Chapter 9: Grounds Upon Which a Contract May Be Set Aside: Mistake and Misrepresentation

Undue Influence

Duress is the threat of harm (Physical, economic, financial) Comply out of fear for duress. Undue influence is the opposite of duress, do it out of love. Defence is made by independence. Voidable

Mistakes about the Subject Matter: Mistake about the value of the subject matter

A buyer is expected to do his homework on the good he is buying, however when a misrepresentation occurs by the seller, rescission may be available. The contract is voidable. If doesn't move quickly, nothing happens. Ex. Marilyn Monroe Dress, Painting not Van gogh example.

Non Est Factum

A form of pleading relied on if contract is apparently valid but for the fact the person was tricked into signing it. Not very effective if party is relatively sophisticated court will hold them responsible for own carelessness. "Not my document" I didn't intend to sign it. Carelessness doesn't count, they're still liable.

Mutual Mistake

Both parties believe a different false fact. Ex. The car is rear-wheel drive. You say its front-wheel and the salesman says its all-wheel drive. Both are wrong about a different thing. Correct the mistake or rescind.

Common Mistake

Both parties believe the same false fact. Ex. The car is rear-wheel drive. You say its front-wheel and the salesman says its front-wheel drive. Both are wrong about the same thing. Correct the mistake or rescind.

Mistakes about Terms: Misunderstandings about the meanings of words

Both parties place different meanings on words. The court will use reasonableness in light of the circumstances. (Could be a mutual mistake) Ex. Both ships called Peerless example. Remedy is rectification.

Mistakes about the Subject Matter: Mistake about the Existence of the subject matter

Common mistake - void. Contract never was. Ex. Cargo in a ship was destroyed (unknown to both parties, shared common mistake exists, is a void contract.

Legal Mistake

Comparing what you thought at the time vs the truth at the time. o What you believed at the moment of contracting vs. The truth at the time of contracting. Ex. I forgot my umbrella while it was raining is a mistake. But errors in judgement do not legally justify avoiding one's legal obligations under a contract.

Mistakes in Terms: Words used inadvertently

Court examines whether words/wording ought reasonably to have been understood. Make a mistake (typo maybe) writing terms. If mistake is found, contract may be voidable for mistake. (Unilateral Mistake)

Void (Pg. 187)

Goods will be returned from third party to the original seller. If original contract is void between the first two parties, it is void throughout.

Mistakes in Terms: Errors in Recording an Agreement

If a contract contains an error, but the party does not want to be released from the obligation, they want the corrected deal enforced. If the final written contract does not reflect the original agreement, then it is declared voidable for mistake. The mistake can be rectified. (Common Mistake)

Types of Misrepresentation in Contracts

Misrepresentations can provide a cause of action in both contract and tort. Misrepresentations can be: • Fraudulent • Negligent • Innocent In contract all three types make a contract VOIDABLE and leads to the remedy of rescission • Only the fraudulent and negligent give rise to remedies in tort

Legal Mistake

Mistakes must be about facts, not the law itself. Typically the mistake relates to the terms of the contract, the subject matter of the contract, or the identity of the party.

Equitable Relief

Only certain kinds of mistakes will make a contract void or voidable. A discretionary remedy first developed by the courts of equity to undo an injustice.

Unilateral Mistake

Only one party is wrong about something the other party is right. Ex. Buy a car, you want an all-wheel drive, you the seller know it's rear wheel drive but sell it anyway. (You know the truth, they are mistaken) thus it is voidable. Lets the guy back out who didn't know.

Voidable

The contract exists until set aside by court, rights may pass to third parties before it is set aside. Key distinction of transactions where goods are subsequently conveyed to an innocent (Buyer has to be unaware of the goods being stolen) third party. Goods are lost to third party (If the person who bought it was unaware).

Mistake about the Identity of a party to contract (Pg. 191)

Unilateral mistakes, involving fraud where an innocently party is tricked into believing the other other party he's not. If an existing identity is used, the contract is void. Blenkhorn example. Usually dealt at a distance. If they use a false identity they created, the contract is voidable as they should have done more research.

Rescission based on Misrepresentation

• Misrepresentation in fact (not opinion) induced you into the contract • Experts are the exception • Party must immediately renounce upon learning of misrepresentation • Party must take no further benefits under the contract • Beware of standard form contract excluding representations