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Lecture

Bus 393 - Lecture 5

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Department
Business Administration
Course
BUS 393
Professor
Colin Hawes
Semester
Fall

Description
BUS 393 October 8, 2010 Lecture 5 Contracts Colin Hawes Mistake  Mistake: Misunderstanding that destroys consensus results in void contract (258)  Mistakes must be serious  “Bad deals” will not count as mistakes  Shared Mistake: Both parties are in agreement, but have both made the same mistake regarding some aspect of the contract  Rectification: The rewriting of a contract on behalf of one of the party at the expense of another Misrepresentation  Misrepresentation: A misleading statement that induces a contract (270)  Must be fact, not opinion or promise  Opinion: This a a good car  Promise: I will wash the car next year  Opinion by expert may be misrepresentation  Ex: When a mechanic says a car is a good car, but it breaks down, it is misrepresentation  Utmost Good Faith: An obligation to disclose certain information  Partial disclosure may also be misrepresentation/false statement  Misrepresentation must inducing  Innocent Misrepresentation: A false statement made honestly without carelessness by a person who too, thought it was true  Remedy is rescission  Rescission: The unmaking of a contract; Properties are returned to original owners  Not Available when in:  Affirmation: Where a person knowing the misrepresentation continues to use product  Impossibility of Restoring: Subject in question is destroyed – courts deny remedy  Third Party Involvement: If it affects a third party  Failure on the Part of the Victim: When victim (plaintiff) comes without “clean hands”  Fraudulent Misrepresentation: A false misrepresentation when the statement was made knowingly, without belief in the truth and recklessly, carelessly  Remedy:  Rescission of Contract  Awarding damages for deceit (monetary)  Negligent Misrepresentation: Damages can also be awarded based on negligent misrepresentation – can sue in contract or tort for negligence Duress (279)  Duress: When a contract is signed due to threats of violence or imprisonment, contract can be voidable  But not available when good is transferred to third party  Ex.: Contract to sell gold watch from A to B. B buys watch, and now sells to C. A cannot sue for duress as title has been transferred to third party Undue Influence (281)  Undue Influence: When a contract is signed due to pressure from a dominant, trusted person who makes it impossible to bargain freely, contract may be voidable  Presumption based on a special relationship  Presumption based on unique circumstances Unconscious  Undue influence determined from facts Transactions (283)  Unconscious Transaction: Where a party is taken advantage of through factors such as desperation by poverty or intellectual impairment that falls short of incapacity Privity  Courts will release the person from the contract (285)  Privity of Contract: When the contract binds only the two parties to it, outsiders cannot enforce it or be bound to the contract, only those inside the contract can do anything  Exceptions:  Land related situations: Rights run with the land (A person leases a room in house, owner sells house, but new owner must still honor the leased room)  Agents create contract been principal and third party (Clerk in a store binds storeowner with customer)  Trust: Allows a third party to benefit from the property of another  Constructive Trust: Benefit bestows on a third party, courts might create a trust  Novation: The substitution of someone new for one of the original party Assignment (289)  Assignment: The transfer of a benefit under contract to a third party  Chose in Action: The benefit which is transferred  Assignor: Person who transfers the benefit  Assignee: Person who receives the benefit  Assignee normally only receives benefit, cannot enforce claim  Statutory Assignment: Transfer where the assignee can directly enforce claim without assignor  Requires:  Absolute (transferred amount must be full and unconditional) 
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