Week 5 - Contract Law Misrepresentation/Assignment/Discharge

What is a misrepresentation in contract law?

A false or misleading statement of fact made during negotiations that induces another party to enter into a contract.

Where can misrepresentation be found?

Sales literature, websites, advertisements, or during negotiations.

What are the three types of misrepresentation?

Innocent (honest belief), Negligent (careless, no reasonable grounds), Fraudulent (knowingly false, reckless, or failing to correct).

What are the 3 elements of misrepresentation in contract law?

1) False statement made, 2) Statement is material (would influence decision), 3) Misled party relied on it and entered the contract.

Do opinions or intentions count as misrepresentations?

Generally no, unless opinions are from experts (then treated like facts).

What is inducement in misrepresentation?

The misstatement materially influences the party, they did not know it was false, the statement was intended to induce, and the claimant relied on it.

Does silence count as misrepresentation?

Usually no (caveat emptor = buyer beware), except for half-truths, required disclosures, fiduciary or insurance contracts, and consumer protection cases.

What are the remedies for misrepresentation?

Rescission (set aside contract) + damages if negligent or fraudulent. Innocent = rescission only.

Can misrepresentation also be a tort?

Yes – fraudulent/negligent misrepresentation can be torts. Innocent is only a contractual remedy.

What is an assignment of contractual rights?

Transfer of unperformed rights/benefits (e.g., to receive money) to a third party.

Who are the parties in an assignment?

Assignor (gives rights), Assignee (receives rights), Promisor (owes the obligation).

What is required for a valid assignment?

Notice must be given to the promisor (consent only needed if contract says so).

What cannot be assigned without consent?

Obligations (duties). Benefits can be assigned, but obligations need approval of all parties.

What is an anti-assignment clause?

A contract term prohibiting assignment.

Who is a factor?

Someone who purchases a right to receive a benefit from someone else

How can contracts be discharged (ended) (4)?

By performance, agreement, frustration, or operation of law.

What is discharge by performance?

When both parties complete obligations.

What is an attempt to perform called?

Tender of performance

What is discharge by agreement?

Parties agree to end obligations, or contract has provisions (condition precedent, condition subsequent, option to terminate).

What is a condition precedent?

A future act or event that must happen before the obligation to perform arises.

What is a condition subsequent?

A future event that brings a promisor’s liability to an end if it happens.

What is a option to terminate?

A term that gives one party or both the choice to bring the contract to an end before its performance has been completed.

What is frustration?

Unforeseeable event beyond parties’ control makes performance impossible or radically different. Cannot be self-induced.

What is a force majeure clause?

Contract clause listing events (e.g., natural disasters, war, strikes, epidemics) excusing or delaying performance.

What is discharge by operation of law?

Termination through legal rules (e.g., bankruptcy, expiry of limitation period).

What is a breach of contract?

Failure to perform contractual obligations.

What is a material breach?

Breach of an essential term that defeats the purpose of the contract → may discharge the other party.

What is repudiation?

A party indicates (by words or conduct) it won’t perform.

Anticipatory breach

repudiation before performance is due.

What is substantial performance?

Minor breach – contract is mostly completed, still enforceable, but damages may be deducted.

What is an exemption clause?

A contract term limiting/removing liability for breach.

How do courts test exemption clauses?

1) Does clause cover situation? 2) Was party alerted to the presence of the clause? 3) Was it unconscionable? 4) Public policy reason against enforcement?

What are the types of remedies for breach?

Damages, Equitable Remedies (specific performance, injunction, rescission), Quantum Meruit.

What are expectation damages?

Compensate for expected benefits if contract had been performed.

What are the prerequisites for an award of damages in contract law?

• Loss must flow from the breach – it must be a foreseeable result of the breach; unusual losses are not compensated.

• Damages must be mitigated – the injured party must take reasonable steps to minimize losses.

• Mitigation costs are recoverable – any costs spent reducing or limiting the loss can also be claimed as damages.

What are consequential damages?

Secondary, foreseeable losses caused by breach (e.g., lost resale profits).

What are general damages?

General damages describes an estimate for intangible injury

What are reliance damages?

Compensation for wasted effort, time, and expenses preparing for contract.

What are punitive damages?

Rare in contract law – awarded for malicious/bad faith misconduct (e.g., Whiten v. Pilot Insurance).

What are the main equitable remedies in contract law?

• Specific performance – court order requiring a party to carry out a contractual act (usually completing a transaction).

• Injunction – court order restraining a party from acting in a way that breaches a contract; requires a negative covenant (promise not to do something).

• Rescission – setting aside a contract to restore parties to pre-contract positions (alternative to damages).

Injured party must choose rescission or damages — cannot have both.

What is quantum meruit?

“As much as deserved” – fair payment for value of partial performance conferred.