Contract Law - 2 Flashcards
What are the 5 legal ingredients required to form a contract?
1) Offer
2) Acceptance
3) Consideration
4) Intention to form a contract
5) Capacity
Offer
A promise by one party to the other to perform certain specified acts on certain terms
Invitation to treat
Invitation to make an offer (advertisements). Expression of willingness to do business
Consideration
The benefit each party to a contract receives (payment in exchange for goods or services)
No, no consideration = no enforceable agreement. Must have something being exchanged
Can gratuitous promises result in enforceable agreements?
What are the exceptions to (no consideration = no enforceable agreement) (2)
1) Promisee relies upon a promise to his detriment (ex. Uncle promises to pay for trip to Europe and you rely upon this promise to your detriment + purchase an airline ticket + hotel)
2) Contract is made under a seal that there is not a requirement of consideration
What are the 6 factors effecting contractual relations (where contract is void)
1) Mistake
2) Misrepresentation
3) Duress and undue influence
4) Unconscionable transaction
5) Privity of contract
6) Assignment
Mistake (Camry example)
_________ goes to the root of the contract and destroys consensus. Ex. I offer to sell you what I thought was a 2005 Toyota Camry, but it was actually 2004. Thus, contact is void.
Mutual or shared mistake
Both parties make the same mistake. (Ex. I agree to sell car to you. Both of us don’t know that the car has been stolen)
Rectification ( mistake )
One sided mistake but that mistake does not mislead the other party. Mistake of such nature that it can be corrected by the court. The court will try to give effect to reasonable expectations. Ex. Accidentally added a zero onto an accounting paper
No - must have the same idea of what we are talking about- no miscommunication
Can a contract be enforceable if both parties have differing ideas what they are talking about?
Unjust enrichment (mistake)
A benefit obtained by one person at the expense of another, without legal justification for it. The court will remedy the mistake in such case (ex. Prof makes an error, two students with the same name. One gets an A, one gets a D.
Uni-lateral mistake
One-sided mistake (where someone is NOT being misled)
Unilateral mistake to identity (John Doe realtor example)
Shafik thinks he’s dealing with John Doe, the experienced realtor, but in reality it’s John Doe, the Intern. Contract will be void for mistake
Unilateral mistake as to attributes (Realtor with experience selling on west side not east side)
Shafik hires a realtor thinking she’s experienced on the east side, but she’s actually experienced on the west side. This is a mistake by you and the court will not allow you to rescind the contract.
Non est factum (what two factors result in a successful plea of this)
1) Signer of the agreement was not careless in signing
2) there is a radical difference between the document which was signed and what the signer thought he was signing
What are the 3 types of false statements that can be made to qualify as misrepresentation
1) Fraudulent statement
2) Negligent statement
3) Innocent ___________
Fraudulent statement
Person making the statement knows it is false and makes it intentionally
Negligent statement
When the person making the statement does not bother to verify a particular fact which turns out to be false or wrong
Innocent misrepresentation
False statement is made without any fault
Misrepresentation
(Pre-contractual negotiations) a party makes false or misleading statements to the other party to induce that party to enter into a contract.
No, silence will not be actionable as a misrepresentation. BUT it is misrepresentation if you ask and I lie to you.
Can silence be actionable as misrepresentation? Ex. I do not disclose that there is a loud train that passes by every hour.
What are the 3 requirements for misrepresentation to be actionable
1) Misrepresentaion must be an allegation of fact
2) Must be incorrect or untrue
3) Victim of misrepresentation was induced into entering a contract by the false statement (it must be relevant). Cannot be, I lied about being Korean when I was actually Chinese.
What are the 2 aspects for innocent misrepresentation
1) Made honestly and without carelessness
2) The person making it actually believes it to be true
(eg. I’m selling a car I thought was AWD (cars salesman told me it was AWD). You pay more because you think its AWD)
Recession
A contract is rendered null and void, and so is no longer recognized as legally binding. Will restore parties to original position before contract was signed.
Fraudulent misrepresentation
A party intentionally misrepresents a fact that induces or leads another to enter into a contract
What are 2 solutions available to a victims of fraudulent misrepresentation?
1) Rescission / Contract may be considered void for failure of consensus of minds
3) Damages
Negligent misrepresentation
A defendant carelessly makes a representation while having no reasonable basis to believe it to be true
What are 5 steps that must be satisfied for negligent misrepresentation to be qualifying under
1) Defendant make a false factual representation, not an opinions
2) Defendant had no reasonable ground for believing it to be true
3) Representation must have been made with the intent to induce the other party to rely upon it.
4) Plaintiff must have believed + reasonably relied on it
5) As a result, plaintiff suffered damages
What is the difference between fraudulent and negligent misrepresentation?
Fraudulent - the person making the representation KNOWS that it’s false, intention to mislead
Negligent - One fails to exercise reasonable care to communicate information
Hedley Byrne v Heller (negligent misrepresentation)
Duty of care arose when pure economic loss was provoked by certain conditions. Basically an accounting firm (Heller) provided satisfactory (and false) reference for a company. Hedley Byrne , the bank, suffered losses. Despite not having a contract, there is a special relationship.
