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COMM 304 - BL > Session 3 > Flashcards

Session 3 Flashcards

Law of Contracts Part II (79 cards)

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1
Q

Why do contracts fail?

A
  1. Misrepresentation
  2. Mistake
  3. Other Reasons (duress, undue influence, inconscionability)
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2
Q

Misrepresentation

A

One party makes a false statement about a material fact which induces the other party to enter into the contract.

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3
Q

True or false: Misrepresentation may be about an opinion.

A

False: Misrepresentation has to be about a fact, not an opinion or belief.

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4
Q

What are the 3 different forms of misrepresentation?

A
  1. Innocent
  2. Negligent
  3. Fraudulent
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5
Q

Innocent Misrepresentation

A

Party making false statement honestly believes it is true.

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6
Q

Negligent Misrepresentation

A

Party making the false statement lacks diligence.

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7
Q

Fraudulent Misrepresentation

A

Party making the false statement knows or ought to know that it is false.

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8
Q

When is something “material” enough to count as misrepresentation?

A

Minor fluctuations are not material, more than 10% disparagement is material.

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9
Q

True or false: Misrepresentation must have been an inducement to enter into the contract.

A

True.
Additionally: there is no obligation of the representee to make an independent investigation into the stated facts (no due diligence obligation. There is also no need for the misrepresentation to be the predominant inducement.

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10
Q

The Issue of Non-Disclosure

A

There is no obligation of disclosure of material facts to the other party in contract negotiations.

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11
Q

True or false: Not disclosing is okay unless you are asked.

A

True. If you are asked lying would be misrepresentation.

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12
Q

Exceptions to Non-Disclosure

A
  • Half-truths
  • Active concealment
  • Certain categories of contracts requiring utmost good faith
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13
Q

What are the different types of consequences of misrepresentation?

A

Rescission and Restitution.

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14
Q

Rescission

A

Aims at putting the parties in the pre-contractual state by requiring restoration of benefits already transferred.

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15
Q

In which form of misrepresentation is recission most likely?

A

Fraudulent (rather than innocent)

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16
Q

True or false: Recission can be used even if it is not possible to restore benefits already transferred.

A

False: Recission is not available if it is impossible to restore benefits already transferred.

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17
Q

With recission is contract void?

A

No, under recission contract is not void, it is voidable. Party who is innocent may choose to void in a timely manner.

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18
Q

Restitution

A

Awarding monetary compenstation instead of or in addition to recission.

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19
Q

True or false: If misrepresentation amounts to deceit or negligence, the party who misrepresented is not able to be liable for a tort as well.

A

False: If misrepresentation amounts to deceit or negligence, the party who misrepresented may be liable in tort too.

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20
Q

What are the different types of mistakes?

A
  • Misunderstanding
  • Mistaken assumptions
  • Mistake in Integration
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21
Q

Misunderstandings

A

Occur if one or both parties are not clear about the meaning of a term/terms of the agreement.

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22
Q

True or false: If there is not consensus between the parties the contract is void.

A

True

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23
Q

Non est factum

A

(It is not the deed) Party can say the contract is void because they thought it was something else.

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24
Q

What was the original reason for non est factum?

A

It was originally made for people who were illiterate or blind, now if you can read the contract/terms you must.

Simply not reading is not non est factum.

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25
Mistaken Assumptions
Parties reach an agreement but share an error on some important context.
26
Under which circumstances does mistaken assumptions apply?
- Res extincta - Res sua
27
Res extincta
(Extinct thing) In a contract for the sale of goods/property both parties are aware that goods/property hadceased to exist at the time of contracting.
28
Res sua
(One's own property) A purchaser discovers at the time of contacting they already owned the subject matter.
29
Unilateral Mistake
One party makes the mistake.
30
Common Mistake
Both parties make the mistake.
31
True or false: It is harder to escape the contract if both parties make the mistake.
False: It is easier to escape the contract if both parties make the mistake, it is much more difficult if the mistake is unilateral.
32
Mistake in Integration
When an error is made in the subsequent written recording of a verbally negotiated contract or where while the agreement was correctly recorded, it has consequences not anticipated by the parties.
33
What remedy is used in instances of mistake in integration?
Rectification
34
Rectification
The courts "correct" the incorrectlt recorded agreement to meet the initial terms agreed upon by the parties.
35
Duress
One party coerces the other party into the contract.
36
3 Forms of Duress
1. Duress to a person 2. Duress of goods 3. Economic Duress
37
Duress to a Person
Includes threats to family members, includes threats of unlawful confinement and imprisonment, and sufficient for threatened party to learn about the threat from 3rd party, no direct communication of threat is required.
38
Duress of Goods
Interference with property rights can amount to duress, includes payment extracted through improper seizure/retention of the other party's property, and apples to both actual seizure and threatened seizure.
39
Economic Duress
Can be difficult to draw line between unacceptable coercion and legitimate commercial pressure, doctrine of economic duress is likely to increase in practical importance especially in context of contract renewals, illegitimacy of threat and lack of practical alternatives for the victim criteria some courts look at.
40
True or false: Threats that appear to be blackmail will likely deemed illegitimate.
True
41
Undue Influence
Can occur if one party dominates the other in such a way that the latter cannot make their own decision, can take the form of actual or presumed undue influence, if party can establish the presumption of undue influence recission is available to the weaker party.
42
The Traditional Doctrine of Unconscionability
Applies in dealing between complete strangers as well as parties with a pre-existing relationship.
43
What are the available remedies for the weaker party in the traditional doctrine of unconscionability?
Recission or claim for compensation for value of the benefit conferred if rescission is not available.
44
Frustration
Performance of the agreement is permenantly impossible, or temporary impossibility.
45
Condition Precedent
Is a condition stating that a certain state of affairs has to exist before a particular undertaking becomes enforceable.
46
Condition Subsequent
Is a condition that stipulates a state of affairs under which an obligation ceases to be enforceable.
47
Breach of Contract
Occurs if one party expressly or impliedly refuses to perform the contract and is called repudiation.
48
The Concept of Fundamental Breach
49
3-Step Test on whether exemption clauses are to be enforced:
1. Does the clause apply to the facts 2. Was the clause unconscionable at the time the contract was made 3. Should the court set aside the clause, even if it is not unconscionable, based on an overriding public policy
50
Breach of Warranty
Does not allow innocent party to treat the contract as terminated, and the innocent party can only bring a claim for damages.
51
True or false: Whether a contractual term is a condition or a warranty is unimportant.
False: Whether a contractual term is a condition or a warranty is of fundamental importance.
52
Using what principle are damages calculated?
The Expectancy Principle
53
The Expectancy Principle
Attempts to secure for the plaintiff the benefits of performance rather than merely restoring the plaintiff to the position they were in before the contract was created.
54
True or false: Damages in the expectancy principle are "backward looking".
False: Damages awarded on the expectance principle are "forward-looking".
55
What is an important exception to the expectancy principle?
Interest
56
Limitations to the Expectancy Principle
- Causation - Foreseeability - Loss Mitigation
57
Are causation Issues more common in tort or contract context?
Tort
58
When might causation issues arise?
- If intervening factors may impact the performance of the defendant - Decrease of assests subject to the contract due to market forces
59
Foreseeability (General Principle)
Only damages reasonably forseeable by the parties at the time the contract is made are compensable.
60
True or false: Damages occuring in the usual course of things from the breach are compensable.
True
61
Under foreseeablitiy what does the loss have to be?
Foreseeable
62
Loss Mitigation (General Principle)
Victim of a breach cannot claim damages for a loss the victim could have avoided by taking reasonable steps.
63
True or false: Profits acquired through mitigation steps reduce defendant's liability for damages.
True
64
Punitive Damages
Not meant to compensate victim, but their objective is retribution towards wrongdoer.
65
Penalties and Liquidated Damages
Parties may agree on consequences of a breach of contract in the contract itself, often in the form of liquidated damages.
66
LD
Liquidated Damages
67
True or false: If LD is deemed unreasonable the courts will classify it as a penalty clause.
True
68
Specific Preformance
Available only in rare circumstances where damages are inadequate, court orders the party in breach to perform the obligation that has been breached.
69
What are some examples of situations where specific performance plays a role?
- Sales of land - Sales of goods - Sales of shares Additionally: Sales of Special Items
70
Injunctions
A court order that requires or prohibits a person or entity from taking a specific action.
71
Types of Injunctions
- Prohibitory - Mandatory - Permanent or perpetual - Intrim or interlocutory
72
Prohibitory Injunction
Orders defendant to not do what they promised not to do.
73
Mandatory Injunction
Orders defendant to undertake a positive act.
74
Permanent or Perpetual Injunctions
Issued after a trial as a final and binding court order, have a limited period of time, and is a final determination of the rights of the parties in the dispute.
75
Interim or Interlocutory Injunctions
Awarded by a court pending trial, are temporary in nature prior to the final determination of the rights of the parties in the dispute, interim injunctions aim at retaining the status quo until a full and proper determination of the matter.
76
Restitution
Claims that may provide attractive alternative for victim of breach instead of damages.
77
Disgorgement
A claim to the profits enjoyed by the party in breach because of the breach.
78
Examples of Restitutionary Claims
- Restitution of money paid to the defendant - Restitution money paid to a third party that benefited the defendant, claims for the value of goods and services provided.
79
True or false: There are many reasons for which a contract may be void.
False: Only a mistake can make a contract void.

COMM 304 - BL (10 decks)

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