📑Contract: misrep, duress, undue influence, mistake, illegality

Question 1

Misrep: What are the Categories of preliminary statement (made during contractual negotiations)

Answer 1

○ Sales puff: extravagant in obvious way/ad gimick (no right of action)
○ Contract term: if untrue, maker in breach (consider remedies for breach)
○ Representation: a pre-contractual statement made by party which induced other party to enter contract but doesn’t form part of it=may be actionable as misrepresentation and make contract voidable

Question 2

Misrep: How to figure out if a statement is a term or a representation

Answer 2

Primary test: Partis’ common intention ?
If unclear, court will consider…
1. Relative skill and knowledge of parties
2. Whether verbal statement was repeated in written contract (YES=ev of term)
3. Did recipient made clear it was of vital importance (YES=ev of term)
4. Did maker invite other party to verify it ?(YES=ev of rep, If maker told other party not to bother checking=term)
5. Lapse of time between the statement being made and contract being formed? (longer lapse, more likely a rep)

Question 3

Misrep: How does the relative skill and knowledge of the parties effect whether something is a term or a representation?

Answer 3

• If expert makes false preliminary statement to non expert, more likely to be deemed term of the contract.
• Non-expert makes false preliminary statement to expert, more likely to be deemed a simple representation.

Question 4

Misrep: Which question carries more weight in the test for if a prelim statement is a term or a representation?

Answer 4

Relative skill and knowledge of the parties

Question 5

Misrep: If a statement t is a representation, what must be proved for it to be actionable?

Answer 5

That its a misrepresentation

Question 6

Misrep: Misrepresentation definition

Answer 6

An untrue statement made by one contracting party which was one of the factors which induced the other party to enter into the contract.

Question 7

Misrep: what form may the false statement be in

Answer 7

□ oral
□ in writing
By conduct

Question 8

Misrep, can silence amount to a misrepresentation?

Answer 8

Generally no, EXCEPT:
1. fiduciary relationship between parties (eg. Sol/client)
2. Contract is one of the upmost good faith (eg. Insurance)
3. There’s been a half-truth distorting what was said (eg. one lady owner)
4. Statement of fact true when made (and failure to disclose change of circumstances)

Question 9

Misrep: can a misep be an opinion or intention?

Answer 9

No, must be fact, EXCEPT:
a. Party lies about intention (misrepresenting state of their mind)
b. Party states an opinion where theres no facts on which it can be reasonably based (misrepresenting that they are in possession of facts on which opinion can be reasonably formulated)

Question 10

Misrep: will a statement be one of the factors inducing the party to enter the contract where the party has it checked by their own experts?

Answer 10

No

Question 11

Misrep: must the statement be the only factor inducing the party to enter the contract?

Answer 11

No

Question 12

Misrep: what is the positon if a party is offered a chance to verify a statement and dont take it up?

Answer 12

Still misrepresentation UNLESS true position set out in contract signed by C

Question 13

Misrep: What are the types of miserp and why do they matter?

Answer 13

Effects the remedies available:
Fraudulent =damages in tort of deceit AND recession
Negligent=damages in tort of deceit AND recession
Innocent=recission only

Question 14

Misrep: fraudulent misrep definition

Answer 14

If misrep is made:
□ with knowledge that it is false
□ OR without belief in its truth
□ OR recklessly, not caring whether it is true or false.
Need proof of fraud

Question 15

Misrep: negligent misrep definition and burden of proof

Answer 15

• Statements made carelessly: Honest belief in truth but belief not held on reasonable grounds
• Burden on misrepresentor to prove they made the statement on reasonable grounds
• C only has to est misrep and loss

Question 16

Misrep: innocent misrep definition

Answer 16

Maker had reasonable grounds to believe statement was true

Question 17

Misrep: what are damages in the tort of deceit?

Answer 17

• Can claim for all consequential losses- innocent party should be put into the position they would have been in, had the misrepresentation not been made.
• Remoteness of loss n/a

Question 18

What is the effect of recession?

Answer 18

aims to restore both parties, so far as possible, to their pre contract positions
=neither party need perform future obligations and both should return money or property transferred under the contract.

Question 19

What type of remedy is recession?

Answer 19

Equitable remedy=at courts discretion and will be barred in some cases

Question 20

If a contract is voidable what are theoptions?

Answer 20

1. Affirm (treat as ongoing)
2. Rescind

Question 21

How does a party rescind a contract?

Answer 21

Innocent party must notify other party of intention to rescind OR apply to court (ie where other party wont return prop)

Question 22

What are the 4 bars to rescission?

Answer 22

1.Affirmation: express/implied act in way leading other party to believe contract ongoing
2. Undue delay (lapse of time): look at when misrepresentation should have been discovered (EXCEPT when actually discovered for fraudulent misrepresentation
3.Innocent purchaser has acquired rights in the property
4. Restitution is impossible

Question 23

When is does the restitution is impossible bar to recession often apply?

Answer 23

contract for sale of business rarely rescind as business will have changed position by entering new 3rd party contract

Question 24

When can damages in lieu of recession be awarded?

Answer 24

If C doesn’t have right to damages, can award if:
- misrepresentation is non- fraudulent.
- No bars to recission apply
- (probably) representation was about a minor matter and recission is unjust

Question 25

Duress: where is the burden of proof

Answer 25

on party alleging duress

Question 26

Duress: What are the elements of economic duress

Answer 26

1. Illegitimate pressure 2. whose practical effect is that there is compulsion on, or a lack of practical choice for, the victim; 3. which is a significant cause inducing the claimant to enter into the contract.

Question 27

# 3 Duress: what will the court consider to decide 'illegitimate pressure'?

Answer 27

1. has there been an actual or a threatened breach of contract 2. was the threat was made in good or bad faith 3. Did the victim protest at the time

Question 28

Duress: what is not 'illegitimate pressure'?

Answer 28

Legitimate commercial pressure/hard bargaining

Question 29

Duress: Does the illegitimate pressure need to be the only reason inducing the C to enter the contract?

Answer 29

No

Question 30

Duress: what is the effect?

Answer 30

Original/renegotiated contract voidable (=its valid until rescinded)

Question 31

Undue influence: definition

Answer 31

Influence that goes beyond what is regarded as acceptable; or OR where one party is in a position to influence another and takes unfair advantage of that position

Question 32

Undue influence: types

Answer 32

**a. Actual undue influence:** C must prove (evidence of innocent party preferred) **b. Presumed undue influence:** i. Relationship is one of trust and confidence (fiduciary) ii. AND the transaction is one that calls for an explanation iii. rebuttable on facts (Ie. If innocent party taken independent advice)

Question 33

Undue influence: can the threat be entirely legal

Answer 33

Yes

Question 34

Undue influence: when will there be a relationship of trust and confidence (presumed undue influence)

Answer 34

Irrebuttably presumed sometimes eg. -Solicitor/client -dr/patient -parent/children -religious advisors/followers -NOT husband/wife (rebuttable not irrebuttable) Where not presumed, innocent party must prove

Question 35

Undue influence: when will the transaction be one that calls for an explanation (presumed undue influence)

Answer 35

Transaction is not readily explicable by the relationship between the parties

Question 36

Undue influence: what is an example of when a third party may be involved?

Answer 36

Where surety influenced by borrower (ie. to use house in joint names as security), there are 2 innocent parties, the surety and the lender (not fair on lender if rescinded)

Question 37

Undue influence: how is the situation dealt with where a surety may be influenced by a borrower (=2 innocent parties)

Answer 37

Etridge guidelines: If the creditor had **actual/constructive notice** of the undue influence, the contract is voidable Creditor will have constructive notice if: 1. It ought to have been put 'on inquiry' (ie all cases where the relationship between a surety and debtor is non-commercial and not for their joint benefit) 2.. AND once put on inquiry, did not take reasonable steps to ensure the surety (wife) was aware of the implications of what they were signing.

Question 38

Undue influence: what counts as 'reasonable steps' for the etridge guidelines

Answer 38

a. Private meeting with surety at which they're told: ◊ extent of liability/risk as surety ◊ to take independent legal advice b. Get written conformation from solicitor that surety had independent advice and made aware of risk

Question 39

Undue influence: effect

Answer 39

Recission subject to bars

Question 40

Mistake: effect

Answer 40

If mistake is so fundamental it negates agreement and existence of contract (=contract void as apposed to voidable) Often last resort

Question 41

Mistake: types

Answer 41

1. Common (Aka. Identical/shared mistake) 2. Cross purpose 3. Unilateral

Question 42

Mistake: what is common mistake

Answer 42

Where both parties have made same fundamental mistake (eg. The existence of the subject matter NOT quality of subject matter)

Question 43

# 3 Mistake: limitations on the operation of common mistake

Answer 43

* Wont operate if one party is at fault * Contract mustn't make express provision on the matter * The mistake must be fundamental (render performance impossible/radically different from what the parties anticipated)

Question 44

Mistake: what is a cross purpose mistake

Answer 44

Where parties at cross purposes about some crucial aspect of the contract. eg. One party asserts that a contract exists, each on terms favourable to that party, its objectively impossible to resolve ambiguity over what was agreed=only possible conclusion is that there was no contract.

Question 45

Mistake: what is a unilateral mistake

Answer 45

* Where only one party is mistaken (often to the identity of the other party) * Must be a genuine mistake where the identity of the other party is of vital importance to render contract void (not their credentials)

Question 46

Mistake: effect of unilateral mistake as to a parties identity where a bona fide purchaser acquired goods

Answer 46

* Recission barred and they own goods * If initial contract void for mistake, mistaken party owns goods

Question 47

Mistake: effect of unilateral mistake as to a parties identity where mistaken party sells to rouge who sells to innocent buyer

Answer 47

One will be entitled to goods, other can sue rouge for breach of implied term they had title to sell goods

Question 48

How to tell if there is a mistake (making contract void) or misrepresentation (making contract voidable)

Answer 48

1. Parties dealing face-to-face=Strong presumption innocent party intends to deal with person in front of them= unlikely void mistake (=try misrepresentation) 2. Dealings conducted exclusively in writing= Written agreement must be construed to determine with whom the innocent party intended to contract. If someone other than the rogue then the contract might be void for mistake. 3. Nature of transaction may indicate to the rogue that it is vital they possess a particular attribute and, if they don’t , offer is not addressed to rogue=no contract . 4. If the entity whom the rogue is pretending to be actually exists and is known to the mistaken party (eg a registered company), it suggests that the offer is not addressed to the rogue=no contract with them

Question 49

How may a contract be illegal?

Answer 49

When its: -Formation -Purpose -Performance Involves the performance of an legal wrong such as a: -Crime -Breach of statutory duty -Violation of public policy/immoral (common law)

Question 50

Effect of an illegal contract

Answer 50

Generally, illegal contracts void, unenforceable and recovery for performance not allowed. Especially where both parties had participated in illegality

Question 51

# 2 When is illegality unlikely to effect the validity of a contract

Answer 51

Where: 1. one party didn’t know of the illegal performance-only innocent party can enforce 2. illegal act purely incidental to performance of the contact (eg. Delivery driver speeding)

Question 52

Illegality: rules for contracts in restraint of trade

Answer 52

Are prima facie void as being contrary to public policy. HOWEVER restraints of trade may be enforceable if: * There's a legit business interest to protect (ie. Customers, employees and trade secrets * AND the restraint is reasonable in terms of geographical area, duration and scope of the prohibited activities.

Question 53

# 2 What counts as 'illegitimate pressure' for duress?

Answer 53

* Unlawful threats * Actual/threatened breach of contract

Question 54

For innocent misrepresentation, where does the burden of proof lie?

Answer 54

Misrepresentor has to show they honestly and reasonably believed what they said to be true

Question 55

Can promissory estoppel be used to sue?

Answer 55

No it is only a defence, 'Shield not a sword'