Chapter 9: Representations and Terms Flashcards
Contractual Term
A provision in an agreement that creates a legally enforceable obligation. Is a promissory statement.
Pre-Contractual Representation
A statement one party makes by words or conduct with the intention of inducing another party to enter into a contract.
What happens if you make a false contractual term?
You are liable for breach of contract.
What happens if you make a false pre-contractual representation?
You are liable for misrepresentation.
Misrepresentation
A false statement of an existing fact that causes a recipient to enter into a contract.
Opinion
The statement of a belief or judgement.
Future Conduct
Not a statement of fact; it is a statement about a person’s future intentions.
If you make a mistake in describing a law, are you liable for misrepresentation?
No, as we are all presumed to know the law.
List statements that are non-factual (not actionable as misrepresentation):
- Opinion based on speculation.
- Description of another’s future intent.
- Statement of law.
List statements that are factual (actionable as misrepresentation):
- Expert opinion.
- Description of one’s present intent.
- Statement of legal consequences.
When can silence be construed as misrepresentation? Hint: there are 6 cases.
- When silence will distort a previous assertion.
- When a statement is a half-truth.
- When the contract requires a duty of utmost good faith.
- When a special relationship exists between the parties.
- When a statutory provision requires disclosure.
- When facts are actively concealed.
Give an example of a time when a contract requires a duty of utmost good faith:
When dealing with insurance companies.
Give an example of a time when a special relationship exists and silence can be construed as misrepresentation:
When your accountant sells you a cottage with known structural damage.
Give an example of a time when a contract includes a statutory provision that requires disclosure:
- Insurance.
- Financial officers.
- Domestic contracts.
For a statement to be actionable as a misrepresentation, the deceived party must prove that the false statement ___ the contract (to some degree).
Induced.
Recission
The cancellation of a contract, by the parties or the court, with the aim of restoring the parties, to the greatest extent possible, to their pre-contractual state.
___ is the only contractual consequence of misrepresentation.
Recission.
Recession is a discretionary remedy. What does this mean?
It is not a right. The remedy is awarded on the basis of the court’s judgement about what is best according to the rules of reason and justice.
Restitution
Involves a giving back and taking back on both sides.
The remedy of recision is often accompanied by…
An order for restitution.
Affirmation
Occurs when the misled party declares an intention to carry out the contract or otherwise acts as though it were bound by it.
When would recission not be available?
- When there is affirmation.
- When restitution is impossible.
- When it would affect a third party.
Damages
Are intended to provide monetary compensation for the losses that a person suffered as a result of relying upon a misrepresentation.
Innocent Misrepresentation
A statement a person makes carefully and without knowledge of the fact that it is false.
What is the only legal remedy available for innocent misrepresentation?
Recission.
Negligent Misrepresentation
A false, inducing statement made in an unreasonable or careless manner.
What is the only legal remedy available for negligent misrepresentation?
Recission. However, it may also amount to a tort that supports the award of damages.
Fraudulent Misrepresentation
Occurs when a person makes a statement they know is false or that they have no reason to believe is true or that they recklessly made without regard to the truth.
Courts have a very high standard when it comes to proving ___.
Fraud.
What are the legal remedies available for fraudulent misrepresentation?
Recission and damages.
What must you prove in innocent misrepresentation?
- False statement of fact or misleading silence.
- Inducing contract.
What must you prove in negligent misrepresentation?
- False statement.
- Made in an unreasonable or careless manner.
- Inducing a contract.
- Causing a loss that is not always sufficiently remedied by recission.
What must you prove in fraudulent misrepresentation?
- False statement or misleading silence.
- Made without honest belief in its truth.
- Made with intent to induce contract.
- Inducing contract.
- Creating a loss not always sufficiently remedied by recission.
Express Term
A statement made by one of the parties that a reasonable person would believe was intended to create an enforceable obligation.
Parol Evidence
Evidence that is not contained within the written contract.
Parol Evidence Rule
Evidence outside of the contract (such as oral conversation) cannot be used as supporting evidence for an express term.
When is parol evidence admissible?
- To rectify or fix a mistake in a contractual document.
- To prove that a contract was never really formed or is somehow defective.
- To resolve ambiguities.
- To demonstrate that a document does not contain the parties’ complete agreement.
Collateral Contract
A separate agreement one party makes in exchange for the other party’s entry into the main contract.
Is the parol evidence rule applicable in a collateral contract?
No.
Literal Approach
Assigns words their ordinary meaning.
Contextual Approach
Goes beyond the four corners of the document by looking at the parties’ presumed intentions and their circumstances.
Golden Rule
Says that words will be given their plain, ordinary meaning unless to do so would result in absurdity.
Contra Proferentem Rule
Ensures that the meaning least favourable to the author will prevail.
Implied Term
Arises by operation of law, their through the common law or under a statute.
When will a court interfere with a business transaction?
- When a gap or omission is an obvious consequence.
2. When it is required for the purpose of business efficacy.
Give an example of a term implied by the court:
The SCC has determined that the employer has to provide reasonable notice before dismissing an employee, even if a contract does not stipulate this or even if the contract expressly says the the employee can be dismissed without notice.
Standard Form Agreement
Mass-produced documents usually drafted by a party who is in an economic position to offer certain terms on a “take-it-or-leave-it” basis.
What is the downside to standard form agreements?
They are so long and complex that no one reads them. Customer is at mercy of other party. May lack the consensus ad idem (meeting of the minds).
Exclusion Clause
A contractual term that seeks to protect one party from various sorts of legal liability.
What three things need to be demonstrated in an exclusion clause?
- The term must be drafted in clear, unambiguous language.
- Party must be given reasonable notice.
- Must be shown that the party agreed (usually a signature).
Does the power imbalance in a contract affect the exclusion clause?
Yss. It does not make the exclusion clause invalid, but judges will decide whether the weaker party truly did agree to the clause.
Does a signature guarantee that the exclusion clause will work?
No, if there are onerous or unusual terms in small print, and the customer is not really given / does not have an opportunity to read them, then the exclusion clause does not apply.
