Business Law - Chapter 6 - Misrepresentation

2 tests for undue influence

A gift so substantial that it could not be accounted for on the grounds of ordinary motives, a relationship of trust so that the recipient was in a position to exercise undue influence

Negligent Misrepresentation

A statement where the representor didn't have reasonable grounds for their belief in its truth

Fraudulent Misrepresentation

A statement where the representor either knew it was false or carelessly didn't know if it was true or false

Wholly Innocent Misrepresentation

A statement where the representor had reasonable grounds for their belief in its truth

3 ways the right to rescind a contract can be lost

Affirmation, if it has become impossible to restore the parties to their pre-contract position, if a third party has acquired rights to the subject matter of the contract

What is the remedy for a mutual mistake?

An objective test takes place to see whether the contract can be understood to have a single meaning. If this is the case then the contract is valid, if not it is void

Misrepresentation

An untrue statement of fact that induced the other party into the contract

5 factors which can render a contract invalid

FUCMI - Form, Undue influence, Capacity, Mistake, Illegality

Difference between damages decided on a tort of deceit basis and damages decided on a contractual basis

For damages decided on a tort of deceit basis there is no requirement that the damages are foreseeable

How can affirmation result in the loss of the right to rescind a contract?

If a person intends to continue with the contract despite knowledge of their right to rescind it

How could a change of circumstances make silence an actionable misrepresentation?

If a statement was true but becomes untrue and the person stays silent

How could an insurance contract make silence an actionable misrepresentation?

Insurance contracts are made in good faith so a person taking out insurance must reveal all material facts whether they are asked about them or not

Fiduciary

Involving trust

What happens if a contract is made under economic duress/ undue influence?

It becomes voidable

3 examples of contracts that have to be in writing

Land, credit contracts, copyright agreements

Remedies for wholly innocent misrepresentation: the innocent party can... (2)

Rescind the contract OR claim damages

Remedies for fraudulent misrepresentation: the innocent party can... (2)

Rescind the contract, claim damages

Remedies for negligent misrepresentation: the innocent party can... (2)

Rescind the contract, claim damages

How can form render a contract invalid?

Some contracts must be in writing

Rescission

The unmaking of a contract in order to put the parties back into their pre-contract positions

Silence can be capable of amounting to an actionable misrepresentation if... (4)

There was a change of circumstances, the contract was an insurance contract, a fiduciary relationship existed between the parties, the silence made the statement misleading

Damages for negligent and fraudulent misrepresentation are decided on a _ basis whereas damages for wholly innocent misrepresentation are decided on a _ basis

Tort of deceit, contractual

Contracts involving people under the age of 18 are __________ unless... (3)

Unenforceable, beneficial contracts, necessaries, continuing obligations

What is the remedy for a common mistake?

Void

Misrepresentation makes the contract...

Voidable

Cross-Purposes

When parties do not understand each other because they are talking about different contracts without realising it

Mutual Mistake

When the parties were at cross-purposes so there was no real agreement

Common Mistake

Where both parties make the same mistake