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Law 122: Chapter 9 Representation and terms.docx

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Law and Business
LAW 122
Avi Weisman

Chapter 9: Representation and terms Pre-Contractual and contractual statements Pre contractual representation: A statement one party makes by words or conduct with the intention of inducing another party to enter into a contract Contractual term: A provision in an agreement that creates a legally enforceable obligation Misrepresentation If a non-contractual statement is false, it is defined as a party’s misrepresentation. If a contractual statement is not fulfilled, it is defined as a party’s breach of contract. The nature of misrepresentation Misrepresentation: A false statement of fact that causes the recipient to enter in to a contract. When an opinion is false it is not considered to be misrepresentation rather a misstatement. Statement of future conduct: Is not a statement of fact as it is only an indication of a person’s future intentions. Non-Factual statements (Not actionable as misrepresentation) -Opinion based on speculation -Description of another’s future intent -Statement of law Factual statements (Actionable as misrepresentation) -Expert opinion -Description of one’s present intent -Statement of legal consequences Silence as misrepresentation -As a general rule, parties are not required to disclose material facts during pre-contractual negotiations, no matter how unethical non-disclosure may be. Except for when: -Silence would distort a previous assertion: When a change in circumstances affects the accuracy of an earlier representation, the party that made the statement has a duty to disclose the change to the other party. -A statement is half-truth: A party cannot give a partial account if the unspoken words would substantially alter the meaning of the actual statement -The contract requires a duty of utmost good faith: Occurs when one party is in a unique position where they must have full disclosure of information. Such as an insurance company who needs all health information. -A special relationship exists between the parties: When the relationship between two parties is one of trust, or when one of the parties has some other form of special influence over the other, a duty of disclosure may arise. -A statutory provision requires disclosure: Some statutes require the disclosure of material facts in a contractual setting, such as insurance legislation and financial officers. -Facts are actively concealed: If a party to a contract actively conceals the truth it may be treated as misrepresentation. -For a statement to be actionable as a misrepresentation, the deceived party must prove that the false statement induced the contract. The legal consequences of misrepresentation There are two possible consequences of an actionable misrepresentation. The deceived party may receive: 1. The remedy of recession 2. The right to damages 1. Recession: The cancellation of a contract, by the parties or the court, with the aim of restoring the parties, to the greatest extent possible, to their pre-contractual state - The remedy of recession is often acco
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