Mistake, misrepresentation and privity of contract, illegality MCQs Flashcards
A man goes into a motorbike showroom pretending to be a well-known snooker player from the 1990’s. He looks a lot like the snooker player. He hands over a cheque for a new motorbike which is accepted by the seller. He rides off with the motorbike. When the seller tries to cash the cheque, it is returned by the bank uncashed because the man writing the cheque had insufficient funds in his account.
The shopkeeper wishes to set the contract aside through mistake. Which statement is the most accurate in relation to whether the contract is void / voidable / valid and why?
This is likely a mistake as to identity and the contract may be rendered void as a result.
This is likely not a mistake as to identity but one as to attributes and the contract may be rendered void if shown.
This is likely a mistake as to identity and the contract may be rendered voidable as a result.
This is likely not a mistake as to identity but one of attributes, and therefore there is no operative mistake, and the contract may be voidable but not void as a result.
This is likely not a mistake as to identity but one of attributes and therefore the contract will likely be rendered voidable.
This is likely not a mistake as to identity but one of attributes, and therefore there is no operative mistake, and the contract may be voidable but not void as a result
Correct on both applications! There is not likely to be an operative mistake (if there was, the contract would be void, not voidable). There may be a misrepresentation, in which case the contract would be voidable, not void
A telecommunications company is expanding its business overseas and needs to enter into lots of different contracts in all the different countries that it wishes to operate in. It wishes to be a named party in each contract and wants to get them signed as soon as possible.
What is the best solution for getting these contracts negotiated and signed quickly?
The telecommunications company can authorise a third party to sign the contract twice; once on behalf of the client and once on behalf of itself.
The telecommunications company can authorise a third party to act as its agent to negotiate and sign the contracts on its behalf.
The telecommunications company can authorise a negotiator to act as an agent for them and then the telecommunications company can sign once the contract is agreed.
The telecommunications company can travel to the different countries to negotiate and sign the contracts.
The telecommunications company can authorise a principal to negotiate and sign the contracts on its behalf
The telecommunications company can authorise a third party to act as its agent to negotiate and sign the contracts on its behalf.
Correct. There is no need for the third party to sign on behalf of itself. It signs as an authorised agent on behalf of the telecommunications company. This is likely to be more efficient than either of the options which require representatives of the company itself to travel. ‘Authorising a principal’ is not a recognised concept.
A (as buyer) enters into a contract with B for the manufacture of 100 personal computers. A had advised B that the microprocessors to be fitted into the computers should be sourced from C. C had previously assured A that its processors lasted on average 6 years, without any loss in speed. B duly contracts with C .The computers were built and within 2 years the speed of the machines is significantly slower and the processors are clearly not of the quality C had stated. Which statement is the most accurate in assessing whether A can bring proceedings against C for breach of contract?
Only B can bring proceedings against C as there is no privity of contract as between A and C , but A could claim from C as agent for B.
Only B can bring proceedings against C as there is no privity of contract as between A and C unless A can show a collateral contract exists between A and C, and thereby claim directly from C.
Only B can bring proceedings against C as there is no privity of contract as between A and C with all sums awarded being held in Trust for B.
Only B can bring proceedings against C as there is no privity of contract as between A and C.
Only B can bring proceedings against C as there is no privity of contract as between A and C, but A could claim from C in the tort of negligence.
Only B can bring proceedings against C as there is no privity of contract as between A and C unless A can show a collateral contract exists between A and C, and thereby claim directly from C.
This answer is correct. Here a collateral contract is likely to be found and so an exception to the privity rule is likely to be established. See the common law methods of circumventing the doctrine of privity and the case of Shanklin Pier v Detel. Therefore, A is likely to be able to bring proceedings against C.
There is no viable claim in negligence, there is no agency / principal relationship and no reason why A would hold sums on trust for B.
A buyer is shopping for a wedding dress when she sees a dress by a famous designer on sale for £100. The seller had made a mistake when writing the price tag and it should have been on sale for £1000. The buyer knows that the dress has been mispriced and she quickly buys the dress.
Which of the following statements is correct as to whether or not the contract is valid / void / voidable, and why?
The contract for sale is void because the seller was mistaken about the value of the dress.
The contract for sale is valid because there was a valid offer and acceptance.
The contract for sale is voidable by the seller when they realise their mistake.
The contract for sale is voidable because there is no agreement.
The contract of sale is void as there is no agreement.
The contract of sale is void as there is no agreement.
There is no real agreement as the seller made a unilateral mistake in expressing their intention so the acceptance does not correspond to the offer. In cases of mistake, a contract is void, not voidable.
Stan, a retailer, sells high quality watches from his shop at 5 Beck High Street. On Monday morning, a man walked into the shop. He introduced himself to Stan as the famous singer, Vick Vegger. He said that he had heard that the shop was selling top quality watches and that he would like to buy some. Stan recommended two handmade watches, at a price of £10,000 each. Vick agreed to buy them and gave Stan a cheque. On Wednesday morning Stan tried to cash the cheque. The bank informed him that the cheque is a forgery and that it will not be honoured. On Wednesday afternoon Stan informed the police that he had been conned by a rogue impersonating Vick Vegger. The police have found the watches. The rogue had already sold them to a respectable retired man named Jacob, on Tuesday morning. Which of the following might be the most likely outcome based on the above facts?
The contract between Stan and the impersonator of Vick Vegger is voidable on the grounds of mistake as to identity and Stan will be able to get his watches back.
Stan will not be able to get the watches back on the grounds of either mistake or misrepresentation.
The contract between Stan and the impersonator of Vick Vegger is void on the grounds of misrepresentation as to identity and Stan will be able to get his watches back.
The contract between Stan and the impersonator of Vick Vegger is void on the grounds of mistake as to identity and Stan will be able to get his watches back.
The contract between Stan and the impersonator of Vick Vegger is voidable on the grounds of misrepresentation as to identity and Stan will be able to get his watches back.
Stan will not be able to get the watches back on the grounds of either mistake or misrepresentation.
Correct. There is no mistake that would render the contract void: Lewis v Avery. The contract is probably voidable for misrepresentation, but rescinding at this stage won’t get the watches back, because they have already been sold to Jacob, who has good title to them.
Question 1
A client bought a business for £180,000 having been deliberately misled by the seller as to
the gross profit made by the business. After running the business for a few months the client
discovered the fraudulent misrepresentation. The client was advised to continue running the
business (albeit at a loss) and to try to sell it. The sale of the business went through last
week. It sold for £80,000.
If the client sues for misrepresentation, which of the following best explains how
damages would be assessed?
A On an expectation loss basis.
B On a reliance loss basis for wasted expenditure that was not too remote.
C On a tortious basis for all consequential losses.
D On a tortious basis and so would not extend to any loss of profit.
E For any loss that was not too remote the client would get damages to put him in the
same position as if the misrepresentation had not been made.
C is correct. Damages under s 2(1) are awarded on the same basis as if the
misrepresentation had been made fraudulently and so extend to all consequential losses and
the measure is as if the misrepresentation had never been made.
A and B are wrong as they are ways of assessing damages for breach of contract.
D is wrong as damages for loss of profit may be assessed on a tortious basis (East v Maurer).
E is wrong as all consequential losses are recoverable – remoteness is not an issue.
Question 2
In May a buyer entered into a contract to buy a beauty salon having been deliberately
misled by the seller as to the gross profit made by the salon over the previous three years.
The buyer made extensive alterations to the salon including the addition of a new treatment
room. Then in August the buyer discovered the fraudulent misrepresentation and decided
he no longer wanted the salon.
Could the buyer rescind the contract of sale?
A No, because rescission would be barred by undue delay.
B No, because rescission is an equitable remedy and damages would adequately
compensate the buyer.
C No, because restitution is impossible.
D Yes, because rescission is potentially available for all forms of misrepresentation and
the buyer has not affirmed the contract.
E Yes, because rescission is always available for fraudulent misrepresentation.
Answer
C is correct. As the buyer made extensive alterations to the salon including the addition of a
new treatment room restitution would be impossible.
A is wrong as rescission would not be barred by delay. With fraudulent misrepresentation time
runs from discovering the misrepresentation.
B is wrong as rescission may be awarded in addition to damages.
D is wrong. Rescission is potentially available for all forms of misrepresentation but would be
barred on the facts as restitution is impossible.
E is wrong as rescission is not available as of right for any misrepresentation.
Question 3
A client saw a vase in an antique shop. The client thought it was very rare and worth far
more than the price asked. The owner of the shop overheard the client telling someone
this on the phone. The owner knew the vase was not rare and valuable but did not tell the
client. The client bought the vase and has now discovered the vase is worth less than the
price paid.
Does the client have a cause of action against the owner of the shop?
A Yes, because the owner of the shop made a misrepresentation: the owner should have
corrected the mistake.
B Yes, because the owner of the shop would be in breach of an implied term that the
sale price was a reasonable price for the vase.
C Yes, because the owner of the shop made a fraudulent misrepresentation by positively
deceiving the client.
D No, because the general rule is ‘buyer beware’.
E No, because the client acted unconscionably in trying to buy the vase for less than it
was worth.
D is correct The general rule is ‘buyer beware’
A is wrong. The owner of the shop had not made a misrepresentation. Generally there is no
obligation to say anything unless specifically asked.
B is wrong. The price was agreed. Consideration need not be adequate – see Chapter 3.1.1.
C is wrong as there was no positive deception; indeed there was no misrepresentation at all.
E is wrong. There is nothing wrong in trying to secure a good bargain.
Question 1
A client advertised her valuable violin for sale. Last week a man visited her and agreed to buy
the violin. When he asked to pay by cheque the client hesitated and said she would prefer
cash. The man said he was a famous violinist and produced photographic identification. On
that basis the client accepted the cheque and let the man take the violin. Yesterday the cheque
bounced and the man cannot be traced. Today the client saw the violin in the shop window of
a musical instrument supplier who had bought the violin in good faith three days ago.
Which of the following statements best describes the client’s legal position?
A The client can rescind the contract of sale with the man based on fraudulent
misrepresentation.
B The client can recover the violin from the musical instrument supplier.
C The client can sue the man for damages in the tort of deceit and recover the violin from
the musical instrument supplier.
D The client cannot recover the violin from the musical instrument supplier.
E The client cannot recover the violin from the musical instrument supplier but can sue the
man for damages for mistaken identity.
Answer
The correct statement is D.
A is wrong as the fact that the musical instrument supplier had purchased the violin would be
a bar to rescinding the contract.
B is likely to be wrong as the client’s mistake appears to be one as to attributes rather than
identity.
C is wrong as rescission will be barred.
E is wrong as damages are not available for mistaken identity. The only remedy is for a court
to declare the contract void
Question 2
A baker’s shop entered into a contract to bake a cake that was to be iced with a gay rights
slogan. The bakers subsequently refused to bake the cake on the basis that the owners were
devout Christians and they sought to refund the customer instead.
If the bakers were taken to court, which of the following would be the most likely
outcome?
A The contract was illegal as being contrary to public policy and therefore unenforceable by
the customer.
B The bakers’ refusal to carry out the contract was because the customer was gay and as
such amounted to unlawful discrimination and was illegal.
C The bakers’ refusal to perform the contract was legal because the bakers should not be
forced to express a political opinion in which they did not believe.
D The contract was legal and, as they had not properly performed it, the bakers should be
liable to pay damages to the customer.
E The contract was legal but the bakers’ refusal to perform it as agreed was illegal because
it amounted to a fundamental breach of contract.
Answer
The correct statement is C. The contract was legal and to have required the bakers to ice the
slogan on the cake would have breached the bakers’ human rights.
A is wrong because the contract per se was legal.
B is wrong. The bakers’ refusal to perform the contract as agreed was not because the
customer was gay. It would have required the bakers to supply a cake iced with a message
with which they profoundly disagreed and that was contrary to their human rights.
D is wrong. The contract was legal but the bakers were entitled to refuse to perform it as
agreed.
E is wrong. Performance of a contract will not be illegal just because it amounts to a
fundamental breach of contract.
Question 30
In March a buyer entered into a contract for the purchase of a children’s nursery because of a fraudulent statement made by the seller in January about the previous year’s sales figures.
In April, after purchasing the nursery, the buyer employed a builder to carry out extensive building works to the nursery including demolishing outbuildings and adding an extension.
In May the buyer discovered the fraudulent statement was false and decided that he wished to rescind the contract.
Could the buyer rescind the contract?
A. No, because rescission is not an available remedy for misrepresentation.
B. No, because a third party has acquired rights.
C. No, because the buyer has affirmed the contract.
D. No, because restitution is impossible.
E. No, because there is a statutory bar under the Misrepresentation Act 1967.
D - No, because restitution is impossible.
A customer buys a television from a shopkeeper on 24 December. It is a gift for his daughter. He does not inform the shopkeeper that it is a gift for someone else.
When his daughter opens the box she discovers the television is defective. She travels to the shop on 26 December and asks for a replacement or refund. The shopkeeper refuses.
What advice should be given to the daughter?
A. The daughter has rights under the contract because she suffered a detriment in travelling to the shop.
B. The daughter has rights under the contract because on an objective test the television was likely to have been purchased as a gift for a third party.
C. The daughter has a right under the contract to have the television replaced only.
D. The daughter has no rights under the contract because she was not a party to it.
E. The daughter has no rights under the contract because it is a domestic agreement between members of a family.
D - The daughter has no rights under the contract because she was not a party to it.
A business person visits a garden building supplier. She selects an ex-display garden building she wishes to purchase. There is a hole in the garden building roof which the owner has filled so the fault cannot be seen but it is not watertight. The owner invites the business person to inspect the garden building prior to sale but she declines, completes the purchase and installs the garden office at her home. It rains overnight and the inside of the garden office is badly water damaged.
Has an actionable misrepresentation occurred?
Select one alternative:
Yes. There was a promise that the garden office would be watertight.
Yes. This is an actionable misrepresentation through conduct.
No. While the owner attempted to cover up the defect, this is not actionable as the business person did not see it.
No. For a misrepresentation to be actionable, it must occur by words - silence cannot amount to an actionable misrepresentation.
Yes. This is an actionable continuing representation.
No. While the owner attempted to cover up the defect, this is not actionable as the business person did not see it.
This is a contract law question on the topic of misrepresentation. Although a misrepresentation can be made by conduct, it is not actionable if the claimant does not see or hear the attempted misrepresentation as they are not induced by it. There is no express promise on the facts. Even if there were such a promise, it would amount to breach of an express term rather than an actionable misrepresentation.
An accountancy firm contracts with an events company, requiring the events company to organise its Christmas party. Acting in accordance with those instructions, the events company contacts a disco company, indicating it is acting on behalf of the accountancy firm, and agrees terms for the provision of a disco service contract in return for payment by the accountancy firm. The contract between the events company and the disco company is entirely oral. The disco company breaches the contract.
Can the accountancy firm bring a claim against the disco company?
Select one alternative:
Yes, as the events company knew that, at the time of contracting, the benefit of the contract would reside with the accountancy firm.
No, as there is no express right to enforce the contract between the events company and the disco company.
Yes, as the events company entered into the contract as the accountancy firm’s agent.
No, as the accountancy firm was not party to the contract between the events company and the disco company.
Yes, as there will be a collateral contract between the disco company and the accountancy firm.
Yes, as the events company entered into the contract as the accountancy firm’s agent.
This is a contract law question on the topic of privity of contract and agency. The events company is acting as an agent for the accountancy firm (principal). All the requirements of agency are made out, so this is the best advice on the facts. None of the other ways of circumventing the doctrine of privity of contract offer the best advice on the facts.
A breeder is selling puppies. The last remaining puppy is aggressive. A man wants to buy a puppy, so he visits the breeder. Before the man arrives, the breeder gives the aggressive puppy a sedative to stop the puppy displaying aggression. The man signs a contract which states he has assessed the puppy’s temperament and then takes the puppy home. A day later, the puppy’s aggression returns.
Which of the following statements best describes the man’s contractual rights?
Select one alternative:
There has been a negligent misrepresentation. Damages will be granted in lieu of rescission.
There has been a fraudulent misrepresentation, but the man’s signature is an affirmation of the contract which will bar rescission.
There has been a fraudulent misrepresentation. The contract can be rescinded.
There has been a negligent misrepresentation, but the man’s signature is an affirmation of the contract which will bar rescission.
There has been an innocent misrepresentation. Damages are not available but the contract can be rescinded.
There has been a fraudulent misrepresentation. The contract can be rescinded.
This is a contract law question on the topic of misrepresentation. The breeder has made a fraudulent misrepresentation by conduct - the breeder knowingly covered up the dog’s aggression. Rescission is the primary remedy for misrepresentation and there is no bar here (the contract was signed, and the puppy taken home, before the fraud could reasonably be discovered so this will not be an act of affirmation).
