Copyright Guy Harley Revision

Copyright Guy Harley Void, Voidable & Unenforcable  Void  Where one or more of essential elements of contract are missing  There is no contract  Voidable  Parties have option to avoid contract  Equitable remedy of rescission  Valid & enforceable until one party rescinds

Copyright Guy Harley Rescission  Effect  Contract is terminated ab initio (i.e. it is as though there never was a contract)  cancels the contract from the point of termination  Procedure  Innocent party rescinds by giving notice to the other party  Notice can be implied from conduct

Copyright Guy Harley Bars to Rescission  Third Party rights adversely affected  Substantial restitution not possible  Innocent party affirms contract  Party wishing to rescind does not have “clean hands”  Lapse of time

Copyright Guy Harley Duress  A contract entered into due to coercion or force can be rescinded  Coercion can be:  To the person;  To goods; or  Economic duress

Copyright Guy Harley Economic duress  An economic threat that is not “legitimate”  No rule that that commercial parties have to be fair to one another  A threat to break a contract can be economic duress  A lawful threat may be illegitimate

Copyright Guy Harley Undue influence  The unconscionable use by one person of power possessed by him over another in order to induce the weaker party to enter into a contract  Presumed in pre-existing special relationships where one party is in a position of trust and confidence  Called a “fiduciary relationship”

Copyright Guy Harley Fiduciary Relationships  Parent & Child  Guardian & ward  Principal & Agent  Trustee & Beneficiary  Doctor & Patient  Lawyer & Client  Religious advisor & Follower  More

Copyright Guy Harley Where No Special Relationship  Weaker party must show that there is a relationship of dependence, trust & confidence  Stronger Party exerted undue influence to the extent that the weaker party could not exercise an independent judgment  There must be more than mere reliance or influence  Weaker party must show that the contract would not have been made without the undue influence

Copyright Guy Harley Where no Special Relationship  Court will look at:  The equality of the bargain  The weaker party’s ability to make free and independent choices  Domination by one party  Dependency on another  Need for guidance, advice and support  Low intelligence, weak mindedness, illiteracy  Age & Health  Lack of independent financial or legal advice

Copyright Guy Harley Unconscionable Conduct  One party takes advantage of the other parties special disability to the extent that the contract is unfair or unconscionable  Blomley v Ryan (S&OR p219\261)  Commercial Bank v Amadio (S&OR p61\86)  Elements  Special disability  Absence of any equality between the parties  Disability evident to other party

Copyright Guy Harley Mistake  A party cannot get out of a contract because they made a mistake  Exceptions:  Mistake due to other party’s misrepresentation, unconscionable conduct etc.  Common mistake  Mutual mistake  Unilateral mistake  Mistake as to nature of document

Copyright Guy Harley Common Mistake – Equity  A common misunderstanding  An important but not fundamental mistake  Mistake through no fault of either party  Unconscionable for one party to benefit from mistake  No bar to rescission

Copyright Guy Harley Mutual Mistake  Parties are talking about different things  Both are mistaken  Difficult to work out what parties intended  No “meeting of the minds”

Copyright Guy Harley Unilateral Mistake - Equity  One party is mistaken as to a fundamental term; and  Other party is aware, or should be aware, of the mistake  Mistaken party will suffer detriment if not allowed to rescind

Copyright Guy Harley Unilateral Mistake – Common Law  Mistake as to Identity  If Third Party rights involved, identity must be important  Mistake as to nature of document  Non est factum

Copyright Guy Harley Mistake as to nature of document  Radical difference between what was signed and what party believed they were signing  Mistaken party relied on others for advice because unable to  read document  Understand document  Mistaken party not careless

Copyright Guy Harley Misrepresentation

Copyright Guy Harley History  1880’s – Caveat Emptor – Let the buyer beware  Court of Equity  Relief for fraudulent misrepresentation  Rescission was only remedy  Common Law Courts  Relief for innocent misrepresentation only if it became a term of the contract  Tort of negligent misrepresentation  Only remedy was damages

Copyright Guy Harley History  1970’s – Statutory Reform  S52 Trade Practices Act & s11 Fair Trading Act  Removed distinction between fraudulent, negligent and innocent misrepresentation  Built upon previous law regarding misrepresentation

Copyright Guy Harley

Copyright Guy Harley Elements of Misrepresentation  Statement of material fact  Statement was false  Statement was addressed to the representee before or at the time that the contract was entered into  Statement induced the representee to enter into the contract  Statement caused loss

Copyright Guy Harley Statement was one of fact  Statement of past or present fact  Not  a mere puff  A misstatement of the law  Statement of future intention  Unless no real intention at time of representation  Edgington v Fitzmaurice  Usually, not an opinion

Copyright Guy Harley Statement was one of fact  An opinion can be a fact where:  No genuine or actual belief in its truth  No reasonable person could hold opinion  The representor has special knowledge  Smith v Land and House Property Corp (Graw )  The existence of an opinion can be a fact  Sola Optical v Mills (1987) 168 CLR 628

Copyright Guy Harley Statement was false  Silence will not normally suffice  Except  Distortion of a positive representation (half truths)  Re Hoffman; ex p Worrell v Scilling  Krakowski v Eurolynx (graw )  Altered circumstances  With v O’Flanagan (Graw )  Lockhart v Osman (Graw )  Where there is a fiduciary relationship  Where contract is of the utmost good faith (e.g. insurance)

Copyright Guy Harley Addressed to the Representee  A representee cannot sue on a representation that was not directed to him and was not intended to induce him into making the contract  Peek v Gurney (S&OR p41\61)  But is sufficient if communicated to a third party with the intention that it would be communicated to the representee

Copyright Guy Harley Statement Induced Representee to Act  Not necessary that it was the only reason for entering the contract  But it must be one of the reasons  Representee cannot be aware of truth before entering into the contract  Holmes v Jones (S&OR p40\60)  Representee is not required to investigate  Redgrave v Hurd (S&OR p41\61)

Copyright Guy Harley Categories of Misrepresentation  Fraudulent misrepresentation  Negligent Misrepresentation  Innocent Misrepresentation  Misleading & Deceptive Conduct  Term of Contract

Copyright Guy Harley Fraudulent Misrepresentation  Representor made a false representation of fact  Knowingly  Without believing its truth or  was reckless as to whether it was true or false  Can sue for damages for tort of deceit whether a term of the contract or not

Copyright Guy Harley Fraudulent misrepresentation (deceit)  Liability for fraud cannot be excluded  Remedy for fraudulent misrepresentation is damages Step 1 A false representation of fact was made (beware of promises, opinions or a mere puffery) Step 2 The representation was intended to (and did) induce the representee to act ; (eg, by creating a contract) Step 3 The false representation was fraudulent: the representor knew the statement was untrue, or was reckless as to its truth

Copyright Guy Harley Negligent Misrepresentation  There was a misrepresentation  Representor owed a duty of care to representee  Representor failed to exercise the required standard of care  Loss, which was a reasonably foreseeable consequence of the misrepresentation, was caused by misrepresentation

Copyright Guy Harley Negligent misrepresentation  Liability for negligence can be excluded by an exemption clause  Remedy for negligence is damages

Copyright Guy Harley Duty of Care  Fiduciary relationships  Special relationships  A person gives information or advice on a serious matter where he knows, or ought to know, that he is being trusted to give the information and knows that the other party relies and acts on the advice (Shaddock v City of Parramatta)  Applies to experts and non-experts

Copyright Guy Harley Innocent misrepresentation  Representor did not know it was false and owed no duty of care to the representee  Will be voidable for mistake  No damages claimable  But see s7 Misrepresentations Act

Copyright Guy Harley Misrepresentations Act  Damages available for all misrepresentations, including innocent misrepresentation  Defence to misrepresentation if representor can prove:  Had reasonable grounds for believing representation was true; or  They were n ot person who made statement and did not know that it had been made or that it was untrue

Copyright Guy Harley Misleading & Deceptive Conduct  Section 52 Trade Practices Act  No need for fraud or negligence

Copyright Guy Harley Misleading or deceptive conduct (statutory misrepresentation)  Prominent and clear disclaimers may affect liability.  Remedies:  Damages (if the misleading or deceptive conduct representation caused the loss);  Contract created in reliance on the misleading conduct may be varied or declared void;  Injunctions;  Other remedies (eg corrective advertising);  Criminal sanctions are available for misrepresentations under s 75AZC TPA.

Copyright Guy Harley Remedies for Misrepresentation  Recission  Contract is void ab initio  Not the same as termination  Damages

Copyright Guy Harley Capacity to Contract

Copyright Guy Harley Contracts with Minors  Anyone under 18 years of age  Contracts with minors can be  Valid – legally enforceable  Voidable – legally enforceable until repudiated by the minor

Copyright Guy Harley Contracts with Minors (Cont)  Valid contracts  Supply of necessaries  Contract for the supply of goods and services that are suitable to the condition in life of the minor and to his actual requirements at the time of sale and delivery  Onus is one person seeking to enforce contract against minor  Nash v Inman  Reasonable price not contract price  Beneficial contracts of service

Copyright Guy Harley Contracts with Minors (Cont)  Beneficial contracts of service  E.g. apprenticeships  Must be for the benefit of the minor  Ratification by Minor after turning 18  Contract becomes valid and enforceable