Week 5 - Questions and Ansthrs
Chapters 10 and 11 (7 edition)
Chapters 11 and 12 (8 edition)
Chapter 10 (7 edition) / Chapter 11(8 edition)
(Please refer to the Week 5 Course Notes for the corresponding page numbers
and questions for both the 7 and 8 editions.)
Question: How does unilateral mistake differ from mutual mistake?
Answer: Unilateral means only one party has made a mistake, mutual
means that all parties have made a mistake about the contract. It is
more difficult to avoid a contract with a unilateral mistake, you
would have to prove the non-mistaken party knew about the
mistake and encouraged the mistaken party to enter into the
contract. For unilateral mistake, a successful party would seek to
rescind the contract.
For mutual mistake, since both parties made a mistake, the
contract is considered void ab initio, as there was no meeting of the
Question: Explain the difference between mistake and misrepresentation.
Answer: Mistake is where a party has made a mistake, unintentionally, in
regard to the subject matter or the nature of the contract.
Misrepresentation occurs where one party has told another some
fact that later turns out to be false.
Question: Distinguish innocent misrepresentation from fraudulent
Answer: The misrepresentation can be innocent, i.e. the person making the
statement believes it to be true at the time, or it can be fraudulent,
where the person making the statement knew it to be false, or was
reckless as to its truth. In either case, in order for a party to avoid a
contract due to misrepresentation, the statement must be about a
fact that induces the party to enter into the contract. For innocent
misrepresentation, the party seeking to avoid the contract may
obtain rescission, but not consequential damages. Where a
fraudulent misrepresentation is made, the innocent party may
obtain rescission of the contract, as well as consequential
damages, (for the tort of deceit). In addition, punitive damages are
1 Question: What obligation rests upon a person who, having made an innocent
misrepresentation, discovers the error?
Answer: Generally speaking, a party who discovers a representation is no
longer accurate is under an obligation to disclose this. As the
statement has been made, and the party making it now knows it is
false, you would then have a situation where there is an intention to
Question: Explain the rationale behind the rule that a person who applies for
insurance from an insurer must disclose all material facts
concerning the subject matter of the insurance.
Answer: Insurance contracts are contracts of utmost good faith. People
seeking insurance contracts must disclose all the risks that would
materially affect the insurer’s willingness to contract with them, as
insurance contracts are based on the assessment and acceptance
of risk. Without full information, insurers would not know how to
assess the risk, i.e. how much the premiums should cost, and
whether the insured is an acceptable risk. A skydiver with a serious
heart condition would likely find it difficult to obtain insurance.
Question: What obligation rests on the “dominant party” in a contract where
the presumption of undue influence applies, if the other party
alleges undue influence?
Answer: The dominant party would have to show there was no undue
influence, by proving: consideration was fair and adequate; there
was full disclosure of position of the parties; weaker party was free
to seek outside advice; and an opportunity for independent legal
This case is a bit distracting, because the names of the companies are so
similar. It would seem that there is a mutual mistake, between Silica Mining and
Silica Exploration. One should also remember that the lease acquired from the
province has nothing to do with McCarthy, McCarthy is the holder of rights in the
surface, and to mine silica.
Since it is a case of mutual mistake, Silica Mining can sue for rescission,
we can assume it will be proven that both parties were of the same
misunderstanding. Since the mistake was mutual, the $25,000.00 should be
returned to Silica Exploration, as the contract would be void ab initio, there never
was a meeting of the minds.
2 Case 7
This could be a case of non est factum. When a party alleges the
document signed was not what they intended, the court’s are reluctant to grant
relief. While it is true on these facts that the Mary McDonald is elderly, and
trusted her daughter to look after her affairs in this limited situation, she was still
looking after her own property, we must assume that she had capacity, and was
not infirm to the degree she would not understand what she signed if she made
appropriate inquiries. She trusted her daughter and made no significant inquiries,
and apparently did not closely examine the document at all.
However, given the trust in her daughter, she could perhaps succeed in
obtaining the return of the property on the basis that her daughter committed a
fraud. It is doubtful the courts would assist the daughter in committing a fraud
against Mary. This case would be bolstered by the argument that the daughter
may have exerted undue influence. If the relationship is characterized as one of
undue influence, the daughter would not meet the test required to disprove this,
and the deed would be transferred back to Mary.
There is no