Topic 5: Contract Law: Factors affecting validity

Question 1

What are the main factors affecting contract validity?

Answer 1

• Misrepresentation during contract negotiations
• Illegality of the contract itself
• If the parties make a mistake (dependant on type of mistake)
• Duress (under threat/harm not freely and voluntarily)
• Undue influence (doctor-patient etc more knowledge)
• Capacity to enter contract - minors
• A patient; mental incapacity

Question 2

What is misrepresentation?

Answer 2

A false statement of fact, made by one party before or at the time of the contract, which induces the other party to enter into the contract.

Question 3

Whats the impact if there is a contractual defect for a mistake, misrepresentation, duress and undue influence?

Answer 3

Mistake - VOID
Misrep - VOIDABLE
Duress - VOIDABLE
Undue - VOIDABLE

Question 4

Explain what valid, void and voidable mean

Answer 4

Valid - legally binding contract
Void = No contract exists or existed previously
Voidable = Contract exists, but IP can choose to affirm or avoid the contract.

Question 5

What are the different kinds of mistake and explain? and who can only render the contract void if they make the mistake

Answer 5

Only the operative can render a contract void.

• Common (quality of goods)
• Mutual - mistake as to subject matter of contract)
• Unilateral (identity of the other party)

Question 6

Types of misrepresentation and explain

Answer 6

Fraudulent - knowing knowing it was untrue, not believing it was true, or not caring if it was true;

Negligent - honestly believing it to be true, but without reasonable grounds for such a belief

Wholly innocent - honestly believing it to be true, with reasonable grounds for such a belief.

Question 7

Whats the burden of proof for the different types of misrepresentation?

Answer 7

Fraudulent - claimant must prove beyond reasonable doubt

Negligent - claimant must prove misrep was made and then defendant must back on the balance of probabilities that they had reasonable grounds to be lieve it to be true

If defendant succeeds then its wholly innocent misrep. if not negligent.

Question 8

Remedies for different types of Misrepresentation

Answer 8

FRAUD -
Damages under tort of deceit AND recission

NEGLIGENT -
Damages under tort of negligence or Misrep act AND recission

INNOCENT -
Recission or damages under misrep act.

Question 9

What do the law say about minors for validity of contract?

Answer 9

Most under 18 have capacity to establish most contracts BUT may be some situations where protection is needed and can be deemed voidable.

E.g. sale of shares, property.

Question 10

To identify a misrepresentation there must be:

Answer 10

i) A statement of material fact (not opinion) that induces the other party into the contract;
ii) A representation that was false;
iii) The innocent party believed the statement to be true; and
iv) The representation induced the party into the contract