Vitiating factors Flashcards
3 types of pre-contract statement
- sales puff
- contract term
- representation
What is a misrepresentation?
An untrue statement of fact made by one party to the contract to the other, inducing the other to enter the contract
3 types of misrepresentation
Fraudulent, negligent and innocent
Consequences of innocent misrepresentation
No damages available
Can rescind, unless rescission barred
What are the 4 bars to rescission?
- C affirmed the contract,
- undue delay,
- innocent B acquired interest in the contract subject matter before purported rescission,
- impossible to substantially restore the goods
What are the 3 vitiating factors?
Misrepresentation
Duress
Undue influence
What is the consequence of a vitiating factor arising?
The contract is voidable (rescission available, unless barred)
Test for economic duress
- creates a compulsion/lack of practical choice for C,
- is illegitimate, and
- is a significant cause for C entering the contract
For which vitiating factors are damages NOT available?
Innocent misrepresentation, duress, or undue influence
2 ways in which undue influence can arise
- actual (shown on facts)
- presumed
When is undue influence presumed?
- relationship of trust and confidence (irrebutably presumed, or proven), and
- transaction that calls for an explanation
When is a security agreement voidable?
When the creditor has actual OR constructive knowledge of undue influence
When does the creditor have constructive knowledge of undue influence?
- creditor should’ve been put “on inquiry”, and
- creditor didn’t take reasonable steps to ensure the surety was aware of implications (eg. independent solicitor)
What are the 3 types of mistake?
- common mistake
- cross-purpose mistake
- unilateral mistake
What is a cross purpose mistake?
When it’s impossible to resolve ambiguity over what was agreed
What may a unilateral mistake be made as to, and what may it not be made as to?
May be: person’s identity
May not be: person’s attributes
What is the consequence of any type of mistake?
The contract is void (there was never a contract- so, seller still owns the goods, no matter what)
When will a contract be void for illegality?
If it’s formation/purpose/performance involves committing a legal wrong
When are restraints of trade clauses enforceable?
If it’s in legitimate business interest, and
The restraint is reasonable (in duration and area)
When does a common mistake arise?
- neither party is at fault,
- contract makes no express provision on the matter,
- the mistake is fundamental (performance is impossible/radically different)
