Introduction and misrepresentation

Understanding Contracts

• Receipt of a Contract: The conditions under which a contract can be received or rescinded are essential for valid agreements.

  • Consensus on material terms is crucial. Without consensus, the contract becomes void.

Material Terms

• Definition: Material terms refer to the essential elements or conditions agreed upon by the parties involved in a contract.

  • Example: If you purchase a car, the expectation is to receive the car, not an unrelated item like a house.

  • Importance: Clarity on the specifics of the material terms avoids mistakes that can void the contract.

  • The more specific the terms (e.g., model, mileage), the clearer the agreement.

Errors and Misrepresentation

• Mistake in Material Terms: If a mistake is made regarding the material terms, it leads to a void contract.

• Misrepresentation: Involves incorrect information that influences a party's decision to enter the contract.

• Types of Misrepresentation:

  • Material facts (leading to a void contract)

  • Error in motive (valid contract but voidable based on undisclosed information)

Improper Behavior and Rescission

• Contracts can become voidable if one party behaves improperly through:

  • Duress: Coercion to agree to the contract.

  • Undue Influence: Taking advantage of a relationship or position of power.

  • Misrepresentation: Providing false information about material terms.

• Rescission: The process of canceling a contract if it is voidable, allowing one party the option to exit.

• Remedies: Include restitution (returning what was exchanged) and damages (financial compensation).

Legal Standards and Grounds for Misrepresentation

• Legal Grounds Recognized: Traditional grounds include duress and undue influence. Contemporary contexts include economic duress and abuse of circumstances, emphasizing alignment with constitutional values.

• Economic Duress Example: A contract is signed under extreme pressure caused by financial situations, leading one party to claim that the agreement was not made freely.

Requirements for Claiming Damages

• To succeed in seeking damages, the claimant must prove:

  • Conduct: Actions, either positive or negative.

  • Fault: Whether there was intention or negligence in the act.

  • Loss: Can be patrimonial (financial) or non-patrimonial (non-financial).

  • Causality: Link between conduct and loss.

  • Unlawfulness: Legal grounds for the claim.

Distinguishing between Misrepresentation and Warranty

• Misrepresentation: Leads to a voidable contract if it involves false statements about material facts.

• Warranty: A promise regarding the quality or performance of a product. Breaches of warranty lead to different remedies, primarily for breach of contract rather than misrepresentation remedies.

Legal Duty to Disclose

• Silence may constitute misrepresentation if there is a legal duty to disclose certain facts.

  • Example: Police officers have a responsibility to act in accordance with their official duties.

Materiality in Misrepresentation

• Material facts are assessed through the reasonable person standard, determining if a typical individual in that situation would consider the information significant.

• Example: If a seller misrepresents financial health related to a business, that could materially mislead the buyer.

Significance of the Reasonableness Test

• A reasonable standard tests whether a misleading action stems from average knowledge and expectations in similar situations, often framed within judicial decisions.

Misrepresentation Case Study: Sheldon and Hugini Water

• Situation: Sheldon misrepresented his qualifications while applying for a job.

  • Legal Issues: The core question was whether his deception constituted misrepresentation under contract law.

• Court Findings: The court found that misrepresentation was present, resulting in the contract being voidable due to the fraud employed.

• Conclusion: Clarified that contracts voidable due to misrepresentation demonstrate fraudulent behavior impacting the legitimacy of the contracting parties.