Remedies for Misrepresentation Flashcards
4 potential remedies for misrep
1) rescission
2) damages
3) indemnity
4) representee refuse further performance of contract
What is the effect of rescission
render the contract voidable but not void = contract still valid until representee decides to set it aside (rescind the contract)
What types of misrep is rescission available for?
any type
What is the general rule in order to rescind?
Representee must communicate the intention to do so to the representor.
alternatively
Representee may initiate proceedings for rescission by a court court order so contract is rescinded.
What type of remedy is rescission?
equitable remedy at court’s discretion
When is rescission generally awarded?
where parties can be restored to their original position - by returning all the property transferred between the parties under the contract.
4 reasons why rescission will not be awarded:
(a) Affirmation:
- a contract is affirmed if representee declares their intention to proceed w the contract/ does some act which intention can b reasonably inferred.
(b) Lapse of time:
- action for rescission must be brought promptly. Lapse of time without any attempt to effect rescission does not in itself constitute affirmation but it may be treated as evidence of such an intention.
(c) Restitution is impossible:
- right to rescind lost if no longer possible to restore parties to their previous position before contract made.
= case where nature of subject matter changed/ declined in value.
eg: Clarke v Dickson: representee induced to take shares in a partnership which was later converted into a limited liability company and the company was in the process of being wound up.
HELD: Rescission impossible since existing shares were wholly different in nature + status from those originally received. As rescission is essentially an equitable remedy, the court will not allow minor imperfections in the restoration of the original position to stand in the way of a remedy.
(d) Third party rights accrue:
contract remains valid up until notice is given of intention to rescind.
at any time prior to rescission, a person acquiring goods under such a contract is able to pass good title to those goods to an innocent third party who purchases the goods without notice of the misrepresentation. This would prevent restitution.
What may be awarded to cover expenses for obligations assumed as a direct result of the contract?
an indemnity - the obligations must have been created by the contract
If damages are awarded, can an indemnity be awarded too?
No
What is the measure of damages?
place innocent injured party in the position he would have been in had the misrepresentation not been made.
What is more likely to be awarded in an innocent misrep?
Indemnity
Can contributory negligence be used as a defence to a claim of fraud misrep?
NO
For what type of misrepresentation will the damages be the greatest?
Fraudulent misrep - cannot be given to innocent misrep
What must C also do for damages to be claimed?
1) C must mitigate as soon as fraud discovered; +
2) any damages awarded to C will be reduced by the value of any benefit C has acquired as a result of the contract.
Can contributory negligence be used as a defence to negligent misrep?
Yes - ONLY FOR NEGLIGENT MISREP
