Chapter Eight-Contracts

Question 1

Misrepresentation

Answer 1

Is a false statement of fact that persuaded someone to enter into the contract.

• opinion is only actionable if people making statement was an expert
• a promise can be misrepresentation if the person who made the statement has no intention to honour that promise
• silence is usually not actionable (unless someone actively hides info)

Question 2

What is it called when individuals mislead themselves?

Answer 2

Caveat emptor (buyer aware)

Question 3

What happens when the misleading statement statement has been incorporated as a term of the agreement?

Answer 3

The normal rules of breach of contract apply

Question 4

Innocent misrepresentation

Answer 4

A false statement that is made honestly and without carelessness by a person who believed it was true
-equitable with remedy of rescission (attempts parties to original position)

Question 5

Fraudulent misrepresentation

Answer 5

Intentional misrepresentation of fact (when person who made false statement did not believe it was true, made knowingly, or recklessly)

• can she for damages of the tort of deceit
• only matters if they did not bother to find truth
• innocent statement can become fraud if not corrected
• court will award decision or damages for deceit (victim does not lose right to monetary compensation if affirming the contract)

Question 6

Negligent misrepresentation

Answer 6

May be established where a party carelessly provided false and material info

• all four elements of negligence must be established
• damages are available as a remedy where the misrepresentation has become a term of the contract that is breached (only when the misrepresentation is truly innocent and without fault is the victim restricted to the remedy of rescission)

Question 7

Duress

Answer 7

When one is pressured or forced to enter into a contract (makes contract voidable)

Question 8

“Badges” of duress

Answer 8

Whether the party protested
Whether the party had a realistic alternative to entering into the agreement
Whether the party could talk to legal counsel
Whether after agreement party took steps to void it
If the pressure was legit
Threatening to sue isn’t duress

Question 9

Undue influence

Answer 9

When pressure from a dominant trusted person makes it impossible to bargain freely makes contract voidable

Question 10

Presumptions of undue influence

Answer 10

Client relationships

Adult children with mentally impaired parents

Question 11

How can a contract with undue influence be binding?

Answer 11

If the person trying to enforce the contract can show that the undue influence was overcome and that the victim either affirmed or did nothing to rescind the contract

Question 12

Unconscionable transactions

Answer 12

An equitable doctrine that permits the court to set aside a contract in which one party had been taken advantage of factors that fall short of incapacity

• used power
• court will not grant a remedy based on undue influence or unconsionabity where a third party is negatively affected

Question 13

Shared mistake

Answer 13

When the two parties incomplete agreement made the same mistake regarding some aspect of the contract (ie. where the subject no longer exists at time contract is made)

Question 14

Misunderstanding

Answer 14

Occurs when parties misunderstand the terms of the agreement itself and neither party is aware of the other’s different understanding
-courts will use reasonable person test to determine which interpretation of the contract is more reasonable, if both interpretations are equally reasonable the contract is void

Question 15

One-sided mistake

Answer 15

Takes place when only one of the parties to the contract is making a mistake

• usually no recourse (caveat emptor)
• contract is void when mistake is fundamental
• if mistake involves identity it is void

Question 16

Non est factum

Answer 16

It is not my act

Question 17

When mistake is about the nature of the document

Answer 17

It is void because of lack of consensus “non est factum”

Question 18

Test of a mistake is…

Answer 18

Objective, courts are not concerned with what the parties thought they were agreeing to but rather what the parties should have been aware of and expected while making the agreement

Question 19

Parol evidence rule

Answer 19

When terms used in an agreement are clear and unambiguous courts will not allow other outside evidence to be introduced, with exceptions

Question 20

Privity and exceptions

Answer 20

Contract bonds only the parties to it

• land
• agent
• trust and beneficiary
• insurance
• novation (new person comes in and replaces party in contract)

Question 21

When assigning things in a contract what can be assigned?

Answer 21

Benefits not obligations- however another person can do vicarious performance but the original party to the contract remains responsible

Question 22

Involuntary assignment

Answer 22

When someone dies and rights or obligations are automatically transferred

Question 23

Negotiable instruments are true exceptions to privity

Answer 23

Can be freely passed from one person to another, includes Chequers and such.