1. Fundamentals of Law
Misrepresentation

2. History 1880’s – Caveat Emptor – Let the buyer beware Court of Equity
Relief for fraudulent misrepresentation
Recision 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

3. 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

4. Categories of Misrepresentation
Fraudulent misrepresentation
Representor knew it to be false or was reckless as to whether it was true or false
Innocent misrepresentation
Representor did not know it was false and owed no duty of care to the representee

5. Categories of Misrepresentation
Negligent 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

6. Elements of Misrepresentation
The statement was false
The statement was one of fact
Statement was addressed to the representee before or at the time that the contract was entered into
The statement was intended to induce, and did induce, the representee to enter into the contract

7. Statement was false Silence will not normally suffice Half truths
Re Hoffman; ex p Worrell v Scilling (p39)
Krakowski v Eurolynx (S&OR p40)
Altered circumstances
Lockhart v Osman (S&OR p40)
Misrepresentation can be made by conduct

8. Statement was one of fact
Not a mere puff
Usually, not an opinion
An opinion can be a fact where the representor has special knowledge
Smith v Land and House Property Corp (S&OR p39)
The existence of an opinion can be a fact
Sola Optical v Mills (1987) 168 CLR 628

9. 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)
But is sufficient if communicated to a third party with the intention that it would be communicated to the representee

10. 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)
Representee is not required to investigate
Redgrave v Hurd (S&OR p41)

11. Remedies for Misrepresentation
Recision
Contract is void ab initio
Not the same as termination
Damages

12. Rescission
The parties must be capable of being restored to substantially the position they were in before the contract was entered into
Known as “Restitution”
Court can make consequential orders
Precise restitution is not necessary
Not possible where services already supplied pursuant to a contract of service

13. Rescission (cont.)
Innocent party must give notice of rescission to other party
Notice can be implied from conduct
Academy of Health & Fitness v Power (S&OR p218)

14. Rescission (cont.)
Rescission is not permitted if the contract has been affirmed
After discovering misrepresentation, innocent party does any act which indicates that he is treating contract as still running
A delay in rescinding can amount to an affirmation

15. Rescission (cont.)
Not permitted if the legal rights of an innocent third party will be adversely affected
For example, where goods have been on sold to a bona fide purchaser for value
But, rescission will be effective where it occurs before the third party gains an interest
Car & Universal Finance Co v Caldwell (S&OR p218)

16. Statutory Provisions S52 Trade Practices Act
A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive
S9 Fair Trading Act (Vic)
A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive

17. Duress, Undue Influence and Unconscionable Conduct
Fundamentals of Law
Duress, Undue Influence and Unconscionable Conduct

18. Duress
A contract entered into due to coercion or force can be rescinded
Coercion can be:
To the person;
To goods; or
Economic duress

19. Duress (cont.) Duress to the Person
Threats of physical punishment or imprisonment to the person, his family or friends
Duress to Goods
Threats that are made against a person’s property

20. 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
North Ocean Shipping v Hyundai (p220)
A lawful threat may be illegitimate
Cockerill v Westpac (S&OR p220)
"The proper approach is to ask whether any applied pressure induced the victim to enter into the contract and then asked whether that pressure went beyond what the law is prepared to count as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts of unconscionable conduct. The categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress". (Crescendo Management v Westpac Banking Corporation [1988] 19 NSWLR 40)
However, this does not prevent a creditor from "driving a hard bargain". (Wardley Australia Limited v McPharlin [1984] 3 BPR 9500)

21. 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 special relationships and where one party is in a position of dominance or confidence
O’Sullivan v Management Agency (S&OR p221)
Lloyd’s Bank v Bundy (S&OR p222)
Undue influence denotes "the improper use of the ascendancy acquired by one person over another for the benefit of himself or someone else, so that the acts of the person influenced are not, in the fullest sense of the word, his free voluntary acts". (Union Bank of Australia Limited v Whitelaw [1906] VLR 711, 720)
Unlike duress, undue influence may not be characterised by any specific act, but it does involve "some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating and generally, although not always, some personal advantage" by the party exerting the influence. (Williams v Bayley [1866] LR 1 HL 200)

22. Undue influence (cont.)
There must be more than mere reliance or influence
Innocent party must show that the contract would not have been made without the undue influence
Court will look at:
The equality of the bargain
The weaker party’s ability to make free and independent choices
Whether the weaker party received independent advice
Undue influence is presumed in two particular situations.
The courts have accepted that certain classes of a relationship without further examination of the facts give rise to a presumption e.g. parent and child, guardian and ward, doctor and patient, solicitor and client, spiritual adviser and member of his congregation, a man and his fiance and a trustee and their beneficiaries.
Apart from these well recognised instances of relationships of influence between established classes of persons it is open to one party to a contract to prove a special relationship or influence, ascendancy or trust arising from particular features of the relationship between them. A good example is Lloyds Bank Limited v Bundy [1975] QB 326
The presumption will only be rebutted if a creditor can show that the contract was entered into as a result of a free exercise of the will of the guarantor and that the other party understood the nature, effect and consequences of entering into the transaction. One of the most obvious ways of discharging this onus is to show that the guarantor was given independent advice from an impartial person, usually, although not necessarily, a lawyer. (Berdoe v Dawson [1865] 55 ER 768 & Union Fidelity Trustee Co-Op of Australia Limited v Gibson [1971] VR 573, )

23. 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)
Commercial Bank v Amadio (S&OR p61)
Elements
Special disability
Absence of any equality between the parties
Disability evident to other party
The courts can set aside guarantees which are unconscionable bargains. The right to do so is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with a consequence that there was an absence of any reasonable equality between them and (ii) the disability was sufficiently evident to the stronger party to make a prima facie unfair or unconscientious that he procure, or accept the weaker parties assent to the impugned transaction in the circumstances in which he procured or accepted it. Where such circumstances were shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: "the burden of showing the fairness of the transaction is thrown on the person who seeks to obtain the benefit of the contract". (Commercial Bank of Australia Limited v Amadio)

24. Unconscionable Conduct - Remedies
Originally, only rescission was available
s51AA Trade Practices Act and s7 Fair Trading Act permits damages
A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories.
S82 Trade Practices Act & s159 Fair Trading Act
A person who suffers loss or damage by conduct of another person … may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.

25. Illegal and Void Contracts
Fundamentals of Law
Illegal and Void Contracts

26. Illegal Contracts Prohibited by Statute; or
“Injurious to the public good” and therefore illegal at common law
Injurious to public life
Contrary to the nations foreign affairs (trading with the enemy)
Interference with administration of Justice

27. Void contracts Declared void by Statute; or
“injurious to the public good” but not serious enough to be illegal
Immoral contracts
Prejudicial to family life
Restraint of trade

28. Void contracts (cont.) Differ from illegal contracts
Bad part of contract can be severed from good part
Related contracts may still be enforceable
Transferred property is recoverable

29. Restraint of Trade All citizens should be free to ply their trade
A clause in restraint of trade is only enforceable to the extent that it is reasonable
It will only be reasonable if it is no wider than is reasonably necessary to protect the legitimate interests of the party relying on it
Otherwise it is void
ICT v Sea Containers (S&OR p140)
Peters (WA) Ltd v Petersville Ltd (S&OR p140)

30. Restraint of Trade (cont.)
3 Types of Contract where restraint of trade often arises
Contracts of service
Sale of business
Restrictive trading agreements
Employment contracts Employment contracts are subject to a stricter approach than contracts for the sale of a business.1 The approach to be taken is as follows.
First, the properly protectable interests of the employer, to which the nature and geographical spread of the employer’s operations, the location of clients and the goodwill of the business will be relevant, must first be identified.3
Second, the status, functions and duties of the particular employee must be identified, and to which the degree of contact between the particular employee and the clients, the level of seniority and responsibility within the structure of the employer’s operations and possession of (or access to) trade secrets and confidential information belonging to the employer will be relevant.4
Third, whether, in the light of these matters, the particular restraint imposed goes no further, and extends no longer, than is necessary to safeguard the employer’s protectable interest.
Sale of business In a contract for the sale of a business the sale of the goodwill of the business provides a justification for and a measure of the enforceability of a restraint. Even a restraint unlimited in area may, in an appropriate case, be upheld in this context. If the restraint is not ancillary to the sale of the goodwill of a business it will be struck down.
Exclusive dealing and other commercial transactions Where a manufacturer and retailer reach an agreement under which the retailer agrees to take all requirements exclusively from the manufacturer,1 the approach has been to regard the parties as the best judges of what is reasonable between them, and, assuming the parties have in fact bargained at arms’ length, the court will be slow to hold the restraint unreasonable.  The same approach has been applied to:
(1) restraints in contracts between traders and trading associations, entered into for the purpose of orderly marketing and price protection;
(2) restraints in contracts for the distribution of products, between agents and combinations of producers, aimed at regulating supply and maintaining prices;
(3) exclusive dealing contracts between manufacturers and suppliers of raw materials; and
(4) exclusive dealing (‘solus’) agreements with garage proprietors.

31. Restraint of Trade (cont.)
Contracts of service
Courts will look at respective bargaining positions
Drake Personnel v Beddison [1979] VR 13
Buckley v Tutty (1971) 125 CLR 353
Restrictive trading agreements
See Part IV Trade Practices Act