Contract 4 - Vitiating Elements Flashcards
What is misrepresentation?
Unambiguous false statement of fact inducing the claimant to enter into the contract.
The false statement does not need to be a term to give rise to rights on the claimant’s part.
What are the elements of an actionable misrepresentation?
- Representations need to be pre-contractual
- Make the contract voidable but not void
- Must be unambiguous, false, and a statement of fact
What is the test for actionability in misrepresentation?
- Unambiguous
- False
- Statement of fact
What does ‘unambiguous’ mean in the context of misrepresentation?
The representation must be clear with unambiguous meaning.
The representor will not be liable if the representee has placed its own unreasonable construction on the representation.
What is required for a statement to be considered ‘false’ in misrepresentation?
A statement must be false; it is not false if it is substantially correct.
Minor differences should not influence a reasonable person to enter into a contract.
What constitutes a ‘statement of fact’ in misrepresentation?
- Not a mere puff
- Made by words or conduct
- Statements of law can give rise to misrepresentation
What are examples of statements that do not constitute misrepresentation?
- Mere puff
- Statements of opinion
- Future intentions
- Silence
What is the significance of silence in misrepresentation?
Silence is not a statement of fact and usually does not result in misrepresentation.
There is generally no duty to disclose facts influencing the other party’s decision.
What are exceptions to the rule of silence in misrepresentation?
- Half-truths
- Continuing representations
- Contracts uberrimae fidei
- Addressed to the claimant
- Induces claimant to enter contract
What is required to establish inducement in misrepresentation?
The representation must have caused the representee to enter into the contract.
The test for materiality is objective.
What is the burden of proof in cases of fraudulent misrepresentation?
The burden of proof is on the claimant and it is a heavy burden to discharge.
What constitutes fraudulent misrepresentation?
- Proof of fraud
- False representation made knowingly, without belief in its truth, or recklessly
What is negligent misrepresentation?
A person is liable if another party suffers loss due to a misrepresentation made before entering a contract.
The defendant is liable unless they can prove reasonable grounds to believe the statement was true.
What defines innocent misrepresentation?
A statement made where the representor proves reasonable grounds for belief in its truth and believed it was true at the time of the contract.
What are the remedies available for misrepresentation?
- Rescission
- Damages
- Indemnity
What is rescission?
The effect of misrepresentation is to render the contract voidable, not void.
The contract remains valid until the representee rescinds it.
What are the grounds for denying rescission?
- Affirmation
- Lapse of Time
- Restitution Impossible
- Third-Party Rights
What is the purpose of indemnity in misrepresentation?
Covers expenses from obligations directly resulting from the contract.
Typically awarded when no right to damages exists.
How are damages calculated for fraudulent misrepresentation?
Calculated on a tortious basis to place the claimant in the position they would have been in without the misrepresentation.
What is the difference between damages for negligent and fraudulent misrepresentation?
No distinction in terms of damages; damages can be reduced for contributory negligence in negligent cases.
What is the significance of s 2(2) MA 1967 in relation to damages?
Only available at the discretion of the court for negligent and innocent misrepresentation, compensating where rescission is not awarded.
What is the requirement for exemption clauses regarding misrepresentation?
Must satisfy the requirement of reasonableness under UCTA 1977.
What are non-reliance clauses?
Exclude liability for misrepresentation, stating ‘no representations were made or relied upon.’
An ‘entire agreement’ clause will not exclude liability for misrepresentation.
What is the legal basis for fraudulent misrepresentation?
Tort of deceit.
What is the legal basis for negligent and innocent misrepresentation?
s 2(1) MA 1967.
What is a mistake in the context of contracts?
Mistake that prevents a contract from taking legal effect.
What is the effect of a statement of non-reliance in a contract?
It can exclude liability for misrepresentation.
What are the three types of mistakes in contract law?
- Mutual mistake
- Unilateral mistake
- Common mistake
What is a mutual mistake?
Both parties are mistaken about different things.
What test is applied to determine the validity of a mutual mistake?
Objective test.
What is a unilateral mistake?
Only one party is mistaken, and the other party knows or is deemed to know of the mistake.
In what circumstances can a claim of unilateral mistake succeed?
When the contract is void.
What must a seller prove in cases of unilateral mistake regarding identity?
Identity was of vital importance.
What is a common mistake?
Both parties are suffering from the same misapprehension.
What are the circumstances where common mistake will not operate?
- The mistake is not sufficiently fundamental
- One party is at fault
- The contract makes provision for the issue
What constitutes duress to the person?
Actual or threatened violence.
What is economic duress?
- Pressure resulting in compulsion or lack of practical choice for the victim
- Pressure is illegitimate
- Pressure significantly induces claimant to enter the contract
What is required to establish economic duress?
The agreement would not have been entered into but for the duress.
What is the ‘but for’ test in the context of duress?
Pressure must be a but for cause of the agreement.
What is the effect of duress on a contract?
The contract becomes voidable.
What is undue influence?
Consent to a transaction produced in a way that compromises free will.
What are the two types of undue influence?
- Overt acts of improper pressure or coercion
- Taking advantage of influence or ascendancy in a relationship
What is required to allege undue influence?
Proof of a relationship of trust and confidence and a transaction which requires explanation.
What is the definition of discharge by performance?
A contract is discharged when obligations are fully performed.
What is the Entire Obligations Rule?
A complete performance discharges the obligation.
What is substantial performance?
If a contract is substantially performed, the performing party can claim the contract price minus the cost of remedying defects.
What is the remedy for a contract affected by duress?
Rescission.
What are the primary ways contracts can be discharged by agreement?
- By a subsequent binding contract
- By operation of a term in the original contract
What is required for a contract variation to be binding?
It must include consideration.
What is the significance of independent advice in undue influence cases?
It can serve as a defense against undue influence.
What does ‘quantum meruit’ mean?
As much as deserved.
What happens if one party is prevented from completing the contract due to the other party’s fault?
The innocent party can sue for damages or claim quantum meruit.
What is a condition precedent in a contract?
A condition that must be satisfied before any rights come into existence.
What is a condition precedent in a contract?
A condition which must be satisfied before any rights come into existence.
What happens if a condition precedent is not met?
Rights and obligations never arise.
Give an example of a condition precedent.
A clause stating that a contract is subject to shareholder approval.
What is a condition subsequent in a contract?
A term providing for termination of the contract upon a specified occurrence.
How can courts empower a party in relation to a condition subsequent?
By allowing a party to determine the contract on giving reasonable notice.
What is the usual remedy for a breach of contract?
Damages.
What is anticipatory breach?
When a party indicates they will not perform their contractual obligations before performance is due.
What must be shown for a breach to be considered repudiatory?
The breach must be shown to be repudiatory at the performance time.
What happens to the innocent party in the case of anticipatory breach?
They have the immediate right to accept renunciation and treat the contract as terminated.
What is a repudiatory breach?
Breaching a condition or an innominate term treated as a condition, allowing the innocent party to terminate the contract.
What are the effects of a repudiatory breach?
- Ends all unperformed primary obligations
- Innocent party can claim damages
- Discharge of remaining rights is prospective only.
What are the risks of wrongful termination?
- Significant risks
- Liability for damages if breach was only of a warranty.
What is the right of election in contract law?
The aggrieved party must choose to treat a repudiatory breach as ending the contract.
What are the benefits of affirming a contract?
- Keeps the contract in place
- Preserves the innocent party’s rights
- Easier than finding another contractor.
What is the rule of mitigation?
A claimant must take steps to minimize their loss.
What is discharge by frustration?
A contractual obligation becomes impossible to perform due to circumstances beyond either party’s control.
What are some causes of frustration?
- Impossibility
- Illegality
- Frustration of common purpose.
What is an example of impossibility in contract law?
The destruction of an essential object necessary for performance.
What is supervening illegality?
When a change in law or state intervention renders performance illegal.
What is frustration of purpose?
When unforeseen events thwart the common purpose of the contract.
What are the limitations on the doctrine of frustration?
- Must be applied narrowly
- Contract rarely frustrated if performance remains possible but becomes more onerous.
What are the consequences of frustration?
- All future obligations are discharged
- Money paid before the frustrating event can be recovered.
What does the Law Reform (Frustrated Contracts) Act 1943 state?
- Money which should have been paid does not need to be paid
- Expenses incurred can be recovered at the court’s discretion.
What burden does the payee have under the Law Reform (Frustrated Contracts) Act 1943?
The burden of proof to show that expenses were incurred and it is just for the court to deduct them.
