rsm225 lecture 10

whats a mistake?

• Happens when parties have different understanding of contract

• Leads to no consensus ad idem (no meeting of the minds)

• Based on a MATERIAL fact

• Courts not concerned w/ different quality/value as long as they don’t affect nature of contract

whats a mutual mistake?

• Contract is void ab initio (void from the outset/no legal effect) if parties share false and fundamental assumption that goes to ROOT of contract

  • Situations where both parties think subject matter of contract still exists

whats a Unilateral Mistake

• Only one party mistaken

when is Unilateral Mistake not valid?

• Non-mistaken party knew/induced mistake, making contract voidable by mistaken party

• Knowledge from non-mistaken that other was mistaken

• Equity considers fraud if person takes advantage over the other by basing the contract on the mistake (“snapping up”)

whats Rectification

Contract can be corrected if there’s errors on writing that don’t reflect discussion

what are 5 things they must prove for rectification

• Does not reflect parties’ actual intent

• Negotiations and clear agreement made

• Agreement did not change until drafting error occurred

• Proof is high (ALMOST beyond a reasonable doubt)

• Rectification rarely happen based on oral evidence

what is Non Est Factum (“Not My Deed”)

• Defense

• Used when document signed is different in nature/character from what signer intended

• Only available if mistake happened from fraud/misrepresentation by other party

whats Misrepresentation

• False assertion of fact make with intention of creating a contract

Misrepresentation is not

• A promise of future performance

• Contractual term

• Opinion

what are 3 types pf misrep. and remedies

1. Innocent misrepresentation → rescission (cancel) only

2. Negligent misrep → rescission + potential tort claim

3. Fraudulent misrep → rescission + potential tort claim

4 times Silence can be misrepresentation:

• Distorts prior assertion (half-truth)

• Contract needs utmost good faith (e.g., insurance contracts)

• Fiduciary relationship exists (e.g., lawyer-client)

• Statute mandates disclosure

what is duress?

• threatening someone to enter contract against their wiill

• voidable

• removes voluntary natures

when can contract be rescinded under duress?

• physical duress

• financial pressure

• look for: threats or coercion; lack of free will; illegitimate pressure

what is ILA?

independent legal advice

• seeking advice from lawyer not involved in transaction

• makes in unbiased

• harder time to impeach contract

what is under influence?

• abusing power to get someone to sign contract

• friendship/trust insufficient

what are 3 factors to look for in undue influence?

1. dominance

2. manipulation

3. coercive abuse of power

what are 4 examples of presumed under influenced relationships?

1. parent/child

2. guardian/ward

3. solicitor/client

4. doctor/patient

what’s unconscionability?

• so one-sided and unfair

what are 3 factors to consider in unconscionability?

1. grossly unfair terms

2. unequal bargaining power

3. excessive/overreaching conduct

what are 2 contracts that must be in writing?

1. guarantees - promise to pay someone else’s debt if they fail to do so

2. contracts for land interests - sale, transfer, or lease of land

whats the difference between a guarantee and indemnification?

guarantee

• third party agrees to be liable only if debtor defaults

indemnity

• third party assumes full liability from outset

• primary responsible

• does not matter who is at fault, important to recover loss

what does contract interpretation consist of?

• focus on existing agreements more than their formation

• torn between strict (literal) and liberal (contextual) approach

• must look beyond contract for meaning

• finding parties’ intentions

what are 3 key rules in interpreting contracts?

1. plain meaning

2. contra proferentem

3. parol evidence

what is the plain meaning rule?

words given ordinary meaning unless otherwise defined

what is the contra proferentem rule?

• any ambiguous term will be interpreted against party that made contract

• favours non-maker

• applies if term was unilaterally imposed

• e.x not liable for any damages caused by negligence

what does the contra proferentem rule encourage?

1. clarity

2. explicit

3. comprehensive

what is the parole evidence rule?

• if agreed term not included in final written contract, cannot be introduced later

• prevents oral or prior written terms not formally documented

• not apply to contract formation issues

what are 3 exceptions to the parole evidence rule?

1. contract not intended to be final agreement

2. clarification of ambiguous terms

3. subsequent oral agreements

what are 3 ways courts may save contracts?

1. collateral agreement

2. condition precedent

3. implied terms

whats a collateral agreement

• separate agreement made alongside main contract w/ separate consideration

whats a condition precedent

contractual requirement that must be met before agreement takes effect

does not need to be in writing

whats implied terms?

• not states but necessary to give contract indended effects

• not implied if an express term already addresses same issue

• fair but unspoken terms

what are 3 examples of implied terms?

1. title - seller must have legal ownership of goods

2. quality and service - goods must meet standards

3. contract duration - implied reasonable time if not specified