Factors affecting consensus: Misrepresentation, duress and undue influence

Question 1

True or false a contract cannot be voidable when all the requirements for a valid contract are present?

Answer 1

False, A contract can be voidable when all the requirements for a valid contract are present, but
there is a DEFECT in the CONSENT of one of the parties

Question 2

In other words, it seems that there is __________ i.e., that both parties are in ___________, but in fact, the consent of one of the parties is ______________.

Answer 2

consensus
agreement
defective

Question 3

What can the defect in a voidable contract be due to? [3]

Answer 3

1. Misrepresentation
2. Duress
3. Undue influence

Question 4

Define Misrepresentation

Answer 4

“False statement of fact made by one party to the other party before or at the time the contract is entered into.”

Question 5

What does a false statement of fact cause?

Answer 5

The false statement of fact must cause the conclusion of the contract

Question 6

What are examples of false statements that are not misrepresentations? [3]

Answer 6

1. Opinion
2. Warranty- term of contract
3. Puff- In relation to the marketing of any
   goods or services, the supplier must not use
   exaggeration, innuendo or ambiguity as to a
   material fact (see CPA act S41)

Question 7

Ways in which misrepresentation can be made? [3]

Answer 7

1. Expressly
2. By conduct
3. By silence

Question 8

Ways in which misrepresentation can be made? [3]

Answer 8

1. Expressly
2. By conduct
3. By silence

Question 9

How can misrepresentation be created by silence?

Answer 9

As half truths create a misleading impression

Question 10

What is the exceptions (duty to speak) regarding misrepresentation by silence? [2]

Answer 10

1. Prior conduct
2. Changed circumstances

Question 11

What are the types of misrepresentation? [2]

Answer 11

1. Causal OR Incidental
2. Fraudelent, Negligent OR Innoncent

Question 12

Every misrepresentation will fit into _______ OR _________ and ___________, ___________ OR __________. It will be either causal or incidental, and it will be either fraudulent, negligent or innocent.

Answer 12

Causal OR Incidental
Fraudulent, Negligent OR Innocent

Question 13

Why are the types of misrepresentation important?

Answer 13

because they determine the remedies that available to innocent parties

Question 14

What are the remedies for misrepresentation? [2]

Answer 14

1. Rescind + restitutio in integrum and/or
2. Damages for consequential loss

Question 15

EXAMPLE:
BUY HOUSE. TOLD CONNECTED TO MAIN
SEWERAGE SYSTEMS. THEN DISCOVER
SEPTIC TANK, WHICH OVERFULL. WILL
COST R50 000 TO REMOVE AND R250 000
TO REPLACE. HOUSE COST R1 MILLION.
How much to rescind and how much for damages?

Answer 15

RESCIND: HOUSE ↔ R 1 MILLION.
DAMAGES: R300 000

Question 16

What are the requirements for Rescind + restitutio in integrum (full restoration of injured party) ? [2]

Answer 16

1. Contract is voidable
2. innocent party can restore other party’s full performance.

Question 17

When is a contract voidable? [2]

Answer 17

i) misrepresentation was causal
ii) and possibly material (?)

Question 18

If voidable, innocent party has decision to _______ or _______

Answer 18

ratify
rescind

Question 19

What are the exceptions if a contract is voidable due to misrepresentation?

Answer 19

requirement that innocent party must be able to restore other party’s full performance.

Question 20

For Damages, when is compensation calimable?

Answer 20

only claimable for fraudulent and negligent misrep, not for innocent misrep.

Question 21

If a contract is voidable (causal), and innocent party chooses to RECIND. What can they claim?

Answer 21

Restitutio in integrum +
Damages

Question 22

If a contract is voidable (causal), and innocent party chooses to RATIFY. What can they claim?

Answer 22

Damages only

Question 23

If a contract is NOT voidable (INCIDENTAL). What can an innocent party claim for?

Answer 23

Damages only

Question 24

What is the CPA (CONSUMER PROTECTION ACT) used for?

Answer 24

False, misleading or deceptive representations

Question 25

What must , In relation to S41 (1) the marketing of any goods or services, the supplier not, by words or conduct do? [2]

Answer 25

1. directly or indirectly express or imply a false,
   misleading or deceptive representation concerning
   a material fact to a consumer.
2. fail to correct an apparent misapprehension on the part of a consumer, amounting to a false,
   misleading or deceptive representation.

Question 26

What happens, in any proceedings before a court
concerning a transaction or agreement between a supplier and consumer, to a person alleges that…?

Answer 26

the supplier contravened section 40, 41 or 48
… the court… may make an order contemplated in subsection (3).

Question 27

If the court determines that a transaction or
agreement was, in whole or in part,
unconscionable, unjust, unreasonable or unfair,
the court may? [2]

Answer 27

(a) make a declaration to that effect; and
(b) make any further order the court considers
just and reasonable in the circumstances,
including, but not limited to, an order—

Question 28

What can further order can the court consider? [4]

Answer 28

(i) to restore money or property to the consumer;
(ii) to compensate the consumer for losses or
expenses relating to—
(aa) the transaction or agreement; or
(bb) the proceedings of the court;

Question 29

What is duress (intimidation) ?

Answer 29

= threat of some considerable evil to person, family or property of the innocent party

Question 30

When is a contract voidable regarding a threat? [5]

Answer 30

1. Threat of an imminent or inevitable evil
2. Threat contra bonos mores (unlawful)
3. Threat made by the other party to contract
4. Threat must have induced innocent party to
   contract
5. Clear objection if threat is to property

Question 31

What is the effect of a voidable contract as a result of threat? [3]

Answer 31

innocent party has election: uphold (1) or rescind (2) & claim restitutio in integrum (3)

Question 32

What is undue influence?

Answer 32

one person exercises influence over another

Question 33

the influence _________ the other’s powers of resistance and renders his will ________

Answer 33

weakens
pliable

Question 34

the influence _________ the other’s powers of resistance and renders his will ________

Answer 34

weakens
pliable

Question 35

What does a person then uses his influence to do in an unscrupulous manner to persuade him to
conclude a contract ? [2]

Answer 35

i) is to his detriment and
ii) he would not have entered into if he had been exercising normal free will (even if had not been unduly influenced).

Question 36

What does undue influence therefore involve?

Answer 36

Undue Influence therefore involves the application of improper PRESSURE which insidiously erodes the victim’s ability to exercise free and independent judgment.

Question 37

What does “full and final settlement” mean?

Answer 37

Full and final settlement means you will not sue or claim any further money

Question 38

Consumer protection act, protects the right to ______ and honest _________

Answer 38

fair
dealing

Question 39

Consumer protection act, protects the right to ______ and honest _________

Answer 39

fair
dealing

Question 40

What must a supplier not do?

Answer 40

A supplier or an agent of the supplier must not use physical force against a consumer, coercion, undue influence, pressure, duress or harassment, unfair tactics or any other similar conduct in connection with any—
(c) negotiation, conclusion, execution or
enforcement of an agreement to supply any
goods or services to a consumer;

Question 41

What is unconscionable for a supplier to knowingly do under CPA S40 (1)?

Answer 41

it is unconscionable for a supplier knowingly to take advantage of the fact that a consumer was substantially unable to protect the consumer’s own interests because of physical or mental disability, illiteracy, ignorance, inability to understand the language of an agreement, or any other similar factor.

Question 42

What is unconscionable for a supplier to knowingly do?

Answer 42

it is unconscionable for a supplier knowingly to take advantage of the fact that a consumer was substantially unable to protect the consumer’s own interests because of physical or mental disability, illiteracy, ignorance, inability to understand the language of an agreement, or any other similar factor.