REAL OR GENUINE CONSENT CHAPTER 13 REAL OR GENUINE CONSENT 2011 Thomson Reuters Legal & Regulatory Ltd. All Rights Reserved. PowerPoint slides to accompany A Guide to Business Law, 19th Edition

CONTRACTS REQUIRED TO BE IN WRITING Writing is not generally a legal requirement for most contracts. However, statute law may sometimes require contracts to be fully written or at least evidenced in writing. Fully written Marine Insurance Transfer of shares Transfer of copyright Evidenced in writing Sale of land Leases 2011 Thomson Reuters Legal & Regulatory Ltd. All Rights Reserved. PowerPoint slides to accompany A Guide to Business Law, 19th Edition

WHAT MISTAKES MAY AFFECT A CONTRACT? Mistakes may make any contract void or voidable depending on the facts There are THREE (3) types of mistake that may affect the legality of a contract: Common mistake Mutual mistake Unilateral mistake 2011 Thomson Reuters Legal & Regulatory Ltd. All Rights Reserved. PowerPoint slides to accompany A Guide to Business Law, 19th Edition

MISREPRESENTATIONS A representation is a statement of fact that may have motivated or induced another to make a contract Where the statement is untrue this is referred to as “misrepresentation” There are three types of misrepresentation: 1. Fraudulent 2. Innocent 3. Negligent (careless) Different remedies are available for each type of misrepresentation. 2011 Thomson Reuters Legal & Regulatory Ltd. All Rights Reserved. PowerPoint slides to accompany A Guide to Business Law, 19th Edition

FRAUDULENT MISREPRESENTATIONS False statement made wrongfully – dishonestly or with reckless indifference as to whether it was true or not. At common law a contract induced by fraudulent misrepresentation is a voidable contract. The innocent party may be allowed to terminate the contract and /or claim damages for any losses 2011 Thomson Reuters Legal & Regulatory Ltd. All Rights Reserved. PowerPoint slides to accompany A Guide to Business Law, 19th Edition

INNOCENT MISREPRESENTATION Where the representation was untrue but there was no intention to mislead and no knowledge of the falsity As the misrepresentation was not deliberate or intentional the innocent party is only permitted to terminate the contract (rescission) but they are not entitled to claim any damages In some cases where it can be shown that the innocent misrepresentation was made carelessly then there may be a right to damages 2011 Thomson Reuters Legal & Regulatory Ltd. All Rights Reserved. PowerPoint slides to accompany A Guide to Business Law, 19th Edition

NEGLIGENT MISREPRESENTATION A false statement can be made innocently but also carelessly If the plaintiff can show that the statement was made to them by a person who owed them a “duty of care” and that there was reasonable reliance on the statement For negligent misrepresentation, the remedy is damages A good example is Shaddock v Parramatta City Council This remedy is in tort rather than under contract law 2011 Thomson Reuters Legal & Regulatory Ltd. All Rights Reserved. PowerPoint slides to accompany A Guide to Business Law, 19th Edition

Unfair Contracts under the new Consumer Legislation as of 1 July 2010 The Trade Practices Amendment (Australian Consumer law) Act (No 1) 2010 prohibits the inclusion of any unfair terms in standard form consumer contracts The types of terms that the Act recognises as unfair include any terms that allow only one party the right to: Terminate a contract Change the terms of the contract Change the price payable under the contract Change the nature of goods or services Decide if a contract has been broken or interpret its meaning 2011 Thomson Reuters Legal & Regulatory Ltd. All Rights Reserved. PowerPoint slides to accompany A Guide to Business Law, 19th Edition

WHAT IS AN UNFAIR TERM IN A CONTRACT? Section 3 of the new Australian Consumer legislation assists the court in deciding unfair terms by reference to : Would it cause a significant imbalance in the rights or obligations of the parties involved Is the term reasonably necessary to protect the party in whose favour it applies Would the term cause detriment to the other party if it was enforced 2011 Thomson Reuters Legal & Regulatory Ltd. All Rights Reserved. PowerPoint slides to accompany A Guide to Business Law, 19th Edition

UNCONSCIONABLE CONTRACTS OR CONDUCT The law of unconscionable contracts protects a weaker party from being forced into an unfair bargain by a stronger contracting party Any unconscionable contract may be “voidable” where: The plaintiff is under some “special legal disability” where they cannot properly protect their interests The defendant took “unfair or unconscientious advantage” of that disability to obtain an obvious advantage for themselves and an unfair bargain for the plaintiff: CBA v Amadio. 2011 Thomson Reuters Legal & Regulatory Ltd. All Rights Reserved. PowerPoint slides to accompany A Guide to Business Law, 19th Edition

UNCONSCIONABLE CONTRACTS: STATUTE LAW The Contracts Review Act 1980 allows a court to review any contract alleged to be unfair/harsh or oppressive (within two years of contract) The Trade Practices Act 1974 prohibits unconscionable conduct in various situations: Section 51AA prohibits conduct that is unconscionable within the meaning of the common law (general application) Section 51AB prohibits unconscionable conduct in consumer transactions (consumer protection) Section 51AC targets unconscionable conduct in business transactions to protect small businesses NOTE the new Australian Consumer Law provides for unconscionable contracts 2011 Thomson Reuters Legal & Regulatory Ltd. All Rights Reserved. PowerPoint slides to accompany A Guide to Business Law, 19th Edition

DURESS AT COMMON LAW Duress refers to unlawful or illegitimate pressure to force an innocent party into a contract against their will Duress may include: physical violence or threats threats against goods or property economic threats Where it is proven that duress motivated the person to make an agreement involuntarily, then the contract is voidable at common law. 2011 Thomson Reuters Legal & Regulatory Ltd. All Rights Reserved. PowerPoint slides to accompany A Guide to Business Law, 19th Edition

UNDUE INFLUENCE Equity will offer a remedy where a person in a dominant position over another uses their influence to coerce the other into an unfair bargain Certain relationships give rise to a PRESUMPTION of undue influence and these include: parent/child guardian/ward doctor/patient minister/priest/devotee In such contracts the defendant must DISPROVE that there was undue influence. In contracts between parties that are NOT in any special relationship, the plaintiff must prove their consent was not given freely – ie show ACTUAL undue influence. Equity requires a plaintiff to seek a remedy without delay (Allcard v Skinner). 2011 Thomson Reuters Legal & Regulatory Ltd. All Rights Reserved. PowerPoint slides to accompany A Guide to Business Law, 19th Edition