Week 3 - genuine consent ch 4 Flashcards
Defects include:
Mistake misrepresentation duress undue influence undue conduct
Types of mistakes
common:
parties make the same mistake (e.g. believe car is in existence but has been burnt) contract is VOID
Mutual:
Parties are both mistaken, but their mistakes are not the same - this type of mistake does not necessarily invalidate the contract (e.g selling a jeep one thinks a tiger the other thinks the car) - contract is VALID
Unilateral:
only one party makes a mistake, and must be known to the other party who takes advantage of it.
In Taylor v Johnson (1983) 151 CLR 422, a woman who made an error as to the price per acre of land should be entitled to rescind a contract on the basis that the other party knew of her error and set out to ensure she did not become aware of her error.
how is misrepresentation different to mistakes?
This differs from mistake because one of the parties has been motivated to agree by an inducement or statement of fact which is untrue.
3 types of Misrepresentation
- ) innocent / misleading conduct
- ) Fraudulent
- ) Negligent
explain fraudulent misrepresentation / conduct
When it is shown that false representation has been made knowingly about the truth
Fraudulent misrepresentations which may be actionable, require the presence of six key elements:
the representation must be one of fact (THERE MUST BE A STATEMENT OF FACT not opinion)
the representation must be untrue;
the party making it must KNOWN TO BE false, not believe it is true or not care;
the party making the representation must intend it be acted upon;
it must be so acted upon; and
damage must result.
REMEDEY = RECESSION + DAMAGES
Explain Innocent Misrepresentation / conduct
This is an incorrect statement made without intention to mislead or deceive - made without realisation of truth,
REMEDY = no damages, recession possible
Explain Negligent Misrepresentation / conduct
Negligent information advice
typically surrounding a ‘special relationship’ e.g. teacher student
Information sought for serious purpose
reasonable reliance
REMEDY = DAMAGES IN TORT FOR NEGLIGENCE
RECESSION POSSIBLE
Explain misrepresentation under the ACL
Duress = is actual or threatened VIOLENCE to a person and/or their family, etc to pressure or exert a person to enter a contract. Contracts made as a result of duress may be voidable in favour of the injured party.
can be personal, goods or economic
Undue influence = involves the improper use of a position of POWER over another person so that the person so influenced has not exercised her or his free will to enter the contract.
where ‘special relationships exist indie influence is presumed
Unconscionable contracts = one party is at great disadvantage
special disability; age, poverty, need, language etc
types of undue influence
actual undue influence
or
presumed undue influence - trust based between a special relationship
Pam entered into an agreement with Denise for the purchase of an antique desk for $400. Pam believed that it was one previously owned by King Ferdinand and thought she was getting a bargain. Denise had made no representations as to the previous history of the desk. Pam later found that it was not owned by the king and wished to return it to Denise. Denise refused. What are Pam’s rights in this matter?
Would there be any difference if Denise was an antique dealer and had a sign on the desk: ‘Owned by the great King Ferdinand’?
Valid contract. No issue of misrepresentation. It is generally difficult to have a contract set aside for a mistake. (Leaf v Int’l Galeries) Caveat emptor applies. Pam is unilaterally mistaken about the previous owner, but she will be bound unless Denise knows of the mistake.
If Denise is an antique dealer and the sign said it was Owned by King Ferdinand then the contract may be vitiated by mistake because it is a term of the contract. (Taylor v Johnson) Further it may be a misrepresentation.
Walter owns and operates a small factory manufacturing plastic piping. He has entered into a contract dated 10 March, to supply Kal Corp Ltd with 200,000 meters of piping for $280,000. Kal Corp is by far the largest user of piping in Walter’s area and he regularly supplies over half his output to that company. However, Kal Corp refused to pay Walter under their contract of 10 March unless he agreed to supply a further 200,000 meters of piping for $1. Walter agreed to do this in order to secure prompt payment of the contract price which was essential to the continuation of his business. Advise Walte
The issue is whether Walter has been pressured to enter the second contract under duress or undue influence (these may overlap where a dominant party exerts pressure on a lesser party).
This may amount to economic duress which is the illegal pressure applied by one party on another to enter a contract which they otherwise would not. There is no presumed undue influence but there may be actual or express undue influence.
Duress or undue influence will make the contract voidable which will allow Walter to reject the contract and/or claim damages. You may also consider unconscionable conduct.
Diego Marrow is in disgrace. He has played for Argentina in the World Cup in 1992 but used steroids and tested positive. He had to leave his beloved country and come to Melbourne. Once here, he signed a contract with Roobok to work as a salesman and endorse their products. Roobok are local manufacturers who sell in the Melbourne area only. He signed a contract which said: On leaving the employment of Roobok Pty Ltd, I covenant not to work or endorse the products of another sporting goods manufacturer in Australia for two years.
After he is rehabilitated Diego decides to leave Roobok and work for Nokee a well-known national sporting goods manufacturer and he agrees to endorse their new range. Advise Roobok whether it can enforce the restraint.
The issue is whether this is a valid restraint of trade. Restraints of trade will prima facie make a contract void for public policy reasons however the courts will make exception if the restraint is reasonable to protect the interest of the party relying on it.
According to Pearson v HRX a restraint can be as long as two years to prevent competition from gaining an advantage. Birdanco v Money also supports the position. Despite this these cases can be distinguished from the facts because they both involved specific issues (namely Pearson in a senior role and Money’s strong links to the clients at Birdanco).
Marrow on the other hand was only in sales so would unlikely have been privy to trade secrets. Additionally it could be argued that the restraint is too wide to protect Roobok.
Frank purchased a car from George. During the discussion immediately prior to the agreement George said that the car was an excellent vehicle, one of the best he had ever driven, and that the engine had done only 10,000 km.
The engine has recently been cleaned of oil so as not to show a leak from one of the gaskets. When Frank drove it on the open road he found that it would not do more than 50 km per hour and that the brakes did not work properly. A test by a motor engineer has now confirmed that the engine has travelled at least 100,000 km. Frank had repairs made to the brakes but on driving it for a further four days decided that the car was totally unsuitable for his purposes.
The issue is whether there has been a misrepresentation. A misrepresentation is a false statement of fact that induced the contract. This is a misrepresentation by George about the km travelled by the car. Is it a fraudulent or innocent misrepresentation? This appears to be a fraudulent misrepresentation if it is made ‘knowingly’ or ‘recklessly’.
Consider the elements of misrepresentation on p.61. Importantly the remedies must also be discussed. Frank may wish to rescind the contract and/or claim damages. If the representation becomes a term of the contract, then it may be a breach of contract.
