Contracts Part 2

Question 1

Mistake

Answer 1

When parties have a different understanding of terms of contracts.

Question 2

What are the three common mistakes in interpreting terms?

Answer 2

1) Shared Mistake
2) Mutual Mistake (misunderstanding)
3) Unilateral Mistake (one-sided)

Question 3

Shared Mistake

Answer 3

Both parties have made the same mistake. Contract may be void for lack of consensus.

Question 4

Mutual Mistake (Misunderstanding)

Answer 4

Where each party has a different understanding of the contract terms, courts will imply most reasonable interpretation. If both interpretations equally reasonable, contract void for lack of consensus.

Question 5

Unilateral Mistake

Answer 5

Only one party has misunderstood a term of contract. Only if different understanding is a result of misrepresentation would it be actionable.

Question 6

Non Est Factum (It is not my act)

Answer 6

If mistake as to nature of document signed, contract must be void.

Question 7

Parol Evidence Rule

Answer 7

verbal evidence inadmissible to vary terms of a written agreement.

Question 8

Contract Interpretation

Answer 8

1) If Terms Clear: court applies literal meaning.
2) If Disagreement About a Term: the words given ‘reasonable meaning’.
3) If Term Ambiguous: court looks to rest of contract to determine intention of parties.

Question 9

Exemption Clauses

Answer 9

Attempt to limit or eliminate liability for one party to contract.

Question 10

Misrepresentation

Answer 10

False and misleading statements that induce a person to enter into a contract.

Question 11

What are the three types of misrepresentation?

Answer 11

1) Innocent: misleading another without knowing or being careless.
2) Fraudulent: intentionally and knowingly misleading another to induce him/her to enter into contract.
3) Negligent: if person making misrepresentation should have known what he/she was saying was false, but he/she was careless.

Question 12

What is the only remedy to innocent misrepresentation?

Answer 12

Rescission: court attempts to put parties in their original position.

Question 13

Duress

Answer 13

Where you enter into a contract because of coercion (pressure). This can involve threats that may be violence, financial pressure or a scandal.

Contract is usually voidable.

Question 14

Undue Influence

Answer 14

Abuse of trust relationship. It is presumed in certain relations such as lawyers, doctors and trustees.

Contract is voidable.

Question 15

Unconscionability

Answer 15

Taking advantage of vulnerable person’s situation(poverty, mental impairment). Court can set aside or modify contract.

Question 16

What is the general rule to privity?

Answer 16

Only the parties to a contract are bound to it or may enforce it.

Question 17

What are the exceptions to privity?

Answer 17

1) Certain interests in land (subleasing an apartment).
2) Trusts (beneficiary of a trust can enforce the trust).
3) Life Insurance (beneficiary of life insurance can enforce the insurance policy).
4) Some Statutory Exceptions (consumer protection legislation may extend warranty to subsequent buyers).
5) Agents acting for Principals (agents negotiating contracts for athletes).

Question 18

Assignment

Answer 18

transfer to a 3rd party of rights arising under a contract.

Question 19

Assignor and Assignee

Answer 19

Assignor: party who transfers rights.
Assignee: party who receives rights.

Question 20

legislation allows assignee to sue directly if three conditions are met:

Answer 20

1) assignment is absolute (complete and unconditional).
2) assignment is in writing.
3) proper notice was given to debtor.

Question 21

Assignment Limitations

Answer 21

1) May only assign the benefits, not the obligations.
2) Assignee cannot be in a better position than the assignor (‘subject to the equities’).