Vitiating elements Flashcards

Question

Redgrave v Hurd (1881) 20 Ch D 1 | m/r (party induced into contract)

Answer 1

The Court of Appeal held in favour of the defendant. The claimant had made a material misrepresentation, so it was to be assumed that the defendant relied on it. The mere fact that the defendant had the means to discover the truth and failed to do so did not rebut this presumption. The defendant was therefore entitled to have the contract rescinded. To rebut this assumption, the party must show that the defendant actually knew of facts which made the statement untrue, or that his words or conduct made clear that he did not rely on the statement. ## Footnote A solicitor purchased into the partnership in the solicitors' firm. He was told the partnership had an income of £300 per year and was given the opportunity to look at the accounts. He declined the offer to check the accounts and took them at their word. In fact the income was only £200 per year.

Answer 2

party unaware of the mis-statement -_m/r => D was not deemed to be induced to enter into the contract by C’s fraudulent misrepresentation ## Footnote The claimant (C) delivered a defective gun to the defendant (D) which D would have rejected it had he examined the gun and discovered the defect C having sued D for the cost cost of the gun, D argued in defence that he was induced to accept the bill by the fraud of C

Answer 3

the party relied on their own judgement so recision denied => A misrepresentation is not actionable where its accuracy is independently verified by the representee, even if the verification did not discover the misrepresentation. ## Footnote D sold mines and steelworks to C. Prior to the sale, D made representations about the capabilities of the property and C agreed to purchase subject to verifying those statements. C’s agents verified that they were true, but they were later revealed to be false. C sought rescission of the contract.

Answer 4

Valuers owe potential mortgagors a duty of care to take reasonable steps to avoid causing economic loss, if they know or ought to have known that the mortgagor will rely on their report without seeking independent verification. T | no misrepresentee's duty to check info but if checking is reasonable yes ## Footnote In the first case, the claimant applied to a building society for a mortgage to purchase a house. The building society instructed the defendant surveyors to carry out an inspection and valuation of the property. The defendant’s employee noticed that the chimney breasts were removed. However, he failed to check whether this left the chimney with adequate support. Their report stated that the property did not need any essential repairs. The chimney later collapsed. The mortgage application form contained a clause disclaiming both the building society and the defendant’s liability for the accuracy of the valuation report. The building society advised the claimant that the report was not a structural survey and that she should seek independent advice. In the second case, the claimant applied for a mortgage from the first defendant, a local council. The first defendant provided a report on the state of the property, undertaken by the second defendant. It failed to note several structural problems which made the property unsaleable. The application form stated that the valuation was confidential and that the first defendant accepted no responsibility for the value or condition of the house based on the inspection report. They advised the claimant to get their own survey. Both claimants relied on the reports without seeking further inspections or advice. Both paid a fee to have the reports made. The claimants sued the defendants in negligence. The defendants relied on the disclaimer in the valuation report as excluding their liability. The claimants responded that the disclaimer did not exclude their liability. In the alternative, they argued that the disclaimer was void for unreasonableness under s.2 of the Unfair Contract Terms Act 1977.

Answer 5

M/R must actually induce the contract: 'real and substantial' ROLE for ENTERING INTO THE CONTRACT Males LJ sets out the legal test : "The relevant enquiry is whether the claimant would have entered into the contract if the representation had not been made at all, not whether it would have done so if it had been told the true position" [61] ## Footnote The Court of Appeal upheld the Commercial Court’s decision and dismissed the appeal. The Court of Appeal emphasized that in general, mere offer of contractual terms will not amount to any representation in the absence of words of representation. In the present case, the offer of guarantee in the charterparty should not of itself be held to involve an implied representation as to current or recent performance of the Vessel.

Answer 6

C is entitled to damages for not only the difference between the purchase and sale price, but also the liabilities he has incurred in running the business (all actual damage directly flowing from entering into the transaction induced by fraud, whether foreseeable or not) ## Footnote C had been D’s fraud to buy an ironmonger’s business for £9500 C later discovered the fraud and sued D for deceit but remained in business in the meantime After three years, he sold the business for £3,700 but incurred debts in running the business

Answer 7

D is not liable to C in negligence Although a duty of care can be owed for negligent misstatement, the disclaimer excluded any duty of care Duty of care for negligent misstatement arises where there is an assumption of responsibility, and loss is recoverable despite being pure economic loss ## Footnote C, an advertising agency, sought information on the creditworthiness of a potential client (E) from the client’s bank D D confirming the credit worthiness of E headed with the disclaimer “for your private use and without responsibility on the part of this bank or its officials” C entered into contracts with and lost $17,000 when E went into liquidation C sued D for negligence

Answer 8

Only rent and cost of repairs were to be restituted to C as indemnity for the misrepresentation. The loss of poultry, loss of profits and medical expenses were consequential losses that were not recoverable. => Indemnity for rescission only covers expenses that were obligated by the contract and benefited the other party. ## Footnote C entered into a lease of a farm by D’s innocent misrepresentation that the premises were sanitary and in good repair. However, the water was poisoned due to the state of the premises and led to the death of C’s poultry. C sought rescission of the contract. Issue arose as to which of the following expenses or losses incurred by C were recoverable under restitution from D: rent paid, cost of repairs carried out in compliance with a local authority order, and/or loss of poultry, loss of profits and medical expenses.

Answer 9

However, the bank was not held liable because when the playboy club called, they did not say who they were. ## Footnote = a gambler wants credit at the Playboy club. The club called the person’s bank ( under a fake identity) who said that it was ok. The bank had not taken care in ascertaining his finances.

Answer 10

The HoL : in Hedley byrne v Heller but rather the basis is assumption of responsibility rather than duty of care. In practice, the two may work out to the same “if a person assumes responsibility to another in respect of certain services, there is no reason why he should not be liable in damages for that other in respect of economic loss which flows from the negligent performance of those services.” [[1994] 3 W.L.R. 761 at 776] => D's were liable in negligence to Cs as they owed them a duty of care ## Footnote Cs, investors (known as “names”) in Lloyds Insurance Syndicates brought actions against Ds, the managing agents (underwriters) of the syndicates, for substantial losses

Answer 11

The court says no reasonable grounds = you should have relied on the documents of the vessel => high standard. ## Footnote Deadweight capacity of the ship. The seller relies on memory of Lloyds list, however the list is false (though it’s a reputable source of information).

Answer 12

=>high treshold to prove that reasonable reason to believe the representatio to be true in that case they successfully proved it

Answer 13

Court of Appeal held = m/r made by conduct (the defendant thought that they were signing a contract with the whole group when one one of their member was about to leave and the claimant knew it) ## Footnote On 9 March 1998, Halliwell informed the other members of the Spice Girls of her intention to withdraw from the group, yet the group signed an agreement with AWS on 24 March and again on 30 April, and participated in a commercial photo shoot on 4 May in Milan, eventually concluding a contract with AWS on 6 May 1998.

Answer 14

⇒ The Court of Appeal awarded damages of £3,625.24 for the difference between the amount paid by Royscot to Maidenhead (£6,400) and the amount paid by Rogerson to Royscot (£2,774.76). = damages under s2(1) Misrepresentation Act 1967 are the same as the tort of deceit and are not subject to foreseeability ## Footnote The defendant was a car-dealer. They agreed to sell a car on hire-purchase terms to a customer. They contracted with the claimant, a finance company, to finance the deal. However, they overstated the value of the car and the deposit payable by the customer. If they had told the claimant the real figures, the claimant would not have agreed to finance the deal. The customer dishonestly sold the car to a third-party and stopped paying the hire-purchase fees. The claimant sued the defendant for damages under the [Misrepresentation Act 1967](https://www.legislation.gov.uk/ukpga/1967/7), alleging negligent [misrepresentation](https://ipsaloquitur.com/contract-law/misrepresentation/). A dispute arose as to how damages should be assessed.

Answer 15

= court held that C was barred from rescinding the contract => If a contractual party is aware of the facts that created the right to rescind and yet still chooses to continue the contract, this constitutes affirmation and bars the party from rescission. ## Footnote The claimant (C) bought a lorry which the defendant seller (D) represented was in ‘exceptional condition’, of a certain speed and fuel consumption. However, the lorry had multiple defects but after being aware of it the plaintiff kept on enforcing the contract, ultimately , the lorry broke down ⇒ C sued D for rescission of the contract on the grounds of innocent misrepresentation

Answer 16

the duty of good faith was implied and vreached by ITC =⇒ the english courts recognise an implied duty of contract (assessed objectively) when it comes to certain contract terms; ## Footnote - Claimant Yam Seng PTE Ltd ("Yam Seng") is a company based in Singapore that entered into a distribution agreement with Defendant International Trade Corporation Ltd ("ITC"), a company based in England. - The distribution agreement was for ITC to distribute Yam Seng's products in specified territories in the Middle East, Asia, Africa, and Australasia. The agreement included clauses relating to mutual trust and good faith, as well as provisions for the termination of the agreement. - Yam Seng sued ITC for breach of contract, including late deliveries, refusal to make agreed products available, and generally failing to perform the contract in good faith. - Yam Seng claimed that ITC had breached the implied duty of good faith and that the parties had intended this duty to be part of their contract.

Answer 17

Damages for loss of the chance to purchase an alternative company (make profit somewhere else), if caused by a defendant's fraudulent misrepresentation and a claimant's reliance on it, were recoverable in an action for deceit, and the foreseeability of such a head of loss was irrelevant. ## Footnote The defendants sold the entire issued share capital of E Ltd, a company which they owned and managed, to the claimant company. The claimant brought proceedings against the defendants for deceit arising out of their alleged knowledge of the falsity of a number of express representations contained in the sale agreement on which it had allegedly relied. The claimant sought, inter alia, damages for loss of the chance to earn income and capital profits from T Ltd which, the claimant submitted, it would have purchased had it not been induced by the defendants' fraudulent misrepresentations to buy E Ltd.

Answer 18

D’s statements did not amount to misrepresentation and thus C is not entitled to rescind Even if misrepresentation had been found, it would not have been equitable for the contract to be rescinded, damages in lieu would be granted => Damages in lieu under 2(2) Misrepresentation Act 1967 (‘MA 1967’) should be calculated on a contractual basis The discretion to award damages in lieu under s2(2) MA 1967 should have regard to the relative importance of the misrepresentation to the transaction ## Footnote C agreed to purchase land for development from the Country Council (D) at £5m D represented that they were not aware of any easements over the land After the sale had been completed, a private sewer was found under the site The value of the property also fell drastically to around £2m due to market conditions unrelated to the private sewer C sought rescission for misrepresentation

Answer 19

recission of contract awarded => The delay was not sufficient to bar rescission either. The claimant did not become aware that there was a problem for a significant amount of time, and so could not have sued earlier. Additionally, part of the delay was due to the defendant refusing to engage with the claimant and the normal litigation process. Therefore, the contract was rescinded. This Case is Authority For… Rescission is available for misrepresentation so long as ‘practical justice’ can be done. Restitutio in integrum only becomes impossible if the contract’s subject matter ‘been consumed or changed in some important way’ or there has been an interposition of third-party rights. Delay is not, on its own, a bar to rescission. Roth LJ explained that delay only bars rescission if there is a ‘lapse of a reasonable time such that it would be inequitable in all the circumstances to grant rescission’. He described this as ‘in essence the principle of laches’. This generally requires the claimant’s conduct to amount to a waiver of their right to rescind. Other The power under s.2(2) of the Misrepresentation Act 1967 to grant damages in lieu of rescission only arises if rescission is possible. This means that if the power to rescind has been lost (for example, due to delay), the court has no power to award damages in lieu. ## Footnote The defendant was a car dealer who sold the claimant a car. He wrongly told the claimant that the car was ‘brand new’ when it was not. After a year, the car exhibited defects and the claimant tried to get a refund. The defendant refused. The claimant sued to have the contract rescinded for misrepresentation. The defendant responded that any claim for rescission was barred due to the claimant’s delay. They also argued that it was not possible to put the parties back in their original position (restitutio in integrum). This was because the car had been sold unregistered, and the claimant had since registered it. As such, the claimant could not return an unregistered car to the defendant.

Answer 20

Rescission is barred where the subject matter of the contract is sold to third-party bona fide purchaser without notice of the misrepresentation, before any intention to rescind is communicated to representor However, it is possible to rescind without communication to the representor where such communication is impossible => There was valid rescission before sale to a bona fide purchaser without notice It was held that the police report was enough to rescind the contract so D got no title to the car ## Footnote C owner of a Jaguar was induced by fraud to sell it to a rogue who absconded and could not be traced Once the cheque was rejected C immediately notified the police and asked them for help in recovering the car The fraudulent buyer then sold to a buyer, and it was exchanged through sale until reaching the hands of D (C & U)

Answer 21

=> you can recover damages for m/r and rescind the contract but not to the extent that you receive double indemnity. Held, (1) that the plaintiff, having obtained judgment both in contract for misrepresentation and in deceit, could recover damages in deceit, which would include repayment of the purchase price of the shares; that the measure of such damages was all expenditure reasonably and properly incurred in consequence of and flowing directly from the deceit, whether before or after the date of the rescission of the agreements ## Footnote The defendant induced the plaintiff, by means of fraudulent representations, to conclude two agreements by which the defendant purported to sell all the shares in a company to the plaintiff, who took out two loans in order to pay for them. The plaintiff also concluded a service agreement with the company under which he was to be its managing director. The defendant had in fact owned no shares in the company, and as a result of his frauds the plaintiff became unemployed and heavily in debt, and was deeply upset. The defendant was convicted of two offences in respect of the frauds and imprisoned. The plaintiff brought an action claiming, inter alia, rescission of the agreements with the defendant, repayment of the purchase price, damages for deceit or, alternatively, breach of contract, exemplary damages for deceit, and aggravated damages in respect of his injured feelings. The defendant's defence was struck out and the plaintiff entered judgment against him. defendant conceded that the plaintiff was entitled to rescission and repayment of the purchase price but contended that he was not entitled to any damages. On the questions whether the plaintiff could recover damages in deceit, what the true measure of such damages was, and whether exemplary damages or aggravated damages for injured feelings could be awarded on a claim in deceit:-

Answer 22

The claim based on misrepresentation was successful however, since it was an innocent misrepresentation, the claimant had lost the right to rescind the contract through lapse of time. With innocent misrep the time starts to run from the date of the contract not the date of discovery. The claim based on mistake was unsuccessful as the mistake related to the quality and did not render the subject matter something essentially different from that which it was believed to be. He believed he was buying a painting and he got a painting. ## Footnote The claimant purchased a painting from the defendant. Both parties believed that the painting was by the artist Constable. In fact 5 years later the claimant discovered the painting was not a Constable. The claimant brought an action based both on misrepresentation and mistake.

Answer 23

cannot affirm contract if unaware of right to rescind ## Footnote The defendant entered an agreement for the assignment of the lease of a restaurant to him. In order to obtain the landlord’s consent, the defendant’s agent agreed to impersonate the defendant at an interview with the landlord. Subsequently, the defendant entered into an agreement with the plaintiff for the assignment of the lease. The plaintiff paid the defendant under the contract and occupied the restaurant as manager. A month later, the plaintiff was informed of his right to rescind the contract because the defendant's actions made his title defective

Answer 24

At the HoL held (3:2) that the contracts are good. => Not void under mistake as to the quality of the SM as it was not sufficiently fundamental to not render the severance agreements void. ## Footnote *‘If mistake operates at all it operates so as to negative or in some cases to nullify consent. The parties may be mistaken in the identity of the contracting parties, or in the existence of the subject-matter of the contract at the date of the contract, or in the quality of the subject-matter of the contract. These mistakes may be by one party, or by both, and the legal effect may depend upon the class of mistake above mentioned.’ [per Lord Atkin]* Lever bros is a “soap empire” : He is approach by a company in West Africa (Niger Company) that sells palm oil. He buys the company but the NC was bankrupt. Bell & Snelling have a contract of employement with Lever brothers. The owner dies, Lever now managed by Francis Darcy Cooper. B& S are secretly bidding against the company in the cocoa trade => breach of their contract of employment in the way that they could be fired(terminable at LB’s option) but LB does not know about the secret trade . B and S get termination contracts, (subject matter = employment contract + quality of the subject matter =these contracts can be terminated at LB’s option) It’s pled that there was a mistake of payment . The jury finds that the contracts are void as to the quality of the subject matter(upheld at the court of appeal). ****

Answer 25

Where parties contract face-to-face, and one party assumes the identity of the other person, the court must consider to whom the offer is addressed. This is determined by reference to who the promisee ought to have interpreted the offer. In this case, the offer was made at the businessman. NB: This case seems to conflict with Philips v Brooks (1919) and Lewis and Averay (1972) **BUT** At the beginning of negotiations, identity of buyer was of no importance, C were content with selling to any purchaser But they accepted cheque on the basis that he was an affluent individual | in favor of the claimant => void for mistake ## Footnote The claimants owned a car, which they sold to a rogue. When the rogue attempted to pay by cheque, they informed him that they would only accept payment by cash. To reassure them, the rogue pretended to be a reputable businessman living at a particular address. The claimants checked, and a businessman by the same name did live at that address. The claimants agreed to accept payment by cheque. As expected the cheque was invalid and the rogue sold the car to a third party. The claimants were treated as having made the offer to the real businessman, not to the rogue. Since the rogue was incapable of accepting the offer on the businessman’s behalf, there was no contract due to the mistake. + Delvin LJ dissenting : the innocent parties should share the loss

Answer 26

Where parties contract face to face, the courts will normally presume that they intend to contract with each other (so not void for unilateral mistake) – regardless of whether each party is telling the truth about their identity. | the contract voidable for fraud + not be rescinded (bona fide buyer) ## Footnote - A rogue pretended to be Sir George Bullough, a rich and famous playboy. - The rogue bought a ring from C’s store, C allowed him to take the ring before the cheque cleared. - The rogue later sold the ring to D, a bona fide purchaser who had no notice of the fraud. - Upon discovering the fraud when the cheque was declined, C sued D in tort for conversion.

Answer 27

A contract can only be void for mistake if one party is mistaken as to a **fundamental** term of the contract. When parties contract face-to-face, they are presumed to intend to contract with that physical individual. NB: Lord Denning and Megaw LJ disapproved of the decision in Ingram v Little [1961] 1 QB 31. The facts of Ingram, Lord Denning argued, are impossible to distinguish from the similar case of Phillips v Brooks Ltd [1919] 2 KB 243, where the court reached the opposite conclusion. ## Footnote A third-party rogue pretended to be a famous actor to get Lewis (C) to accept payment by cheque for a car Having obtained the car, the rogue pretended to be C and sold car to Averay (D) When the cheque was declined, C discovered the fraud and sued D for the tort of conversion

Answer 28

Unilateral mistake as to identity renders the contract void when the contract is made in writing | in favour of the claimant => contract void ## Footnote A third-party rogue (Alfred Blenkarn) pretended to write from a reputable firm. (Blenkiron Co.) and purchased handkerchiefs by mail from C. The invoice from C was addressed to Blenkiron Co. not Alfred Blenkarn. The rogue then sold some handkerchiefs to D. C brought a claim against D for tort of conversion.

Answer 29

underscores that the mistake of identity must go to the root of the contract and be of such significance that it affects the identity of the contracting party with whom the innocent party intended to contract + affirms the difference between contracts in writing and oral | The contract was void for mistake ## Footnote a fraudster who presented himself to be “Mr. Patel " used stolen personal information to pose as a legitimate customer and applied for financing to purchase a car from Shogun Finance. Shogun Finance, unaware of the fraudulent scheme and believing the fraudster, carried out the transaction and provided financing for the car purchase. Later, when the true identity of the parties was revealed, it became evident that “Mr. Patel” had committed a fraud by impersonation to obtain the financing. Mr. Hudson, as an innocent third party who purchased the car from the fraudster, sought protection under the innocent third party rule, arguing that he acquired the rights to the car in good faith and without any knowledge of the fraudulent scheme. = The HoL that “section 27 of the Hire Purchase Act 1964 did not avail Mr Hudson because the crook was not the hirer named in the written hire-purchase agreement and therefore he was not the debtor under the agreement.” [17]

Answer 30

Held : Because NOS didn't protest then at the time of the contract and the potential ED is irrelevant => there is a binding contract ## Footnote The claimant was a shipbuilding company. They contracted to build a ship for the defendant for a fixed price in USD payable in instalments. They opened a letter of credit as security to refund the payments should they default on the contract. After the first payment, the USD devalued by 10%. The claimant insisted that the defendant pay an additional 10% on the remaining instalments. The defendant refused, but when they paid the second and third instalments without a 10% uplift, the claimant refunded the money. The defendant suggested that the parties enter arbitration to resolve the dispute, but the claimant refused. The claimant continued to insist on the additional 10%, threatening to terminate the contract. By this time, the defendant was negotiating a lucrative contract for the charter of the ship. They told the claimant that though they did not consider themselves obliged to pay the extra 10%, they would do so ‘without prejudice’ if the claimant agreed to increase the amount available under the letter of credit. The claimant agreed. Issue(s) Eight months later, after the ship was built, delivered and the payments made, the parties entered arbitration. The claimant sought the return of the additional 10% they paid on two grounds. That the defendant had not provided consideration for the agreement; That the contract was voidable for economic duress.

Answer 31

To raise the presumption of undue influence, it must be proven that there is 1. a relationship of trust and confidence and 2. a transaction which calls for an explanation (new crieria added) The bank is placed on inquiry where: In any kind of non-commercial transaction, a creditor is put to an inquiry: 1) the transaction is on its face not to the financial advantage of the wife; and (2) there is a substantial risk in transactions of that kind that, in having the wife agree to act as a surety, the husband has committed a legal or equitable wrong that entitles the wife to set aside the transaction. + the steps to rebut a presumption of UI ## Footnote The UKSC had to determine eight appeal court cases where homeowners had mortgaged their houses to secure loans contracted by husbands for their respective businesses in which the wives had no direct benefit. The businesses failed and the bank wanted to repossess their houses. The wives claimed undue influence; This case departs from the decision in Barclays and O’Brien where Lord brown Wilkinson held that a relationship of trust and confidence is enough raise presumed UI on its own. Here, Lord Nichools ⇒ a relationship of trust and confidence alone is not enough (there must also be a transaction that calls for explanation).

Answer 32

Held ( leading judgement by Eric Sachs): the charge is to be set aside under UI (normal application : father and bank ⇒ fiduciary care “a relationship under which the complainant generally reposed trust and confidence in the wrongdoer, the existence of such relationship raises the presumption of undue influence” Lord Denning LJ suggests a broad approach which reunites ui, duress and unconscionability ⇒ inequality of bargaining power. Later rejected by the HoL in National Westminster Bank plc v Morgan [1985] AC 686, 707-708 => Lord Scarman : However, this broad umbrella does not exist in English Law. No relief for inequality of bargaining power: in some instances protection offered by statutes. e.g. Consumer Credit act 1974; Consumer Rights Act 2015: relief for strict inequality of bargaining power: ## Footnote A son to an elderly man (C) is creating a company. the son’s company wants to secure an overdraft ( but tbh it’s at the brink of bankruptcy) and C agrees to give the bank (D) charge over his house (sole asset). C recieves advice from an employee of the bank (H) + C had long-term relationship with the bank. **C placed trust and confidence in bank manager for financial advice.** Conflict of interest between the father and the bank.

Answer 33

To establish an unconscionable bargain, not only must the transaction be unfair, it must have been procured by morally reprehensible conduct Held: The lease was set aside for unconscionable bargain ## Footnote An elderly woman (C)’s affairs were managed by her cousin D, knowing that the cousin was away, invited C to a tea party where she flattered C and gave her a ride to the solicitor where C agreed to lease premises to B for less than 1/6 of the market value for ten years C entered into the transaction despite the solicitor’s advice against it

Answer 34

C claim failed; the charge was avoided against D The severe disadvantage of the transaction to D that C cannot be deemed to take reasonable steps to be discharged of constructive notice Where a transaction is excessively onerous, the third party has to take steps beyond what was laid out in Barclays v O’Brien to avoid being fixed with constructive notice of undue influence The relationship of employer and a junior employee (especially in a small company) is likely to give rise to a relationship of trust and confidence, which can be inferred where there is a particularly onerous transaction ## Footnote Burch (D), a 20-year-old employee, had a close relationship with the owner of the company, Mr Pelosi, she worked at and his family Pelosi persuaded her to offer her flat as security for the company’s debt The bank, Credit Lyonnais (C), wrote to D twice to advise her of the unlimited nature of the mortgage, whether it was what was agreed and advised her to seek independent advice Pelosi dictated to D on what she should reply, and D was not aware of the extent of the company’s debt nor did she obtain independent legal advice When C issued proceedings for possession, D argued that the mortgage was set aside for undue influence

Answer 35

m/r by active concealement

Answer 36

The court held that there were reasonable grounds because the party making the m/r relied on info from the club responsible officer.

Answer 37

There is an equitable discretion in cases of substantial restitution to order rescission while allowing for a financial adjustment to take account of inability to make full restitution: ## Footnote D sold an island for phosphate mining to C for £110,000, but failed to disclose that they bought it just days before for 55K in breach of their fiduciary duty. C sought rescission of the contract.

Answer 38

= example of cross purposes: one party intends ship 1 and the other party intends ship 2) ⇒ contract is **void** bc parties at cross purposes ## Footnote Raffles = established cotton dealer in Liverpool wants to sell the cotton to Wichelhaus coming on the ship Peerless Bombay. In this case, they were two ships Peerless, but they came at different times (October and Different)

Answer 39

the plaintiff was awarded damages for breach of contract. => the court held that when one party is responsible for a mistake they cannot rely on the mistake (it would probably fit under the modern M/R Act s2(1)) = the contract is good ## Footnote at the end of WWII, the CDC sells McRae the right to salvage a tanker at a specific place. But this place does not exist and the tanker did not exist. CDC argues that the contract is void

Answer 40

=> void for mistake as essential/fundamental to contract ## Footnote both partes thought that a crop of land could produce sisal

Answer 41

= **void at common law : you can pay the lease of sthg you own** The HoL held the contract was voidable and set aside for common mistake. (however, the current law is that common mistake renders the contract void) ## Footnote - Cooper mistakenly rented a fishery from his cousins, believing them to have inherited the fishery from his uncle. - In actual fact, his uncle only had a life tenancy of the fishery (a now defunct ownership interest lasting for one’s lifetime) while he held the residual interest, and thus Cooper inherited the fishery after the uncle’s death. - Cooper sought to have the contract set aside for mistake.

Answer 42

The commercial reason for this agreement does not exist => void for mistake as to the possibility of the performance ( commercial impossibility) ## Footnote Coronation of King Edward VII – one party rented to another a room to view the coronation. However, there was no coronation on this day because it was canceled.

Answer 43

Steyn J at the High Court : this contract (A and Credit) is void as to the quality of the subject matter (contract of A & B). Quality of the contract of A&B = the existence of the machines = Common mistake + Fundamental – 2nd contract essentially different ## Footnote contract between A and B for the sale and lease of machines. B owns machine and would pay a monthly rent to lease the machines from A (=tax advantage). A Wanted a guarantee and contracted at Crédit du Nord : in exchange for money, they guarantee that B can pay. Except B never had the machines.

Answer 44

⇒ held: C’s claim succeeded as there was no common mistake as to quality of the SM Lord Phillips added to Lord Atkin’s criteria (in Bell and Lever Brother: common + existence quality: renders fundamentally different) and a mistake is only operative => thus almost never a mistake as to the quality of the SM ## Footnote A vessel began to sink. The owner contacts T to salvage the vessel. They are mistaken as to what is the nearest vessel to the vessel. - GPS chartered The Great Peace that was supposedly 35 miles away, but was actually 410 miles away - D contracted with a nearer vessel and cancelled the charter with C - The charter provided that D have to pay compensation in the event of cancellation, but D refused to pay - C made claim for cancellation fee, D argues that contract was void under common law or voidable under equity for common mistake T raises as defence a mistake as to the quality of the subject matter: which vessel is closer.

Answer 45

=> a retrial was ordered Hannen LJ p.610: **sets out the test for when you have a mistake as to the promise** - The buyer has to be mistaken as to the promise of the seller (here : age of the oats) - The seller knows of the buyer’s mistake as to his promise ## Footnote armer comes to a racehorse owner to make a offer to sell oats by showing a sample. The racehorse owner concludes that these are old oats by looking at them and considering the price (only food acceptable for horses). However, when delivery, he realises these are new oats. The farmer sues for the payment of oats. Trial judge directed the jury to rule that the seller is liable if he knew that teh farmer wanted old oats rather than new oats

Answer 46

A contract is void if there is a unilateral mistake as to a term in the contract and the other party knows or ought to known of the mistake ## Footnote Facts - D sold 30,000 Argentine hare skins to C, by mistake offering them at a price per pound instead of at a price per piece - When D refused to deliver the goods, C brought claim for breach of contract

Answer 47

Where parties contract at a distance, a person who lies about their identity by inventing a wholly fictitious identity is not lying about any fundamental term of the contract. Such a person is merely lying about their attributes, so the contract cannot be void for mistake. => contract not void for mistake, merely voidable for m/r = the mistake as to identity must be material (real identity) ## Footnote A rogue ordered goods from King’s Norton Metal. When placing the order, he convinced King’s Norton Metal that he was a wealthy businessman associated with ‘Hallum & Co’. In fact, there was no such company. The rogue then took possession of the goods on credit, sold them to Edridge Merrett and vanished. King’s Norton Metal sued Edridge Merrett for the return of the goods under the tort of conversion. To establish this, they had to show that their contract with the rogue was void for unilateral mistake. If it is was merely voidable for misrepresentation, then property would have passed to the rogue, who would have passed that property to the claimant before the contract could be voided.

Answer 48

The contract is voidable for fraud => Presumption arises when you see them face to face that you intend to deal with that person. The contract is then voidable for fraud and not void for mistake. ## Footnote he is selling jewelry. A man (rogue) comes in pretending to buy a ring by cheque pretending to be a Lord.

Answer 49

The lease was voidable and set aside => Denning LJ sought to lay down an equitable doctrine of mistake, under which contracts would be voidable and not void in this case | equitable doctrine of mistake rejected by the courts in GPS v Tsavliris ## Footnote The landlord (D) purported to increase rent from £140 to £250. However, the parties had not abided by the legally required procedure to vary rent under the Rent Acts, as such the actual rent payable by the tenant (C) was fixed at £140 under the law. C sued D for restitution of overpaid rent. D made a counterclaim for rescission of the lease on the ground of common mistake so as to avoid paying restitution for rent that was already paid.

Answer 50

The Court held in favour of the defendant. Though the parties were subjectively mistaken as to the nature of ‘feveroles’ and ‘horsebeans’, their objective conduct indicated only an intention to contract for ‘horsebeans’. As such, the claimant was not entitled to rectification. This Case is Authority For… Rectification is only available where there is clear proof that the written agreement does not correspond to the contract the parties entered into. It cannot make a new contract. The courts must examine their objective evidence – the subjective beliefs of the parties are not relevant. ## Footnote The claimants received a third-party order for ‘Moroccan horsebeans described in Egypt as feveroles’. A feverole is a specific type of horsebean. The claimant’s agent did not know what a feverole was, so they asked one of the defendant’s agents. The defendant’s agent responded that they were normal horsebeans and that the defendant could supply them. On this basis, the claimant contracted to purchase ‘horsebeans’ from the defendant. In fact, the beans supplied were not feveroles. The claimant sought damages for breach of contract. To achieve this, they applied to the court to rectify the contract to add the word ‘feveroles’ after the word ‘horsebeans’. They argued that there had been a mutual mistake, such that the written contract did not reflect the parties’ true intentions.

Answer 51

need to establish a duty of care to receive damages. ## Footnote ‘The foundation for liability for negligent misstatements demonstrates that where the terms on which someone is prepared to give advice or make a statement negatives any assumption of responsibility, no duty of care will be owed. Although there might be cases where the law would impose a duty by virtue of a particular state of facts despite an attempt not “to assume responsibility”, the relationship between GSI either as arranger or as vendor would not be one of them.’ ([28] per Waller LJ)

Answer 52

for negliegent m/r : differentiate advice and information. (info no liab ## Footnote Lords might have said of the 'advice' cases that the client was entitled to the losses flowing from the transaction if they were not just attributable to risks within the scope of the adviser's duty but to risks which had been negligently assessed by the adviser. If the adviser has a duty to protect his client (so far as due care can do it) against the full range of risks associated with a potential transaction, the client will not have retained responsibility for any of them. The adviser's responsibility extends to the decision. [41] “By comparison, in the 'information' category, a professional adviser contributes a limited part of the material on which his client will rely in deciding whether to enter into a prospective transaction, but the process of identifying the other relevant considerations and the overall assessment of the commercial merits of the transaction are exclusively matters for the client . . . In such a case . . . the defendant's legal responsibility does not extend to the decision itself. It follows that even if the material which the defendant supplied is known to be critical to the decision to enter into the transaction, he is liable only for the financial consequences of its being wrong and not for the financial consequences of the claimant entering into the transaction so far as these are greater.

Answer 53

GR : Entire agreement clauses generally do not exclude liability for prior misrepresentations s 2(3) of the M/R Act 1967 ## Footnote D (AXA) had committed fraudulent misrepresentation against Cs. Clause 24 of AXA’s contract with Cs states: “This Agreement…herein constitute the entire agreement…this Agreement shall supersede any prior promises, agreements, representations, undertakings or implications whether made orally or in writing” (an “entire agreement clause”) Issue arose as to whether clause 24 excludes liability for misrepresentation

Answer 54

Exception : case where the exclusion of liability for m/r clause was deemed effective.

Answer 55

The Supreme Court held that the trial judge was entitled to find as a matter of fact that Z was induced to enter into the settlement agreement by H’s misrepresentations, although it did not believe them and had carried out its own investigations

Answer 56

in FSHC Group Holdings Ltd v GLAS Trust Corp Ltd => Overruling/refining Chartbrook, the test for rectification of a common mistake is objective where rectification is based on a prior contract but subjective where it is based on a common continuing intention.

Answer 57

The court held that the contract was void because the subject matter of the contract did not exist at the time the contract was made ## Footnote A cargo of corn was in transit being shipped from the Mediterranean to England. The owner of the cargo sold the corn to a buyer in London. The cargo had however, perished and been disposed of before the contract was made. The seller sought to enforce payment for the goods on the grounds that the purchaser had attained title to the goods and therefore bore the risk of the goods being damaged, lost or stolen.

Answer 58

A transaction with a third party can be avoided if the third party has actual or constructive notice of undue influence (or if the person exerting undue influence is an agent of C - unlikely) + the division between de facto and legal relationships in influence acepted by the HoL ( class 2a and 2b) + detailed the steps to be taken into account to rebut constructive notice ( fac to face personal meeting + urge to take independant legal advice) ## Footnote A husband persuaded his wife (D) to mortgage their matrimonial home to Barclays (C) so as to secure an overdraft for his business The husband misrepresented the true extent of liability under the overdraft The branch executing the mortgage had received but ignored instructions to ensure that the wife was aware of the risk and to advise her to consult a solicitor When the husband defaulted, C sought to enforce the mortgage D claimed that the mortgage was avoided against her due to misrepresentation from her husband

Answer 59

A tort of deceit is proven where a false representation is made knowingly, without belief in its truth or recklessly, careless whether as to whether it is true or false. ## Footnote A company’s prospectus stated that its tramways had the right to use steam power when it did not due to a lack of consent from the Board of Trade. C bought shares relying on the prospectus. The company was wound up and its directors (Ds) were sued for damages in the tort of deceit.

Answer 60

there had been no UI, the contract was upheld ## Footnote D and her husband bought a house on a mortgage from a building society When the mortgage payment fell into arrears, the husband asked the bank (C) to refinance the loan The bank manager obtained D’s signature for a legal charge on their on the house When the husband defaulted on the loan, C sought possession of the house D argued undue influence in defence

Answer 61

it was held that duress needed to be a ‘but for’ cause of entering into the contract.

Answer 62

actual & presumed UI divide acknowledged

Answer 63

Duress needs to be a but for cause of entering the contract

Answer 64

breaches of contract are likely to amount to illegitimate pressure

Answer 65

third-party duress requires actual or constructive notice

Answer 66

the seller had not done any m/r so not buyer not entitled to resisit order of SP ## Footnote A seller sold property in a sale-room under the description: ‘All that inn with the brewhouse, outbuildings, and premises ... situate at N., NOS. 454 and 455 on the tithe map, and containing by admeasurement twenty perches more or less.’ The sale-room also provided plans of the property. At the back of the land were unfenced gardens which were not part of the sale. The buyer was acquainted with the land but did not realise that the gardens were not part of the sale. They did not look at the plans.

Answer 67

Court refused non est factum because what she believed to occur was not much different from the reality of what happened (e.g. here she was relinquishing her right of ownership of the property) ## Footnote Case involved a 78 year old widow. She wanted to help her nephew financially raise money. The nephew was going through a divorce and got a friend to help with the transaction. The widow wanted to let her nephew live at the house rent free for life. A document was drawn up to give effect to the agreement and she signed it without reading it because she did not have her reading glasses. She said that there was non est factum

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