L7: Defects 2

Question 1

Explain Common Mistake, state the 2 relations and the effect of it.

Answer 1

Both parties contract on the same mistaken assumption that a fundamental fact exists, and subsequently finds out that it doesn’t exist.

It can relate to the:
1. Existence of the subject matter

2. Possibility of performing the contract

Contract is void.

Question 2

Explain Mutual Mistake and the effect of it.

Answer 2

It is when X intends to deal with one things, Y intends to deal with a different one.

The parties are at cross-purposes and they do not have a meeting of the mind due to a misunderstanding.

Contract is void

Question 3

Explain Unilateral Mistake, list the 3 relations and the effect of it.

Answer 3

It is when only one party makes a mistake and the other party is aware of the mistake.

It may relate to:

• Impt term such as price
• Identity
• Signed Document

Question 4

What is the general rule for a signed document?

e.g. what happens when a person signs a document?

Answer 4

In the absence of a fraud or misrepresentation, the person is bound to contract by signature, regardless if its read or not.

UNLESS:
non-est factum.
(where a person signs a document under the MISTAKEN BELIEF that the document is something completely different from what it really is)

Question 5

What is non-est factum?

Answer 5

It is when a person signs a document under a mistaken belief that a document is something completely different; than what it really is.

Question 6

A person who signs a contract can show the contract is void if:

(state 2)

Answer 6

1. Induced to sign by trick/fraud
2. Makes a fundamental mistake regarding nature of document
3. Not careless in signing

Question 7

3 types of Contracts that are illegal at common-law

Answer 7

1. Objective of contract is to commit a civil wrong
2. Objective is to defraud the tax authorities
3. Interference with administration of justice

Question 8

2 types of contract that are illegal by statute

Answer 8

Civil Law Act: gaming/wagering contracts are void. They cannot sue to recover winnings.

Moneylenders Act 2008: Loans granted by unlicensed moneylenders are not enforceable.

Question 9

What is Restraint of Trade? (ROT)

Answer 9

An agreement that prevents a person from carrying on his trade/business/profession.

Question 10

State the 2/3 types of ROT

Answer 10

1. Non-competition clause
   Employee agree not to set up competing business
2. Non-solicitation clause
   - Employee agree not to solicit or entice away existing employee
   - Employees agree not to solicit the customers of the company

Question 11

ROT is void and unenforceable unless the employer can show any of the 3 things:

Answer 11

1. Trade secrets
2. Customer connection
3. Maintaining a stable, trained workforce.

Question 12

When is ROT reasonable? List 4.

Answer 12

1. Area of restraint
2. Duration of restraint
3. Scope of Restraint.
4. Position of Employee