Business Law - Topic 4

Vitiating factors

factors which may affect the validity of contract even when the 4 elements of a contract are present

Misrepresentation

an untrue statement of important facts which materially misleads an innocent party to make a contract, makes contracts voidable

Shum v Chui

misrepresentation of garden and garage coming with sale of a house, however, these were owned by the government.

Legal duty of disclosure

when it comes to important information, silence is equal to misrepresentation

Yili v Lee

incorrect description of apartment size (a fact) is a misrepresentation

Smith v Land

sold land with 'most desirable tenant', this tenant didn't pay rent in a timely manner so that opinion couldn't be reasonably held

British Airways v Taylor

British airways made a false statement about an overbooked flight. a statement to provide something in the future is false statement of a fact if the maker of the statement is a risk, even a small, the statement cannot be fulfilled

Leung v HKCU

sale of property with unauthorized canopy (fraudulent misrepresentation)

Long Year v Tse

A and B bought a flat and made observations leading them to believe it came with a covered parking spot, they re-sold it with this assumption. While they believed the statements they made, this belief shouldn't have only been based on observation and should have inspected the apartment better. (negligent misrepresentation)

Innocent misrepresentation

due to reliance on an expert, a small sum of damages

Fraudulent misrepresentation

damages covering all incurred losses + aggravated damages under common law + rescission

Negligent Misrepresentation

damages cover all incurred losses + rescission

Recission

undoing of the contract to the original position of the parties

Leaf v International Galleries

no rescission as a reasonable time has lapsed after the contract has been made, the buyer couldn't return a fraudulent painting after 5 yrs because he reasonably should have been able to know it was a fraud within a few days

Innocent party is unable to restore to the original position at the formation of the project

rescission is unable to happen

Illegal contracts

against the law, immoral, restriction of others' right to work in the same trade (automatically void)

Susan v Janesville

hairdresser agreed not to work in HK for one year, unreasonable because of the geographical location, so the clause was invalid

Kao v Koo

restrict junior partner from soliciting legal business from clients of the firm, as he wasn't a full partner; this was unnecessary to protect the legitimate interests of the firm (the restriction has to be reasonable and legitimately protect the interests of employers, not unnecessarily restricting employees and their trade)

Undue Influence

when a party agrees to the contract with a party who uses trust or power to influence them into forming the contract

Royal Bank of Scotland and Etridge

in confidential relationships, the "weaker" party has made the contract under the influence of the "superior party", the weaker party can rescind the contract if it is shown to be manifestly disadvantageous, and the stronger party can disprove this by providing evidence that the weaker party got independent advice. The making of a personal guarantee by a wife to secure the debts of her husband's company is manifestly disadvantageous to her, and the bank must make sure she has been given independent advice

Lloyds Bank v Bundy

a customer relied on a bank for its advice on banking matters over a long time, if the "weaker party" can show that he, as a matter of fact, has trust and confidence on the "superior party" on matters in which the superior party knowledge/skills, the court can also determine that the "weaker party" has made the contract under the influence of the stronger party

Bank of China v Wong

in a case where there is no presumed undue influence, a party can still rescind the relevant transaction if they can prove that the other party has influenced them improperly

Unconscionable Contracts

uneven bargaining power?, has the consumer been induced or pressured?, do they understand the contract?

HSCC v Tsang

Certain contract terms unfavourable to consumers were printed in small fonts and not explained to them in a language that they could understand. These terms couldn't be enforced against consumers

Vitiating factors

Effects on the contract

Misrepresentation and undue influence

Voidable

Illegality

Void

Unconscionable contracts

Subject to revision or non-enforcement

Lo v Cheung

a case concerning an unconscionablecontract, in this case the court took into account the price in determining whether therelevant contract was unfair