Topic 5 - Proper Negotiation of Contracts: Mistake and Representation

What is a common mistake?

Where both parties share the same mistaken assumption about a fundamental fact.

What is a unilateral mistake?

Where only one party is mistaken and the other party knows or should know of the mistake.

What is a mutual mistake?

Where both parties misunderstand each other and are at cross-purposes.

What is misrepresentation?

A false statement of fact that induces another party to enter a contract.

What are the three types of misrepresentation?

• Fraudulent

• Negligent

• Innocent

Define fraudulent misrepresentation.

A false statement made knowingly, without belief in its truth, or recklessly.

Define negligent misrepresentation.

A false statement made carelessly where a duty of care is owed.

Define innocent misrepresentation.

A false statement made with reasonable grounds for belief in its truth.

What is rescission?

The cancellation of a contract, returning parties to their pre-contract position.

What bars rescission?

• Lapse of time

• Affirmation

• Impossibility of restoration

• Third-party rights

What is inducement in misrepresentation?

The false statement must influence the claimant to enter the contract.

What is a statement of opinion?

A belief or estimate rather than a factual assertion.

When can an opinion become actionable?

When the maker has expertise or implies supporting facts exist.

What principle came from Raffles v Wichelhaus?

No contract exists where parties attach fundamentally different meanings to an agreement.

What rule was established in Couturier v Hastie?

A contract is void where the subject matter no longer exists before formation.

What principle came from Hartog v Colin & Shields?

A party cannot enforce a contract where they knowingly “snap up” another’s obvious mistake.

What modern test came from Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd?

Common mistake only voids contracts where performance becomes impossible or radically different.

Why is Solle v Butcher important?

It recognised equitable mistake, though this approach was later rejected by The Great Peace.

Which case rejected equitable mistake?

Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd

What principle came from Spice Girls Ltd v Aprilia World Service BV?

Conduct can amount to a representation.

What rule was established in Bisset v Wilkinson?

Honest statements of opinion are not usually actionable misrepresentations.

What principle came from Smith v Land and House Property Corp?

Statements of opinion may become actionable where they imply supporting facts.

What did Esso Petroleum Co Ltd v Mardon establish?

Expert predictions may create liability for negligent misrepresentation.

What principle came from With v O'Flanagan?

A statement that becomes false must be corrected before contract completion.

What did Museprime Properties Ltd v Adhill Properties Ltd establish?

Half-truths and misleading partial disclosures can amount to misrepresentation.

What rule came from Redgrave v Hurd?

A claimant may rely on misrepresentation even if they could have discovered the truth themselves.

What principle came from Edgington v Fitzmaurice?

False statements of present intention are actionable misrepresentations.

What definition of fraud came from Derry v Peek?

Fraud exists where a statement is made knowingly false, without belief in truth, or recklessly.

Why is Derry v Peek important?

It established the classic definition of fraudulent misrepresentation.

What principle came from Smith New Court Securities Ltd v Citibank NA?

Fraudulent misrepresentation allows recovery for all direct losses, even unforeseeable ones.

What did Downs v Chappell establish?

Damages under s2(1) Misrepresentation Act are assessed similarly to fraudulent damages.

What principle came from Salt v Stratstone Specialist Ltd?

Courts remain willing to grant rescission unless a recognised bar applies.

What rule was established in Leaf v International Galleries?

Lapse of time can bar rescission for innocent misrepresentation.