Misrepresentation
An untrue statement of fact – an incorrect or false representation
Three types of misrepresentation
- Innocent Misrepresentation – made without fault
- Fraudulent Misrepresentation – made knowing it was false
- Negligent Misrepresentation – made where should have known it was false
Duress
Force or pressure to enter into a contract
Note: Must show that (1) the threat must be the main inducement to enter into the contract and (2) the threat was illegitimate
Duress tests
- whether the party protested
- whether the party had a realistic alternative
- had opportunity to speak with independent legal counsel
- the party took steps to void it within a reasonable period of time
- whether the pressure exerted was illegitimate
Undue Influence
Pressure from a dominant, trusted person that makes it impossible for a party to bargain the terms of a contract freely
- More subtle than duress
Presumption of Undue Influence
Court may find undue influence:
Presumption (unless rebutted) based on special relationships
- Doctors or lawyers
- Parents/guardians with infant children
- Adult children with mentally impaired children
- Trustees with beneficiaries
- Religious advisers with parishioners
Unconscionable Transactions
Equitable principle allowing the courts to set aside a contract in which a party in a superior bargaining position took advantage of the other party and the consideration was grossly unfair
Must be shown that (test):
1. Bargaining positions of parties are drastically unequal
2. One party uses position of power to gain advantage
3. Agreement is substantially unfair to weaker party
Agreement must be unreasonable to be unconscionable
Blackburn v Eager [2001] NSSC
Facts: Blackburn, who was 42 and had a grade 7 education was injured in an automobile collision. She commenced an action for damages and the insurance adjuster offered her $7000 to settle the matter. The adjuster suspected that Blackburn’s injuries were far more serious than she realized but withheld the information. Blackburn accepted without seeking legal advice and later discovered her injuries would be permanent.
Held: Settlement was set aside as unconscionable – adjuster had unconscientiously exploited Blackburn’s naivety to achieve an early and unconscionable settlement.
Mistake
Error about some aspect of a contract that destroys CONSENSUS
3 Types:
- Shared Mistake
-One Sided Mistake
-Misunderstanding
Shared Mistake
Occurs when the two parties are in agreement but have made the
SAME MISTAKE regarding some aspect of the contract
Misunderstanding
Neither party is aware of the other party’s misunderstanding about the terms of the agreement
One-Sided Mistake
Occurs where only one of the parties to the contract makes a mistake interpreting contract
Raffles v Wichelhaus [1864]
Facts: Plaintiff agreed to sell the defendant 125 bales of cotton
to arrive via the ship called the Peerless from Bombay. As it
happened, there were two ships called the Peerless and the
contract did not specify which ship carried the cotton. The
Defendant believed the shipment would arrive on the Peerless
in October, however the Plaintiff was unaware of such ship and
intended the cotton to arrive in December. Defendant refused
to accept the December shipment.
Held: Reasonable person test could not resolve the case since
the disagreement was fundamental and no consensus between
the parties – contract was void.
Non Est Factum
- Claimed as a defence where there was a mistake about the very nature of the contract (not merely a mistake as to its terms).
Reasonable Person Test
- What would a reasonable person have understood the contract term to mean?
Parol Evidence Rule
- Courts will not permit outside evidence to contradict clear wording of a contract
Privity of Contract
Contract terms only apply to the actual parties to the contract
Novation
If the second party agrees to the substitution of the new party, a new contract is formed and Contract A is discharged, replaced by the new contract B.
Assignment
A person entitled to receive a benefit under a contract can transfer that benefit to a third party
