GROUNDS UNDER WHICH A CONTRACT CAN BE SET ASIDE Flashcards
common mistake
- both parties believe the same erroneous fact—the car is black, when it is really navy blue
Grounds Under Which a Contract Can Be Set Aside
- Mistake
- Misrepresentation
- Undue Influence
- Duress
unilateral mistake
if only one party is mistaken, and the other knows the truth
mutual mistake
= a situation in which both parties believe a mistake exists in the contract but their understandings of the mistake are different
Mistake (3)
a) Mistake in terms
b) Mistake as to the meaning of the words used
c) Mistake about the nature of the signed document
Mistake in reducing the terms to writing and rectification
Court may grant rectification where:
* Mutual Mistake
* Unilateral Mistake (very rare and is an extreme remedy)
* There was an otherwise complete agreement;
* Parties did not engage in further negotiations;
* Possibly the occurrence of fraud (not required)
* When the document was signed, the defendant knew or should have known of the mistake and the plaintiff did not;
Misunderstanding about the meanings of words
Multiple interpretations of the same term.
* One more reasonable interpretation: Court will interpret which meaning is most reasonable
* Two equally reasonable interpretations: mutual mistake exists and will be void for mistakes as to the meaning of terms.
Raffles v. Wichelhaus (1864), 159 E.R. 375: a ship called “peerless.”
Mistake In Subject Matter
Mistake in assumption as to the existence of the subject matter: K is void.
Mistake in assumption as to the value of the subject matter:
* Court will only intervene if mistake in value was present from the outset (court will not intervene due to fluctuations in the market price)
Non est factum
it is not my doing = This is not the contract I agreed to
only available to someone who, because of misrepresentation, has signed a document mistaken as to its nature and character and who has not been careless in doing so
blind persons or illiterate persons
Misrepresentation (definition)
= a statement/representation made during negotiation of a contract, before formation of the contract, that turns out to be false
Elements of the Tort of Misrepresentation:
(1) Statement must be made
(2) Statement must be false
(3) Reliance on the statement caused the injured party to enter the contract
(4) Reliance on the statement caused the innocent party harm
Fradulent vs Negligent vs Innocent
(a) Fraudulent: false statement is made knowingly or with reckless disregard to its truth
(b) Negligent: A statement is made when a duty of care is owed, and the making of the statement fell below the standard of care
(c) Innocent: If not (a) or (b)
Representation and opinion
- representation must be a statement of fact, not opinion
Expert exception: Expert opinions are considered to be statements of fact.
Omissions: Not necessarily a misrepresentation unless there is a duty of good faith owed (e.x. a fiduciary duty or an implied contractual duty of good faith) or if there is some latent defect.
Specific roles/contracts that require disclosure
directors to their corporation (fiduciary duty); partners in a partnership; insureds to their insurance company; professionals to their clients.
Caveat Emptor: Sales of Goods Act
A buyer is expected to inspect the goods. However, when the seller has made a misrepresentation, discovery is impossible, or both parties believe the same mistaken characteristics, rescission may be available. If the purchaser moves quickly, the contract is voidable. Delay will close the door.
