LAW 1503 Lecture Notes - Lecture 7: State Rail Authority, Parol Evidence Rule, Puffery
23 May 2018
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MISINFORMATION
If A and B have entered into a contract, and A is under some sort of misapprehension.
After discovering the truth, what can A do?
• One party will say something to the other and I will sound too good to be true- sounds
unfeasible. Ends up being incorrect. Other party will want recourse.
• Discuss the law and apply to facts
1. Breach of contract- need not be in TC
STEP 1: in order for A to sue B for breach of contract, it must be established that
before entering into the contract B promised A that something was true
STEP 2: distinguish warranty from a mere representation
o mere representation (opinion, something said without guarantee, mere puff,
sales pitch) J J Savage & Sons Pty Ltd v Blakney
o Warranty when the statement is of fact; language used - 'guarantee' 'for
sure' 'definitely' 'absolutely'; Context- B is more knowledgeable than A on
the matter Oscar Chess Ltd; Dick Bentley Productions Ltd; or the statement
is on an important matter made just before the contract was concluded Van
den Esschert
STEP 3: The promise (warranty) became part of the contract or a collateral contract, and
turned out to be false
• Part of c* (incorporation of terms- signature; display or delivery),
o parole evidence rule
▪ apparently complete C* reduced to writing- terms supersede oral
promise Equuscorp Pty Ltd v Glengallan Investments Pty Ltd no
evidence is admissible to suggest there was an additional oral term
L G Thorne & Co Pty Ltd
o Modern View- sufficiently strong evidence can rebut presumption that what
is in writing is what the parties have officially agreed
▪ NOTE: entire agreement clauses may not bar evidence of an
additional term or implication of additional terms (can argue there is
an implied term) Hart v McDonald
• To circumvent the PE rule, A may argue the promise is enforceable as it is part of a
separate collateral contract
▪ B promises the statement is true, and in return (giving their
consideration) A promises to enter into the main contract Shepperd
v Ryde Corporation
▪ Easier to establish when the c-c deals with a matter which wouldn’t
be expected to be found in the main c
▪ collateral contract cannot be inconsistent with the main contract
Hoyt's Pty Ltd v Spencer
• B’s statement must be false
STEP 4: Remedy for breach of contract as per Robinson v Harman: Put A back in the
position they would have been in had the contract been performed- see remoteness etc
0. Estoppel- need not be in TC
• If the promise does not have contractual force, it may be enforceable in equity through
the doctrine of promissory estoppel State Rail Authority v Heath Outdoor
find more resources at oneclass.com
find more resources at oneclass.com
• A can argue that B is estopped from resiling from, or denying the truth of, an
assumption that B has encouraged A to adopt which they have relied upon to their
detriment
1. Assumption and inducement by B
2. Detrimental reliance by A- giving up more than c* price
3. Unconscionable for B to depart from the promise- more than unfair
4. Remedy at court's discretion- usually will be the enforcement of Bs promise, or
at least its value (Shidu v Van Dyke)
• Estoppel may still be established even where a written contract has an entire agreement
clause Saleh v Romanous
1. Misrepresentation at common law- need not be in TC. rescission only remedy
STEP 1: A contract is voidable for misrepresentation if there has been a
representation of existing fact (which turns out to be false) that induced the other
party to enter into the contract.
STEP 2: statement of fact which is false
• Doesn’t have to be a promise, just need to SAY it is true.
o Cannot regard something in the future; or be an opinion; or a mere puff (an
obviously exaggerated statement, not intended to be taken seriously) Mitchell v
Valherie
o Cannot be a mere failure to disclose information W Scott Fell & Co v Lloyd
• But duty to disclose updated figures when original statement is no longer
correct Slinger v Southern White
• Must disclose when reasonable expectation of disclosure Demagogue Pty
Ltd v Ramensky
• Mis-rep can arise from half-truths (something which is literally true but due
to the omission of extra qualifying information is false) Henjo
STEP 3: Inducement
• Where there is a misstatement of a material fact (something relevant to c*),
inducement will be presumed unless the representor can show that the representee did
not rely on the statement (coz P knew the truth-Holmes v Jones)
STEP 4: Rescission
• If these elements are met, and no bars to rescission apply, the contract is voidable and
the aggrieved has the right to rescind It
Bars to rescission
Affirmation
• If A affirmed
the contract
after
discovering
the truth,
they lose
their right to
recission
Restoration of pre-contractual
position impossible
• Although the court has equitable
jurisdiction to adjust the parties'
rights to achieve substantial
restoration Alati v Kruger
If it is impossible to restore the
parties to the position they were
in prior to the contract being
made it cannot be rescinded.
Intervention of a bona fide third party
• If the property has been acquired for value by a
third party in good faith and without notice of the
ground for rescission
• the time of recission is critical Car and
Universal Finance Co Ltd v Caldwell
o if the owner rescinds the contract
before a third party buys it, the original
owner is still the owner.
STEP 5: If rescission is barred, and P is in South Australia, may seek damages in lieu of
rescission under the Misrepresentation Act 1972 (SA) s7(3) if It is fair and reasonable in the
circumstances
find more resources at oneclass.com
find more resources at oneclass.com
