Chapter 9: Representations and Terms

Question 1

Contractual Term

Answer 1

A provision in an agreement that creates a legally enforceable obligation. Is a promissory statement.

Question 2

Pre-Contractual Representation

Answer 2

A statement one party makes by words or conduct with the intention of inducing another party to enter into a contract.

Question 3

What happens if you make a false contractual term?

Answer 3

You are liable for breach of contract.

Question 4

What happens if you make a false pre-contractual representation?

Answer 4

You are liable for misrepresentation.

Question 5

Misrepresentation

Answer 5

A false statement of an existing fact that causes a recipient to enter into a contract.

Question 6

Opinion

Answer 6

The statement of a belief or judgement.

Question 7

Future Conduct

Answer 7

Not a statement of fact; it is a statement about a person’s future intentions.

Question 8

If you make a mistake in describing a law, are you liable for misrepresentation?

Answer 8

No, as we are all presumed to know the law.

Question 9

List statements that are non-factual (not actionable as misrepresentation):

Answer 9

• Opinion based on speculation.
• Description of another’s future intent.
• Statement of law.

Question 10

List statements that are factual (actionable as misrepresentation):

Answer 10

• Expert opinion.
• Description of one’s present intent.
• Statement of legal consequences.

Question 11

When can silence be construed as misrepresentation? Hint: there are 6 cases.

Answer 11

• 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.

Question 12

Give an example of a time when a contract requires a duty of utmost good faith:

Answer 12

When dealing with insurance companies.

Question 13

Give an example of a time when a special relationship exists and silence can be construed as misrepresentation:

Answer 13

When your accountant sells you a cottage with known structural damage.

Question 14

Give an example of a time when a contract includes a statutory provision that requires disclosure:

Answer 14

• Insurance.
• Financial officers.
• Domestic contracts.

Question 15

For a statement to be actionable as a misrepresentation, the deceived party must prove that the false statement ___ the contract (to some degree).

Answer 15

Induced.

Question 16

Recission

Answer 16

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.

Question 17

___ is the only contractual consequence of misrepresentation.

Answer 17

Recission.

Question 18

Recession is a discretionary remedy. What does this mean?

Answer 18

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.

Question 19

Restitution

Answer 19

Involves a giving back and taking back on both sides.

Question 20

The remedy of recision is often accompanied by…

Answer 20

An order for restitution.

Question 21

Affirmation

Answer 21

Occurs when the misled party declares an intention to carry out the contract or otherwise acts as though it were bound by it.

Question 22

When would recission not be available?

Answer 22

1. When there is affirmation.
2. When restitution is impossible.
3. When it would affect a third party.

Question 23

Damages

Answer 23

Are intended to provide monetary compensation for the losses that a person suffered as a result of relying upon a misrepresentation.

Question 24

Innocent Misrepresentation

Answer 24

A statement a person makes carefully and without knowledge of the fact that it is false.

Question 25

What is the only legal remedy available for innocent misrepresentation?

Answer 25

Recission.

Question 26

Negligent Misrepresentation

Answer 26

A false, inducing statement made in an unreasonable or careless manner.

Question 27

What is the only legal remedy available for negligent misrepresentation?

Answer 27

Recission. However, it may also amount to a tort that supports the award of damages.

Question 28

Fraudulent Misrepresentation

Answer 28

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.

Question 29

Courts have a very high standard when it comes to proving ___.

Answer 29

Fraud.

Question 30

What are the legal remedies available for fraudulent misrepresentation?

Answer 30

Recission and damages.

Question 31

What must you prove in innocent misrepresentation?

Answer 31

- False statement of fact or misleading silence. | - Inducing contract.

Question 32

What must you prove in negligent misrepresentation?

Answer 32

- False statement. - Made in an unreasonable or careless manner. - Inducing a contract. - Causing a loss that is not always sufficiently remedied by recission.

Question 33

What must you prove in fraudulent misrepresentation?

Answer 33

- 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.

Question 34

Express Term

Answer 34

A statement made by one of the parties that a reasonable person would believe was intended to create an enforceable obligation.

Question 35

Parol Evidence

Answer 35

Evidence that is not contained within the written contract.

Question 36

Parol Evidence Rule

Answer 36

Evidence outside of the contract (such as oral conversation) cannot be used as supporting evidence for an express term.

Question 37

When is parol evidence admissible?

Answer 37

- 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.

Question 38

Collateral Contract

Answer 38

A separate agreement one party makes in exchange for the other party's entry into the main contract.

Question 39

Is the parol evidence rule applicable in a collateral contract?

Answer 39

No.

Question 40

Literal Approach

Answer 40

Assigns words their ordinary meaning.

Question 41

Contextual Approach

Answer 41

Goes beyond the four corners of the document by looking at the parties' presumed intentions and their circumstances.

Question 42

Golden Rule

Answer 42

Says that words will be given their plain, ordinary meaning unless to do so would result in absurdity.

Question 43

Contra Proferentem Rule

Answer 43

Ensures that the meaning least favourable to the author will prevail.

Question 44

Implied Term

Answer 44

Arises by operation of law, their through the common law or under a statute.

Question 45

When will a court interfere with a business transaction?

Answer 45

1. When a gap or omission is an obvious consequence. | 2. When it is required for the purpose of business efficacy.

Question 46

Give an example of a term implied by the court:

Answer 46

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.

Question 47

Standard Form Agreement

Answer 47

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.

Question 48

What is the downside to standard form agreements?

Answer 48

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).

Question 49

Exclusion Clause

Answer 49

A contractual term that seeks to protect one party from various sorts of legal liability.

Question 50

What three things need to be demonstrated in an exclusion clause?

Answer 50

1. The term must be drafted in clear, unambiguous language. 2. Party must be given reasonable notice. 3. Must be shown that the party agreed (usually a signature).

Question 51

Does the power imbalance in a contract affect the exclusion clause?

Answer 51

Yss. It does not make the exclusion clause invalid, but judges will decide whether the weaker party truly did agree to the clause.

Question 52

Does a signature guarantee that the exclusion clause will work?

Answer 52

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.