Contract Law - 2

Question 1

What are the 5 legal ingredients required to form a contract?

Answer 1

1) Offer
2) Acceptance
3) Consideration
4) Intention to form a contract
5) Capacity

Question 2

Offer

Answer 2

A promise by one party to the other to perform certain specified acts on certain terms

Question 3

Invitation to treat

Answer 3

Invitation to make an offer (advertisements). Expression of willingness to do business

Question 4

Consideration

Answer 4

The benefit each party to a contract receives (payment in exchange for goods or services)

Question 5

No, no consideration = no enforceable agreement. Must have something being exchanged

Answer 5

Can gratuitous promises result in enforceable agreements?

Question 6

What are the exceptions to (no consideration = no enforceable agreement) (2)

Answer 6

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

Question 7

What are the 6 factors effecting contractual relations (where contract is void)

Answer 7

1) Mistake
2) Misrepresentation
3) Duress and undue influence
4) Unconscionable transaction
5) Privity of contract
6) Assignment

Question 8

Mistake (Camry example)

Answer 8

_________ 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.

Question 9

Mutual or shared mistake

Answer 9

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)

Question 10

Rectification ( mistake )

Answer 10

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

Question 11

No - must have the same idea of what we are talking about- no miscommunication

Answer 11

Can a contract be enforceable if both parties have differing ideas what they are talking about?

Question 12

Unjust enrichment (mistake)

Answer 12

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.

Question 13

Uni-lateral mistake

Answer 13

One-sided mistake (where someone is NOT being misled)

Question 14

Unilateral mistake to identity (John Doe realtor example)

Answer 14

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

Question 15

Unilateral mistake as to attributes (Realtor with experience selling on west side not east side)

Answer 15

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.

Question 16

Non est factum (what two factors result in a successful plea of this)

Answer 16

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

Question 17

What are the 3 types of false statements that can be made to qualify as misrepresentation

Answer 17

1) Fraudulent statement
2) Negligent statement
3) Innocent ___________

Question 18

Fraudulent statement

Answer 18

Person making the statement knows it is false and makes it intentionally

Question 19

Negligent statement

Answer 19

When the person making the statement does not bother to verify a particular fact which turns out to be false or wrong

Question 20

Innocent misrepresentation

Answer 20

False statement is made without any fault

Question 21

Misrepresentation

Answer 21

(Pre-contractual negotiations) a party makes false or misleading statements to the other party to induce that party to enter into a contract.

Question 22

No, silence will not be actionable as a misrepresentation. BUT it is misrepresentation if you ask and I lie to you.

Answer 22

Can silence be actionable as misrepresentation? Ex. I do not disclose that there is a loud train that passes by every hour.

Question 23

What are the 3 requirements for misrepresentation to be actionable

Answer 23

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.

Question 24

What are the 2 aspects for innocent misrepresentation

Answer 24

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)

Question 25

Recession

Answer 25

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.

Question 26

Fraudulent misrepresentation

Answer 26

A party intentionally misrepresents a fact that induces or leads another to enter into a contract

Question 27

What are 2 solutions available to a victims of fraudulent misrepresentation?

Answer 27

1) Rescission / Contract may be considered void for failure of consensus of minds
3) Damages

Question 28

Negligent misrepresentation

Answer 28

A defendant carelessly makes a representation while having no reasonable basis to believe it to be true

Question 29

What are 5 steps that must be satisfied for negligent misrepresentation to be qualifying under

Answer 29

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

Question 30

What is the difference between fraudulent and negligent misrepresentation?

Answer 30

Fraudulent - the person making the representation KNOWS that it’s false, intention to mislead
Negligent - One fails to exercise reasonable care to communicate information

Question 31

Hedley Byrne v Heller (negligent misrepresentation)

Answer 31

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.