Contract law: Disproving factors, discharge, remedies

Question 1

What are Vitiating factors?

Answer 1

They are what makes an agreement not valid.

Question 2

What are common mistakes?

Answer 2

When both parties share the same mistake, which must be of a fundamental nature to be considered operative

Question 3

What are mistakes res extincta/res sua?

Answer 3

Mistakes res extincta regard the existence of the subject matter of the contract.

Mistakes res sua is when one of the parties of the contract already owns what they are contracted to receive.

Question 4

Describe two mechanisms for dealing with mistakes in written contracts

Answer 4

1. The equitable doctrine of rectification is used to solve the issue when a written document fails to state the actual intentions of the parties.
2. When someone signs a document under a misunderstanding as to its true nature, they can claim non est factum, meaning the document is not their deed. this only is valid if the person who signed the document was not careless with regards to its content.

Question 5

When do mutual mistaken happen?

Answer 5

When the parties are at cross-purposes, meaning they have different views on the facts of the case without realising. If the court can’t find an outcome on the basis of an objective reasonable person, the contract will be void.

Question 6

What are unilateral mistakes?

Answer 6

When one party is mistaken about circumstances of the agreement, and other party is aware of this. Usually also involves misrepresentation. Makes a contract void, misrepresentation makes a contract voidable.

Question 7

Describe two mechanisms for dealing with mistakes in written contracts

Answer 7

1. The equitable doctrine of rectification is used to solve the issue when a written document fails to state the actual intentions of the parties.
2. Someone signs a document under misunderstanding, they can claim non est factum, meaning the document is not their deed. Only valid if person who signed document cared about its content.

Question 8

What is a representation?

Answer 8

Statement that induces a person to enter a contract. Not a term of contract. Misrepresentation: when statement is false. Makes contract void. There must be a false fact.

Question 9

Misrepresentation

Answer 9

When a statement was true when made, but has become false before contract was finished, change must be notified for it to not be misrepresentation. There must be a written/oral statement- Silence is not misrepresentation.

Question 10

Name three factors that cannot constitute representations because they are not facts

Answer 10

1. ‘Sales puffs’.
2. Statements of law: Everyone in theory presumed to know the law, it cannot be misrepresented.
3. Statements of opinion: Not actionable.

Question 11

What is discharge by performance?

Answer 11

Parties have completely and exactly performed their obligations in the normal way as defined by the contract

Question 12

Describe 3 types of misrepresentation

Answer 12

1. Fraudulent misrepresentation is when statement was made knowing it to be false. These cases are difficult in proving mens rea of fraud. Remedy is rescission and/or damages.
2. Negligent misrepresentation: false statement is made, thinking it is true. Without reasonable grounds for that. Remedy is rescission and/or damages.
3. Innocent misrepresentation is made believing the statement to be true. Remedy is rescission.

Question 13

Duress

Answer 13

Element of force limiting party’s freedom to enter contract. Makes contract voidable at instance of innocent party

Question 14

When can discharge by frustration NOT be applied? (4)

Answer 14

1. Parties made express provision in the contract for the event which occurred.
2. Frustrating event is self-induced.
3. Alternative method of performance is still possible.
4. Contract becomes more expensive to perform

Question 15

Transactions and special relationships

Answer 15

Transactions are voidable when entered under excessive influence of person benefiting from them.

When there is special relationship between parties, there is a presumption that transaction is consequence of undue influence and that consent wasn’t fully given.

Where no special relationship exists between parties, burden of proof lies on party claiming protection from excessive influence. When contract is discharged, parties are free from contractual obligations.

Question 16

What is anticipatory breach?

Answer 16

When a party expresses intent that they won’t perform. This can be express intention, when the party actually state that they won’t perform. Can be implied intention, when the party carries out some act which make performance impossible.

Question 17

What is anticipatory breach?

Answer 17

When a party expresses intent that they won’t perform. This can be express intention, when the party actually state that they won’t perform. Can be implied intention, when the party carries out some act which make performance impossible.

Question 18

Give 6 remedies for breach of contract

Answer 18

• What damages should be paid is estimated by considering remoteness and measure. Remoteness is a consideration of the remoteness of cause from effect.
• Damages will only be awarded in respect to losses which could’ve been presumed to arise in the case of a breach of contract. Damages in contract are intended to compensate.
• The market rule is for breach of contract regarding goods. the damages should be in line with the market price of the undelivered goods.
• The duty to mitigate losses is that the injured party is under duty to minimise their loss in any way possible.
• No-pecuniary losses (non-financial) used to not be protected by damages, but they are now.
• Business contracts often make an agreement as to a set amount of damages that would be paid if a breach were to occur. this is known as liquidated damages. they are only valid if they represent a genuine pre-estimate of loss.

Question 19

Damages aren’t always adequate as remedies. What is sometimes used instead?

Answer 19

Equitable remedies

Question 20

What does quantum meruit mean? (3)

Answer 20

A party should be awarded as much as he had earned when:
- A defendant refuses to perform his part in a contract.

• Work has been performed under a void contract and accepted by the defendant.
• The contract is for goods, but no price has been fixed.

Question 21

What is specific performance?

Answer 21

When a court orders the completion of the terms of a contract, often when a vendor refuses to convey property

Question 22

What are Injunctions?

Answer 22

…… They restrain a person from doing something. Won’t be used if effect would lead to performance of contract.

Question 23

What is anticipatory breach?

Answer 23

When a party expresses intent that they won’t perform. Express intention, when party actually states that they won’t perform. Implied intention, when the party carries out some act which makes performance impossible.

Question 24

Give 6 remedies for breach of contract

Answer 24

• What damages should be paid is estimated by considering remoteness (of cause from effect).
• Damages only awarded in respect to losses which could’ve been presumed to arise in case of a breach of contract. Damages in contract intended to compensate.
• Market rule is for breach of contract regarding goods. Damages in line with market price of undelivered goods.
• Duty to mitigate losses is that injured party is under duty to minimise loss in any way possible.
• No-pecuniary losses (non-financial) used to not be protected by damages, but they are now.
• Business contracts often make agreement as to a set amount of damages that would be paid if breach were to occur: liquidated damages. Only valid if they represent pre-estimate of loss.

Question 25

Give the facts, arguments and judgment in the Lloyds Bank Ltd. v. Bundy case

Answer 25

Facts:
Defendant was an elderly farmer. His son and him were both customers of the same branch of the plaintiff’s bank. Defendant decided to guarantee his son’s company’s overdraft for £1500 and charged his house, his only asset, to the bank to secure the sum. The company had further financial trouble so the bank manager advised the defendant to sign a further guarantee for £5000 and a further charge of £6000, which the defendant did. The company had even further trouble and the son suggested that the defendant would provide further money. The son and the assistant manager visited the defendant with a form of charge prepared for him. The assistant manager recognised that the defendant relied on him to advise about the transaction. The company finally went under and the bank looked to bring an action for possession against the defendant for his house.

Arguments:
The previous court found: Relationship between the bank and the defendant was one of trust and confidence. Defendant was liable to be influenced by the banks proposals. Bank was seeking to obtain a benefit from the defendant, there was a conflict of interest. Bank’s duty to advise the defendant and by failing this, they had breached their duty of fiduciary care. Action for possession should be dismissed. Plaintiffs appealed.

Judges found: Duress of goods. Unconscionable transaction. Undue influence. Undue pressure. Saw a pattern of ‘inequality in bargaining power’. Consideration of the bank was ‘grossly inadequate’. Relationship between the defendant and the bank was one of trust. Defendant and his son’s relationship had huge influence on the defendant.

Judgment:
The appeal was allowed.

Question 26

Give the facts, arguments and judgment in the Lloyds Bank Ltd. v. Bundy case

Answer 26

Facts:
D: Elderly farmer. His son and him were both customers of same branch of the P’s bank. D decided to assure his son’s company’s overdraft for £1500 and charged his house, his only asset, to the bank to secure the sum. The company had further financial trouble so the bank manager advised D to sign a guarantee for £5000 and a charge of £6000, which D did. Company had even further trouble and the son suggested that D would provide further money. The son and assistant manager visited D with a form of charge prepared for him. The assistant manager recognised that D relied on him to advise about the transaction. The company finally went under and the bank looked to bring an action for possession against D for his house.

Arguments:
Previous court: Relationship between bank and D was of trust and confidence. D was liable to be influenced by bank’s proposals. Bank was seeking to obtain a benefit from D, there was conflict of interest. Bank’s duty to advise D and failing this, they had breached duty of fiduciary care. Action for possession should be dismissed. P appealed.

Judges: Duress of goods. Unethical transaction. Excessive influence and pressure. Pattern of ‘inequality in bargaining power’. Consideration of bank was ‘grossly inadequate’. Relationship between D and bank was one of trust. D and his son’s relationship had huge influence on D.

Judgment:
The appeal was allowed.

Question 27

What does quantum meruit mean? (3)

Answer 27

Party should be awarded as much as he had earned when:
- A defendant refuses to perform his part in a contract.

• Work has been performed under a void contract and accepted by the defendant.
• The contract is for goods, but no price has been fixed.

Question 28

Give the facts, arguments and judgment in the Lloyds Bank Ltd. v. Bundy case

Answer 28

Facts:
D: Elderly farmer. His son and him both customers of same branch of P’s bank. D assured son’s company’s overdraft for £1500 and charged his house, his only asset, to bank to secure sum. The company had further financial trouble so the bank manager advised D to sign guarantee for £5000 and charge of £6000. D did. Company had further trouble and son suggested that D provide further money. Son and assistant manager visited D with form of charge. Assistant manager recognised D relied on him to advise about transaction. Company finally went under and bank looked to bring an action for possession against D for his house.

Arguments:
Previous court: Relationship between bank and D was of trust and confidence. D was liable to be influenced by bank’s proposals. Bank was seeking to obtain a benefit from D, there was conflict of interest. Bank’s duty to advise D and failing this, they had breached duty of fiduciary care. Action for possession should be dismissed. P appealed.

Judges: Duress of goods. Unethical transaction. Excessive influence and pressure. Pattern of ‘inequality in bargaining power’. Consideration of bank was ‘grossly inadequate’. Relationship between D and bank was one of trust. D and his son’s relationship had big influence on D.

Judgment:
The appeal was allowed.