause

Answer 40

specifies a predetermined amount of money that must be paid as damages for failure to perform under a contract

Question 41

penalty clause

Answer 41

punishes the other party for breach

Question 42

frustration of the common venture

Answer 42

the commercial purpose of a contract is said to be defeated if the essential commercial purpose no longer exists

Question 43

express clause

Answer 43

terms explicitly stated by the parties, orally or written

Question 44

prohibitory injuction

Answer 44

prohibit a person from doing something

Question 45

mandatory injuction

Answer 45

require someone to do something

Question 46

freezing injuction

Answer 46

prevents a party from disposing of or dealing with its assets

Question 47

interim injuction

Answer 47

a temporary order given by a court of law which tells someone either to do or not do something until an official decision on the case can been made

Question 48

final injunction

Answer 48

a final order given after the trial

Question 49

ab initio

Answer 49

parties are returned to the position they would have been in if the contract had never been made

Question 50

restitutio in integrum

Answer 50

it is impossible to go back to the former position

Question 51

frustration of the common venture

Answer 51

commercial purpose is said to be defeated where there is no physical destruction of the subject matter, but the essential commercial purpose no longer exists

Question 52

specific performance

Answer 52

an order to make a party perform his obligations under the contract