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Contract Law Flashcards

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1
Q

What is a contract?

A

A legally enforceable agreement in which failure to perform according to terms of agreement enables the innocent party to remedies

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2
Q

What are ‘remedies’?

A

financial compensation for the innocent party (damages), treating the contract as discharged or terminating the contract

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3
Q

Why is the risk of unfulfillment less in contract?

A

risks to businesses, damage to reputation from adverse publicity/lawsuits

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4
Q

Why do we need contracts?

A

We don’t trust that agreements made will be fulfilled and contracts foster artificial trust

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5
Q

Why do foreign firms choose English law to govern their contracts?

A

English contract law prioritises certainty, autonomy and formalism

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6
Q

Why do contracts enable trust?

A

The law says the parties have to do certain things or they risk legal consequences (legal enforceability)

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7
Q

What is ‘special performance’

A

When the court orders the party in breach to perform according to terms of contract (rare)

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8
Q

What is ‘non-intervention’?

A

Courts don’t insert extra terms to make contracts ‘better’

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9
Q

What is ‘formalism’?

A

The belief that contracts are made by the parties for the parties and that parties should have sovreignty over their contract (without intervention of the law)

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10
Q

What is ‘caveat emptor’?

A

‘Let the seller beware’

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11
Q

What is ‘autonomy”

A

When parties have sovreignty over their contract and therefore contracts entered into freely are sacred

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12
Q

What if parties want extra protection from contracts?

A

Parties must put them in by themselves (caveat emptor)

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13
Q

What are benefits of contracts?

A
  • provide backup to help allocate losses if problems arise

- allows parties to determine responsibility for themselves

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14
Q

Is legal enforceability concrete?

A

it doesn’t mean that all contracts will be fulfilled but risk of unfulfillment is less

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15
Q

Is flexibility good?

A

The more flexible the rules the easier it is in theory to achieve fair results in cases

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16
Q

In what circumstances are remedies appropriate?

A

When there has been a breach in contract and it is very serious (repudiatory breach)

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17
Q

Disadvantages of flexibility in contract law

A
  • outcome of each case is more debateable
  • increased time to decide on outcomes
  • more expensive (poorer party my not be able to afford case delay)
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18
Q

Are inflexible/simple rules good?

A

No… increased potential for unfair results in cases

Yes… party with greater resources has less chance to identify/exploit loopholes

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19
Q

What do you need for a contract to be concluded?

A

-you need an agreement, contractual intention, consideration and compliance with formality (contract in writing)

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20
Q

What is a bilateral contract?

A

when each side makes a set of promises to the other and each party has obligations owed to the other

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21
Q

What is a unilateral contract?

A

(if contract) promise in return for performance of an act and obligations are on one side only

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22
Q

What is the main model for reaching an agreement in contract?

A
  • offer and acceptance

- before parties reach an agreement they can walk away with no liability and not be in breach of contract

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23
Q

What happens the parties reach an agreement?

A
  • a legally binding contract now exists

- parties cannot walk away without being legally liable

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24
Q

What is an offer?

A

An expression of willingness to contract on certain terms made with the intention that it will eventually become a binding contract when the other party accepts

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25
Q

Characteristics of acceptance

A
  • the offeree responding to the offer by accepting its terms
  • an unqualified yes to an offer
  • silence cannot be used as acceptance
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26
Q

What is the tennis match idea?

A

-negotiations going backwards and forwards until an offer is proposed and accepted

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27
Q

How do you test the verification of an offer?

A
  • objectivity (look objectively at communications between parties)
  • preparedness to commit and conduct (offers can arise through actions also)
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28
Q

What is an invitation to treat?

A

preliminary communication/negotiation to elicit an offer which may then be considered

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29
Q

How do auction sales work?

A
  • goods put up by auctioneer is invitation to treat
  • bids made are all offers (most aren’t accepted)
  • until the hammer falls anyone can retract their bid because the offer hasn’t been accepted and you’re still in negotiation phase
  • once hammer falls its changed from negotiation to legal commitment
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30
Q

How do auction sales with no reserve price work?

same legal analysis for auction with reserve price if highest bidder exceeds or meets reserve

A
  • reserve price is minimum price below which the goods won’t be sold
  • if seller refuses highest bid you can use a ‘collateral contract’ against the auctioneer
  • goods auctioneer put up are invitation to treat and because there is no reserve price they’re considered to have made an offer
  • auctioneer essentially implies a (collateral) unilateral contract that he will accept buyer with highest bid
  • highest bid is acceptance of auctioneer’s collateral offer and has therefore qualified for award and auctioneer’s failure to provide would be breach in contract
  • highest bidder can claim damages for breach of collateral contract
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31
Q

What is a collateral contract?

A

-contract comes into existence on an implied basis to support a possible primary contract

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32
Q

Contractual reasoning of a ‘display of goods’

A
  • goods displayed in supermarket with attached price are invitation to treat
  • customer picking a good and taking it to checkout is offer
  • supermarket accepts/rejects through checkout assistant
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33
Q

Contractual reasoning of Catalogue

A
  • HoL held that catalogue is invitation to treat
  • orders placed by customers were offers
  • merchant is free to accept/reject offers
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34
Q

Contractual reasoning of adverts inviting parties to submit tenders/bids

A
  • invitation to submit tender is invitation to treat
  • tenders/bids submitted are offers
  • it’s up to party that invited tenders to decide which offer to accept
  • no obligation to accept a tender that wins in terms of price BUT if party decided in advance that it would accept lowest/highest bid it must do so
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35
Q

Certainty/completeness in contracts

A

-contracts need to be certain/complete to be enforceable in court

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36
Q

Problems associated with determining certainty/completeness

A
  • unclear wording
  • vague/hard to discern wording
  • material omission (parties failing to address essential issues)
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37
Q

Sovereignty of the contract

A

courts don’t have the right to create a contract that the parties didn’t create for themselves
-courts do everything they can to uphold/give effect to a contract where it is clear that the parties intended to have one

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38
Q

Is an agreement to agree valid?

A
  • -an agreement to agree on something in the future is no agreement at all
  • it is not recognised as a contract because there is uncertainty
  • it is impossible to say what the agreement would have been
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39
Q

What happens if negotiation has no fixed duration?

A

-if there is a preliminary agreement with no fixed duration the courts will probably decide that there is only an agreement to negotiate which is not legally enforceable (Walford v Miles)

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40
Q

Sales of goods act section 8

terms to ascertain price

A
  1. the price in contract of sale may be fixed by contract/fixed manner agreed by parties themselves
  2. where price isn’t determined as mentioned before the buyer must pay a reasonable price
  3. What is a reasonable price is a question of fact depending on each particular case
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41
Q

Sales of goods act section 9

A

if contract states price is to be determined by a third party but third party cannot/will not do it the agreement is void
-if this does not work the agreement is void

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42
Q

Significance of performance

A
  • legal reasoning must take cues from reality
  • if you’re trying to argue that the contract is void after most of the subject matter has been performed courts will not believe you
  • if the deal is unworkable how did you work it up until this point?
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43
Q

Possible responses to an offer

A
  • acceptance (offeree signifying that they agree to the offer as a whole)
  • rejection (offeree says no to package of the offer)
  • counter offer
  • enquiry
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44
Q

Can an offeree pick and and choose bits and pieces of an offer?

A

If you say no to parts you say no to the entire contract (its indivisible)

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45
Q

What is a counter offer?

A
  • when offeree doesn’t say no or yes but says what about this instead
  • offeree that makes counter offer is turning down offer that has been received
  • rejection of first offer to make fresh offer awaiting response of other party
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46
Q

What is an enquiry?

A
  • offeree might not want to accept/reject
  • the offeree is not ready to make a final decision
  • offeree might want to continue negotiation and responds saying they want to continue to negotiate
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47
Q

What happens if the method of accepting the offer is indicated?

A

-the stipulated method is the only allowed method

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48
Q

What happens if the method of accepting the offer are not indicated?

A
  • if there is no specific instruction the offeree can use the same method used by offeror to offer the contract
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49
Q

What method of acceptance is expected with a unilateral contract?

A
  • offeror does not look for offeree to respond with acceptance they just expect them to perform the stipulated act
  • similar to acceptance by conduct
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50
Q

Can acceptance be inferred from conduct?

A
  • it can provided the conduct is clearly relevant to the offer when viewed objectively and if the offeror is aware
  • conduct must be unequivocal
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51
Q

Issues of acceptance by conduct

A
  • conduct relied upon can be ambiguous

- acceptance could equally be explained as a wish to carry n negotiations

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52
Q

Battle of the forms

A
  • business contracting parties approach contracts with their own established standard terms
  • each party wants to conclude on the basis of their terms
  • each party replies to offer from the other party with counteroffer (goes on for a while)
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53
Q

Problems with offer acceptance by silence

A
  • if silence could act as acceptance in all circumstances we would have to vocally reject all things offered to us
  • junk mail and offers we don’t ask for would overwhelm us
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54
Q

Is it ever possible for silence to constitute acceptance?

A
  • maybe if the offer has been requested
  • if the offeree asks offeror for an offer for their car
  • offeror comes up with price and says the price they want saying if they don’t hear from offeree by the next day the deal is done
  • it would definitely not work if there was no time limit for offeree to decide
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55
Q

Requirement of communication in acceptance

A
  • for an acceptance to be valid it has to be communicated

- it must get through to the other party or it does not take effect

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56
Q

Communicating acceptance by email

A
  • offer made by email and acceptance sent off by email
  • acceptance is not effectively communicated when it is read because it would depend on how often offeror checks his email/how efficient their staff is
  • unfair to say email is communicated when it is sent off cause of different time zones
  • email acceptance is communicated when it has been read
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57
Q

What if acceptance by email does not get through? (problem with offeror’s internet)

A
  • it’s the offeror’s fault and the offeree wasn’t responsible for lack of communication
  • you usually get notification when something doesn’t deliver
  • law says there is no acceptance and you should try again
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58
Q

What if you sent an acceptance off before the deadline but because of offeror’s IT failure it didn’t deliver in time?

A
  • its too late to send another message because deal had strict time limit
  • original communication met deadline so it would be enough
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59
Q

Postal acceptance rule

A

-an acceptance sent off by post takes effect in law as soon as it is posted and a binding contract now exists (even if post is lost acceptance is technically valid)

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60
Q

Why does PAR exist?

A
  • post has risk of things being delayed/lost

- risk should fall on offeror because they initiated the use of post

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61
Q

Does PAR always apply?

A
  • offeror can phrase contract so that although post is permissible method for acceptance PAR doesn’t apply
  • under those circumstances for acceptance to be valid the post must be delivered
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62
Q

What if PAR applies and the offeree posts acceptance but wants to change their mind?

A

-sends a second communication using a faster method like email to reject the offer if it arrivers before acceptance than it is valid

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63
Q

Cons of allowing offeree to change their minds with PAR

A
  • unfair advantage to offeree
  • they can play the market at expense of offeror
  • if the deal is good offeree can post acceptance then if the market moves and the deal isn’t as good they can quickly send electronic rejection and escape contract
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64
Q

What is the impact of a rejection/counter-offer?

A

-They completely kill off the initial offer

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65
Q

When does a rejection/counteroffer occur?

A

When they get through to the offeror

-no such thing as postal rejection/counteroffer rule

66
Q

If the offeree does nothing after a reasonable time will the offer expire?

A
  • offer contains implied term that it’s only available for acceptance for a reasonable time
  • the failure of the offeree to respond within reasonable time a rejection
67
Q

Revocation of offer

A

-an offeror is free to revoke an offer until a legally binding contract has been concluded

68
Q

How does revocation of offer take effect?

A
  • it must be communicated to the offeree and must get through
  • if it has been sent off and doesn’t reach the other party it cannot work
  • revocation can be communicated by third party
69
Q

Revocation of unilateral offer

A
  • often made to large numbers of people (posted missing cat posters)
  • not possible to track everyone down
  • you just have to do a public revocation that is equivalent to offer that’s been made
70
Q

When is a unilateral offer acceped?

A
  • it’s accepted once the other party has performed the stipulated act
  • completion of stipulated act is acceptance
71
Q

What about unilateral contracts that require acts that take a long period of time to complete?

A
  • offer is accepted by commencing performance

- the contract is concluded by commencing the act but you don’t get the award until you complete the act

72
Q

Walk from london to york analogy

A
  • if you’re walking from london to york and you’re 3/4 of the way there
  • the offeror catches up to you and revokes the offer
  • the revocation didn’t work but you stop walking because you think it does
  • you would stop walking and loose the reward
  • there is potentially an implied collateral contract from offeror saying that once offeree starts performance they won’t do anything that prevents them from completing
  • sue for breach of collateral contract and can claim damages for loss of opportunity to complete walk
73
Q

What three components are needed to complete an agreement to be a contract?

A
  • intention to create legal relations
  • (some require) compliance with a given formality
  • consideration
74
Q

What counts as intent to create legal relation?

A

(it is an objective requirement)

  • as long as there are relevant words/conduct which indicate intent to create a legally binding contract
  • if the agreement was broken would it end up in court?
75
Q

Rule for formalities (putting contract in writing)

A

-contracts do not have to comply with formality unless it is specifically stipulated but because of common sense most people put significant contracts into writing

76
Q

When are formalities required?

A
  • if the subject matter is particularly important so courts want reliable record of transaction (land contracts have to be in writing)
  • contracts of guarantee also have to be in writing (statute of frauds, 1677)
  • in consumer law the contracts require the seller to give buyer a written statement of their rights
77
Q

What is consideration?

A
  • something that is given in return for a promise
  • it can be a benefit to the party making the promise or a detriment incurred by the promisee
  • there must be consideration for a contract to be legally enforceable
78
Q

Consideration in bilateral contracts

A

two sets of promises exchanged, in return to sellers’ promises the buyer makes a reciprocal promise and that is their consideration

79
Q

Consideration in unilateral contract

A

the performance of the stipulated act is consideration

80
Q

Can past consideration work?

A
  • no because it pre-dates the promise it is supposed to support
  • sometimes a later promise after the consideration may just make explicit what was already impliedly understood by both parties
81
Q

Consideration must move from the…

A
  • it must move from the promisee
  • to generate a bargain the consideration for the promisor’s promise must be provided by the promisee
  • promisee doesn’t have to give promise to promisor (promisor could make promise to promisee in return for promisee paying money to a third party)
82
Q

Do considerations have to be adequate?

A
  • no legal requirement for balance between value of agreement and value of consideration to make it binding
  • up to parties to look after their own interests (caveat emptor)
83
Q

What if the rights the promisee refrained from pursuing were invalid but promisee did not know this ? (consideration)

A
  • consideration doesn’t collapse
  • their forbearance is still good consideration as even if the promisee lost their case you would still have to pay legal fees etc
  • being relieved of that is a benefit
84
Q

what is good consideration

A

refraining from a suit or enforcing legal rights (forbearance)

85
Q

What if the rights the promisee refrain from pursuing were invalid and they knew?

A

it is not good consideration, it could be fraudulent

86
Q

What do you do if you have doubts that there is valid consideration?

A

use a deed (special document that derives its enforceability entirely from its form)
-a promise stated in a deed does not need consideration, it is enforceable in itself

87
Q

Argument for consideration not serving a purpose

A
  • very rare that contracts fail solely on consideration, usually because there also hasn’t been a proper bargain
  • Lord Mansfield believed the purpose of consideration was to provide evidence that the parties intended their argument to be legally binding and that consideration had no fundamental substance
88
Q

Arguments for consideration serving a purpose

A
  • HoL rejected Mansfield’s view
  • consideration held avoid contracts happening in informal circumstances
  • ‘importance of consideration is as a valuable signal that the parties intend to be bon=und by their agreement’ (supreme court of australia)
89
Q

What are vitiating factors?

A

Factors that taint the validity of an agreement (foundation of contract)

90
Q

Examples of vitiating factors?

A

misrepresentation, duress (coercion), undue influence (taking advantage of interdependent relationships), unconscionable bargains

91
Q

Duress/Coercion (vitiating factors)

A

party may complain that they were not left with any other alternative/effectively forced into contract

92
Q

Undue influence (vitiating factors)

A

one party says they were taken advantage of because they were in a position of weakness and were exploited

93
Q

What is the effect of vitiating factor on contract?

A

-contract is voidable which means the claimant is able to take it back but can also just act as normal

94
Q

What is rescission?

A

taking the whole contract apart, terminating it

-it reverses everything that resulted from the contract from the day it was concluded

95
Q

What is misrepresentation? (vitiating factor)

A

when the offeree is induced to agree to contract based on false statement (mislead)

96
Q

Characteristics for actionable misrepresentation?

A
  • must be a statement of fact
  • made by either of the two parties to the other
  • statement must be false
  • must induce the other party into the contract
97
Q

Does there need to be dishonesty for misrepresentation?

A

NO because a lie is intentionally untrue

-maker of misrepresentation can believe what they say and have solid reasoning

98
Q

What doesn’t qualify as fraud?

A
  • negligence–> if the reasonable person would know the statement was untrue this is NOT fraud
  • you’re only fraudulent when you know something is untrue/probably untrue
  • if you SHOULD have known it is negligence
99
Q

What about silent misrepresentation?

A

-if the D sells goods knowing they have a defect and keeps silent on their condition there is no remedy for what they do NOT say

100
Q

What happens if statement is true at the time it’s made but stops being true before contract is binding?

A

maker of statement needs to correct it and if they fail that is misrepresentation (With v O’Flanagan)

101
Q

Can statements of opinion constitute actionable misrepresentation? (rule)

A

NO–> it must be statement of fact

102
Q

Exceptions of actionable opinions as misrepresentation

A
  • if the statement of opinion implicitly involves certain statements of fact and the fact is wrong there will be liability because both the opinion and implicit fact are incorrect
  • if party provided opinion that required some factual thought and did a blind guess there could be liable misrepresentation
  • someone giving false opinion is misrepresentation
103
Q

Other exceptions to the actionable opinions as misrepresentation?

A
  • no reasonable grounds for opinion
  • representor holds itself as having special knowledge and that the representee can trust them
  • representor is in good position to know what truth is and is wrong
104
Q

What is a statement of intention?

A

a statement that contemplates what you will do in the future

105
Q

Are we allowed to change our minds with statement of intentions?

A
  • no law against changing your mind
  • failure to keep to intention in itself doesn’t warrant liability
  • person to whom statement is made cannot see statement as guarantee and if they do it is their problem
106
Q

When is a statement of intention misrepresentation?

A
  • what you’re saying is your opinion

- if you say it’s your intention to do X when it’s NOT that is misrepresentation of fact

107
Q

Who needs to make the statement in misrepresentation?

A

It needs to be made by or on behalf of the defendant

108
Q

What if the claimant is induced by 3rd party into contract? (3rd party liability)

A

-if C is induced into contract by something false said by 3rd party this generally is sufficient grounds to challenge contract

109
Q

What if the claimant is induced by 3rd party into contract? (defendant liability)

A

if misrepresentation is made by 3rd party and D is aware and knows it is misrepresentation and C is entering into contract based on that then D is liable

110
Q

What if claimant overheard Defendant’s misstatement and relied upon it and wanted to use it against D?

A

they would not be permitted to do so

111
Q

What is materiality? (misrepresentation)

A

whether a reasonable person in the position of the representee would regard the misstated fact as relevant in deciding whether to enter the contract

112
Q

What is the function of materiality?

A

to make sure representees don’t rely on statements that objectively no reasonable person would take seriously

113
Q

Examples of materiality in misrepresentation

A

there is no materiality in cases of advertising hype or obvious hyperbole

114
Q

What if someone enters into a contract without materiality?

A

they cannot claim misrepresentation

115
Q

How do you qualify for inducement (misrep)?

A

-claimant needs to show that without representation they would have not entered the contract/entered it on different terms

116
Q

What is the authority for the inducement requirement in misrepresentation?

A

Assicurazioni Generali v Arab Insurance Group

117
Q

Do you need to show if the misrepresentation is fraudulent for inducement??

A

-no you just need to show that the representation was a relevant reason as to why C entered into contract

118
Q

What does section 13 of the sales of goods act say?

A
  • when goods are sold by description it’s implied that they should match description
  • even if the goods are described pre-contractually those statements have contractual effect
119
Q

What duress concerned with?

A
  • illegitimate exercise of coercion

- draws line between legitimate and illegitimate coercion

120
Q

What are three requirements for coercion? (duress)

A
  • illegitimate threat
  • causation
  • sufficient coercive power
121
Q

What is an illegitmate threat?

A

-threat made to do something unlawful such as personal harm or threat to property and threat to break contract

122
Q

an example of what does not constitute duress?

A
  • a threat to not conclude future contracts

- they are threatening to exercise a right they have

123
Q

What is the Obiter dictum of CTN Cash and Carry v Gallagher, used to argue lawful act duress cases?

A

L.J Stain said to determine L.A.D we have to consider whether the party genuinely believed they had the right to make that threat

124
Q

How does LJ Leggatt address lawful act duress in Al Nehayan case?

A

-if the threat is lawful but does not meet minimum standards it is illegitimate

125
Q

What does LJ Leggatt address as the minimum standards of acceptable behaviour in Al Nehayan?

A
  • D had no reasonable grounds to make demand

- threat would not be considered by reasonable people to be a proper means of reinforcing demand

126
Q

The ‘but for’ test in duress (general rule)

A

-without the making of the threat the coerced party would have declined entering the contract or entered on different terms

127
Q

Can you qualify for duress if it is a threat the claimant could resist or reasonably should resist?

A
  • NO

- according to the law you have voluntarily acquiesced to the threat

128
Q

How do you satisfy sufficient coercive power requirement for duress?

A

-courts look for evidence that Cs are put in situations which there was no realistic alternative

129
Q

requirements to help determine sufficient coercive power (duress) set out in Pao On v Lau Yiu

A
  • did they protest at the time?
  • any sensible alternative?
  • did they take independent legal advice?
  • did C take steps to rescind pressure removed?
130
Q

Ingredients for undue influence?

A

-some unacceptable form of persuasion and causation

131
Q

What causation do you have to show for undue influence?

A

-simply that the undue influence is what induced the party into the contract

132
Q

What is actual undue influence?

A

-proved by direct evidence

133
Q

What is presumed undue influence?

A

-proved by circumstantial evidence

134
Q

How do we determine presumed undue influence?

A
  • relationship of trust of confidence

- transaction that is out of the ordinary within the context

135
Q

Can you refute presumed undue influence?

A
  • if they can show that C entered into the contract because they wanted to the transaction could stand and not be rescinded
  • evidence C thought about contract properly such as obtaining independent legal advice
136
Q

What is the doctrine of unconscionable bargains concerned with?

A

-its concerned with exploitation of vulnerability

137
Q

What is the general rule for minors entering contracts? (unconscionable bargains)

A
  • minors lack contractual capacity and cannot consent to a contract
  • if one party is a minor the contract is void
138
Q

What is the general rule for people with mental incapacities entering contracts? (unconscionable bargains)

A
  • their mental incapacity must be what causes them to not understand the contract
  • protection is granted on proof of their M.I and that the other party knew
  • there is a contract but it is voidable
139
Q

What are the characteristics needed for a qualifying unconscionable bargains case?

A
  • special susceptibility that merits protection
  • incapacity of vulnerable party must rob them of ability to comprehend contract properly
  • susceptibility must be exploited (unconscientious exploitation)
  • dominant party must be aware of the susceptibility (substantive imbalance)
140
Q

What are possible rebuttals to unconscionable bargains?

A
  • if you can show you knew about their speical susceptibility so you had it explained to them by a professional in a way they understood
  • it is no longer exploitation because they were properly informed before they made decision
141
Q

What is the primary remedy of vitiating factors?

A

recission

142
Q

Can you use recission to alter the contract to deal with the misrepresentation?

A

No, if you rescind you are terminating the contract completely

143
Q

How do you rescind?

A
  • self help remedy

- you just have to contact the other party and let them know

144
Q

What happens in fraud cases when the 1st party cannot tell the other party they want to rescind? (Caldwell case)

A
  • by making ‘caldwell noises’
  • try to give publicity to the fraud
  • in caldwell they notified the police and automobile association and CA held it was enough to rescind
145
Q

What are the bars to recission?

A
  • unjust enrichment
  • intervening third party rights
  • affirmation
146
Q

What is the doctrine of unjust enrichment (recission) ?

A
  • if you’re unable to reverse the contractual terms and give back complete restitution the rescission cannot be done
  • if one party cannot give back what they received they will be unjustly enriched
147
Q

What is the doctrine of intervening third party (recission) ?

A
  • fraudster tricks the owner of goods into selling and pays with bad cheque
  • third party buys the goods from the fraudster
  • if the seller did not rescind before F sold to 3rd party they cannot rescind because the 3rd party’s rights override theirs
148
Q

What is the doctrine of affirmation (recission) ?

A
  • if you decide to not rescind the remedy of rescission is gone
  • affirmation is being aware of whatever vitiating factor has occurred but choosing not to rescind
149
Q

Is recission affected by time?

A
  • In Allcard she did not choose to excercise her R for a long time and she was aware of it so it was conduct for affirmation
  • recission may not be granted if too much time has passed (implied affirmation)
150
Q

What is indemnity (rescission) ?

A

it covers expenditure incurred as a result of entering the contract but NOT by reason of the wrongdoing

151
Q

When do you need damages in misrepresentation?

A
  • recission is not available

- if further loss has been sustained which recission does not cover

152
Q

What tort is most useful to recover for misrepresentation?

A
  • the tort of deceit

- it can recover all losses caused by misrep

153
Q

What does section 2 (1) of the misrepresentation act 1967 say?

A
  • created a liability for misrepresentation when a person entered into contract because of it and suffers loss
  • if the defendant proves he had reasonable grounds to believe the facts he presented were true there is no liability
154
Q

What does section 2 (2) do?

A
  • it gives the courts judicial discretion to award damages for innocent misrepresentation in lieu of rescission
  • you cannot claim this section it is up to courts
155
Q

What is actual notice?

A

where the bank would know of the wrondoing by the spouse to make the other spouse grant security
-bank is not allowed to take the security

156
Q

What is constructive notice?

A
  • bank has knowledge of circumstances which should alert them to possibility of wrondoing
  • bank must take reasonable steps to respond to this
  • if they take reasonable steps their constructive notice is discharged and they can enforce security
157
Q

How does the law conclude that a bank is alive to possibility of husband committing wrongdoing according to O’Brien case?

A
  • trust and confidence (risk of undue influence)
  • informal relationship (risk of misrep)
  • extends to all stable emotional relationships not just H/W
  • if it is a non commercial suretyship (W gains nothing)
158
Q

What is the next step the banks should take after being alerted to constructive notice according to Etridge?

A
  • bank must ensure the wife takes advice from solicitor who she is content with (formal confirmation)
  • recieve confirmation from S that he has given advice
159
Q

If the solicitor fails to give proper advice is the bank liable?

A
  • no
  • if the solicitor fails to provide proper advice and the bank is not aware they are not liable as long as they have brought him in
160
Q

requirements for solicitor’s advice to wife

A
  • explain why they are involved
  • obtain W’s confirmation she is happy for S to act for her
  • explain nature of transaction and risks
  • ask if W is happy to proceed
  • ask if she is happy for S to tell bank they have given her advice
  • W needs to be aware of full context of granting security
161
Q

What if solicitor fails to give proper advice? Who is liable?

A
  • bank is not liable they are entitled to assume the solicitor performed their function properly and do not have to check
  • wife can sue the solicitor
  • S owed W professional care

Law (7 decks)

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