Copyright © 2008 Pearson Education Canada8-1 Chapter 8: Factors Affecting the Contractual...

Copyright © 2008 Pearson Education Canada 8-1

Chapter 8:Chapter 8:Factors Factors

Affecting the Affecting the Contractual Contractual RelationshipRelationship


Factors Affecting Contractual Factors Affecting Contractual Relationships Relationships

MistakeMistake MisrepresentationMisrepresentation Duress and undue influenceDuress and undue influence Unconscionable TransactionUnconscionable Transaction Privity of ContractPrivity of Contract AssignmentAssignment


Mistake Mistake

Error that destroys consensusError that destroys consensus Shared Mistake—fundamental mistake Shared Mistake—fundamental mistake

about subject matter of contract—about subject matter of contract—common to both parties—courts must common to both parties—courts must correct obvious errorcorrect obvious error

Misunderstanding - questions existence Misunderstanding - questions existence of consensus - differing interpretationsof consensus - differing interpretations


Mistake/2 Mistake/2

One-sided Mistake-fundamental mistakeOne-sided Mistake-fundamental mistake usually when one party misleads the otherusually when one party misleads the other mistaken identificationmistaken identification

Non Est FactumNon Est Factum (It is not my act) (It is not my act) mistake goes to the nature of the documentmistake goes to the nature of the document usually involves misrepresentationusually involves misrepresentation

Rules of Interpretation apply with simple Rules of Interpretation apply with simple misunderstandingmisunderstanding


Rules of Interpretation Rules of Interpretation

Reasonable person testReasonable person test Literal or liberal meanings imposed on Literal or liberal meanings imposed on

written termswritten terms Courts or statutes may imply termsCourts or statutes may imply terms Parol Evidence RuleParol Evidence Rule

Outside evidence will not change clear Outside evidence will not change clear wordingwording


Case Summary Case Summary

Cooper v. PhibbsCooper v. Phibbs Because of a shared mistake a vendor Because of a shared mistake a vendor

sold some property, on which he had sold some property, on which he had done considerable work, to a neighbour done considerable work, to a neighbour who it turned out already owned the who it turned out already owned the property. property.


Case Summary/2 Case Summary/2

There was no way to compensate the There was no way to compensate the vendor for his improvements to the vendor for his improvements to the property without the court applying an property without the court applying an equitable principle.equitable principle.


Case Summary/2Case Summary/2

There was no way to compensate There was no way to compensate the vendor for his improvements to the vendor for his improvements to the property without the court the property without the court applying an equitable principle.applying an equitable principle.


Misrepresentation Misrepresentation

False statement of fact that persuades False statement of fact that persuades someone to enter into a contract.someone to enter into a contract.

The statement must be an allegation of The statement must be an allegation of factfact

Silence is not misrepresentation when Silence is not misrepresentation when there is no duty to disclosethere is no duty to disclose

The statement must be incorrect and The statement must be incorrect and untrue and must have been the untrue and must have been the inducement that led to the contractinducement that led to the contract


Innocent Misrepresentation Innocent Misrepresentation

The person making it honestly believes it The person making it honestly believes it to be true.to be true.

Remedies are limited to rescissionRemedies are limited to rescission Rescission puts both parties back into Rescission puts both parties back into

original positionsoriginal positions


Innocent Misrepresentation/2 Innocent Misrepresentation/2

Rescission is not available when contract Rescission is not available when contract is:is:

affirmedaffirmed impossible to restoreimpossible to restore where a third party is involvedwhere a third party is involved


Fraudulent Misrepresentation Fraudulent Misrepresentation

Victim of intentional misrepresentation can sue Victim of intentional misrepresentation can sue for damages in addition to rescissionfor damages in addition to rescission

An innocent misrepresentation becomes An innocent misrepresentation becomes fraudulent if not corrected when discoveredfraudulent if not corrected when discovered

Remedies:Remedies: rescissionrescission damagesdamages contract may be considered voidcontract may be considered void



Negligent Misrepresentation Negligent Misrepresentation In In Haig v. BamfordHaig v. Bamford the courts found that the courts found that

even though the accountants honestly even though the accountants honestly believed what they had stated on the believed what they had stated on the audit was true, because they had not audit was true, because they had not measured up to the standard expected of measured up to the standard expected of a reasonable accountant they were liable a reasonable accountant they were liable for the damages they caused to the for the damages they caused to the group of investors they knew about.group of investors they knew about.


Duress and Undue Influence Duress and Undue Influence

DuressDuress threat of violence makes contract voidablethreat of violence makes contract voidable

Undue InfluenceUndue Influence which reduces free will to bargain - voidable which reduces free will to bargain - voidable

contractcontract presumed in certain relationshipspresumed in certain relationships


Duress and Undue Influence/2 Duress and Undue Influence/2

Unconscionable Transactions Unconscionable Transactions Where a person takes advantage of Where a person takes advantage of

another’s vulnerability - voidableanother’s vulnerability - voidable


Question for Discussion Question for Discussion

The courts will presume undue influence The courts will presume undue influence in certain circumstances which may in certain circumstances which may include a spouse assuming the include a spouse assuming the indebtedness of their partner.indebtedness of their partner.

What evidence do you think would What evidence do you think would convincingly demonstrate to a court that convincingly demonstrate to a court that there has been undue influence?there has been undue influence?



Stevenson v. Hilty - Stevenson v. Hilty - the courtthe court determined determined that a contract could be set aside if:that a contract could be set aside if:

One party is ignorant, in need or in One party is ignorant, in need or in distressdistress

One party uses position of power to One party uses position of power to achieve an advantageachieve an advantage

The agreement is substantially unfair to The agreement is substantially unfair to weaker partyweaker party


Privity of Contract Privity of Contract

Contract can only affect parties to itContract can only affect parties to it Exceptions:Exceptions:

Original party can enforce contract when Original party can enforce contract when benefits bestowed on outsiderbenefits bestowed on outsider

Novation - a new party is substituted for an Novation - a new party is substituted for an original party to the contractoriginal party to the contract

Contractual Rights run with landContractual Rights run with land Contracts created through agentsContracts created through agents



The number of exceptions to the privity The number of exceptions to the privity rule suggest that there is no justification rule suggest that there is no justification for its existence.for its existence.

Consider the validity of this statement Consider the validity of this statement and the advantages and disadvantages and the advantages and disadvantages of the principle of privity of contract, of the principle of privity of contract, particularly with reference to trusts which particularly with reference to trusts which are designed to bestow benefits on third are designed to bestow benefits on third parties.parties.


Assignment Assignment

The benefits (chose in action) received The benefits (chose in action) received under a contract can be assigned or under a contract can be assigned or transferred to anothertransferred to another

Qualifications for statutory assignmentQualifications for statutory assignment absolute and unconditionalabsolute and unconditional must be in writing and completemust be in writing and complete must give proper noticemust give proper notice


Assignment/2 Assignment/2

Some things cannot be assigned:Some things cannot be assigned: the right to sue (champerty)the right to sue (champerty) when contract involves the personal when contract involves the personal

performance of a particular skillperformance of a particular skill


Assignment/3 Assignment/3

Assignee is in the same position as Assignee is in the same position as original contractororiginal contractor

Subsequent claims do not affect Subsequent claims do not affect assigneeassignee

Contractual rights assigned automatically Contractual rights assigned automatically in case of death or bankruptcyin case of death or bankruptcy



The rules relative to assignment of The rules relative to assignment of contractual benefits seem to favour the contractual benefits seem to favour the original contractor because the original contractor because the agreement is subject to the rights agreement is subject to the rights between the parties to the original between the parties to the original contract.contract.

Is this appropriate, or should the Is this appropriate, or should the advantages be given to the assignee?advantages be given to the assignee?

Copyright © 2008 Pearson Education Canada8-1 Chapter 8: Factors Affecting the Contractual...

Documents

Transcript of Copyright © 2008 Pearson Education Canada8-1 Chapter 8: Factors Affecting the Contractual...