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Lecture 5


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Philosophy 2080
James Hildebrand

Week 5 - Questions and Ansthrs Chapters 10 and 11 (7 edition) Chapters 11 and 12 (8 edition) th th 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 minds. 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 misrepresentation. 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 sometimes available. 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 mislead. 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 advice. Case 4 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
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