Grounds under which a contract can be set aside

Question 1

Grounds under which a contract can be set aside

Answer 1

1. Mistake
2. Misrepresentation
3. Undue influence
4. Duress

Question 2

Mistake in the terms of the contract

Answer 2

• typographical errors
• mistakes in reducing the terms to writing
• misunderstanding about the meaning of words

Question 3

Typographical Errors

Answer 3

• Would a reasonable bystander recognize it as a mistake looking at the terms objectivity?
• If so, then the contract would be voidable at the option of the party that made the mistake
• Can ask the court to recifty it
• Set aside (rescind) – did not intend to buy something high

Question 4

Mistake in reducing the terms to writing

Answer 4

• Usually happens when an oral agreement is reduced to writing but there is a mistake in the contract
• Court may grant rectification and fis the term where there is a mistake if it was a mutual mistake, rare if it was a unilateral mistake

Question 5

unilateral mistake

Answer 5

• There was an otherwise complete agreement;
• Parties did not engage in further negotiations;
• Possibly the occurrence of fraud (not required)
• When the document was signed, the defendant knew or should have known of the mistake and the plaintiff did not;
• Any subsequent attempt to enforce the inaccurate document would be equivalent to fraud.

Question 6

Misunderstanding about the meaning of words

Answer 6

• One more reasonable interpretation – court will interpret the which meaning is most reasonable
• Two equally reasonable interpretations – mutual mistake exists, and will be void for mistake as to the meaning of terms
• Ex – ambiguity, there are multiple interpretations of the word

Question 7

Mistake in assumption about the subject-matter of the contract

Answer 7

• Mistake in assumption as to the existence of the subject matter
• Misktake in assumption as the value of the subject matter

Question 8

Mistake in assumption as to the existence of the subject matter

Answer 8

Contract is void

Question 9

-Mistake in assumption as the value of the subject matter

Answer 9

• Court will only intervene if a mistake in value was present form the outset
• Court will not intervene due to fluctuations on the market price

Question 10

Mistake about the identity of a part to the contract
- fraud

Answer 10

• If the identity of the party is assumed then the contract is void
• If the identity of the party is completely fabricated, then the contract is voidable
• Lies about working for corporation – since there was a mistake as to the identity of the fraudster the contract is void, and has to return the goods

Question 11

Non-existent corporation

Answer 11

• Court holds that they cannot recover from innocent party since the contract was only voidable, and before the contract was elected to be void, the party had already passed title to the innocent third party

Question 12

Mistake about the nature of a signed document

Answer 12

• Non Est Factum – this is not the contract I agreed to
• Defence available to someone who has been misled into executing a deed or signing a document which is fundamentally different from the one they intended to sign
• When someone is blind, contract was discussed orally, someone is illiterate

Question 13

Misrepresentation

Answer 13

a statement/ representation made during negotiation of a contract, before the contract, that turns out to be false

Question 14

Three Types of Misrepresentation

Answer 14

• fraudulent
• negligent
• innocent

Question 15

Fraudulent Misrepresentation

Answer 15

false statement is made knowingly or with reckless disregard to its truth

Question 16

Negligent Misrepresentation

Answer 16

statement is made when a duty of care is owed, and the making of the statement fell below the standard of care

Question 17

Innocent Misrepresentation

Answer 17

if not fraudulent or negligent

Question 18

Elements of Misrepresentation

Answer 18

(1) Statement must be made;
(2) Statement must be false;
(3) Reliance on the statement caused the injured party to enter the contract;
(4) Reliance on the statement caused the innocent party harm.

Question 19

Sale of Good Act, s. 15

Answer 19

Buyer has the obligation to do due diligence to inspect
Sample – rely on it to match the rest
Online – rely on the description

Question 20

Undue Influence

Answer 20

The domination of one party over the mind of another to such a degree as to deprive the latter of the will to make an independent decision

Question 21

Undue Influence

Answer 21

The domination of one party over the mind of another to such a degree as to deprive the latter of the will to make an independent decision

Question 22

Undue Influence examples

Answer 22

• contract is voidable
• special relationships
• dire circumstances
• threat of prosecution
• unconscionable contracts

Question 23

Contract is voidable

Answer 23

– at option of the victim to the influence

Question 24

Special relationships –

Answer 24

fiducuary relationships, spouse, need for independent legal advice

Question 25

Dire Circumstances

Answer 25

where one party is temporalty desperate and will agree to any terms

Question 26

Threat of Prosecution

Answer 26

agreeing to terms to avoid prosecution of yourself or family member

Question 27

Unconscionable Contracts

Answer 27

arising from inequality of bargaining power

Question 28

Undue Influence Test

Answer 28

Plaintiff who make the contract voidable must show on a balance of probabilities that:
(1) There was domination by the other party in the circumstances by showing:
(a) a special relationship exists; or
(b) That s/he was in a desperate circumstance at the time of contract formation; or
(c) That s/he was under a threat of prosecution at the time of contract formation; or
(d) It was an unconscionable contract.

(2) That the contract is unfair or disadvantageous to the weaker party.

Question 29

Duress

Answer 29

• Actual or threatened violence or imprisonment as a means of coercing a party to enter a contract
• Contract would be voidable at the option of the victim