Contracts Part 2 Flashcards
Mistake
When parties have a different understanding of terms of contracts.
What are the three common mistakes in interpreting terms?
1) Shared Mistake
2) Mutual Mistake (misunderstanding)
3) Unilateral Mistake (one-sided)
Shared Mistake
Both parties have made the same mistake. Contract may be void for lack of consensus.
Mutual Mistake (Misunderstanding)
Where each party has a different understanding of the contract terms, courts will imply most reasonable interpretation. If both interpretations equally reasonable, contract void for lack of consensus.
Unilateral Mistake
Only one party has misunderstood a term of contract. Only if different understanding is a result of misrepresentation would it be actionable.
Non Est Factum (It is not my act)
If mistake as to nature of document signed, contract must be void.
Parol Evidence Rule
verbal evidence inadmissible to vary terms of a written agreement.
Contract Interpretation
1) If Terms Clear: court applies literal meaning.
2) If Disagreement About a Term: the words given ‘reasonable meaning’.
3) If Term Ambiguous: court looks to rest of contract to determine intention of parties.
Exemption Clauses
Attempt to limit or eliminate liability for one party to contract.
Misrepresentation
False and misleading statements that induce a person to enter into a contract.
What are the three types of misrepresentation?
1) Innocent: misleading another without knowing or being careless.
2) Fraudulent: intentionally and knowingly misleading another to induce him/her to enter into contract.
3) Negligent: if person making misrepresentation should have known what he/she was saying was false, but he/she was careless.
What is the only remedy to innocent misrepresentation?
Rescission: court attempts to put parties in their original position.
Duress
Where you enter into a contract because of coercion (pressure). This can involve threats that may be violence, financial pressure or a scandal.
Contract is usually voidable.
Undue Influence
Abuse of trust relationship. It is presumed in certain relations such as lawyers, doctors and trustees.
Contract is voidable.
Unconscionability
Taking advantage of vulnerable person’s situation(poverty, mental impairment). Court can set aside or modify contract.
What is the general rule to privity?
Only the parties to a contract are bound to it or may enforce it.
What are the exceptions to privity?
1) Certain interests in land (subleasing an apartment).
2) Trusts (beneficiary of a trust can enforce the trust).
3) Life Insurance (beneficiary of life insurance can enforce the insurance policy).
4) Some Statutory Exceptions (consumer protection legislation may extend warranty to subsequent buyers).
5) Agents acting for Principals (agents negotiating contracts for athletes).
Assignment
transfer to a 3rd party of rights arising under a contract.
Assignor and Assignee
Assignor: party who transfers rights.
Assignee: party who receives rights.
legislation allows assignee to sue directly if three conditions are met:
1) assignment is absolute (complete and unconditional).
2) assignment is in writing.
3) proper notice was given to debtor.
Assignment Limitations
1) May only assign the benefits, not the obligations.
2) Assignee cannot be in a better position than the assignor (‘subject to the equities’).
