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Lecture 3

Week 3 - Contracts (Chapters 11-14).doc

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Department
Administrative Studies
Course
ADMS 2610
Professor
William Pomerantz
Semester
Winter

Description
3.1 ADMS 2610 Week 3 Chapter 11 Failure to Create an Enforceable Contract Grounds for Impeachment - person will be bound by a written agreement that he or she signs UNLESS grounds exist for the contract to be impeached 1) Mistake 2) Misrepresentation 3) Undue Influence 4) Duress 1) Mistake - one party (unilateral mistake) or both parties (mutual mistake) may be mistaken as to important aspect of contract (contract potentially voidable): - Terms (e.g. Words used inadvertently, recorded incorrectly, meaning misunderstood, iden- tity of parties) - Assumptions (e.g. Existence/value of subject matter) - E.g.Agree to buy a car but someone takes that car out after we buy it and its trashed, we can get out because we are mistaken of the subject matter Mistake of Law - presumed to know the law - Usually no relief provided - Exception: if statute provided for recovery - Mistake of law cant get us out out contract E.g. Sign a lease to do business, we think its a 1 year lease, after the 1 year we say we want out but really its 5 years, landlord says its a 5 year lease, WE cannot sue because it was in the contract that its 5 years Mistake of Fact - mistake as to the existence of the subject matter of the contract or the identity of a party - If the parties are mistaken as to the existence of the subject matter of the contract, then The contract will be void - Sunset Sails Co. Offers to sell Beverley a yacht moored in the Caribbean, and Beverley accepts the offer. Unknown to both Sunset Sails Co.And Beverley, the previous night a fire completely destroyed the marina where the yacht was. Under common law the court would not require the purchaser to accept this. 3.2 - e.g. Hire photographer at someones wedding, they are well renown, we know what the person looks like and we know what the person looks like and then someone shows up saying they are that person but they are not the person - We can get out because we were mistaken of the party involved Non est Factum - When one of the parties may be mistaken to the true nature of a written contract - Nature of written contract (e.g. Non est Factum it is not my doing, completely different document, due to infirmity relied on other part, not mere carelessness) - a defense that may allow illiterate or infirm persons to avoid liability on a written agree- ment if they can establish that they were not aware of the true nature of the document, and were not careless in its execution - - Rectification of mistake by court possibly - Ask court put proper number into contract E.g. Older person and someone goes to their door and they say sign a reference letter, the letter was really a loan document, we can get out of it because we were mistaken Non Est Factum 2) Misrepresentation A) Innocent - Rescission only B) Negligent - rescission and damages C) Fraudulent - rescission and damages D) By non-disclosure - Rescission (the revocation of a contract or agreement) is only possible if the innocent or injured party relied on the false statement of fact made by the other party - Rectification - the correction of a mistake in an agreement that would have rendered the agree- ment impossible to perform E.g. Go to buy used car, ask dealer who has owned the car, dealer says only one previous owner, so we buy the car and then find out it was owned by lots of previous owners, we want to get out of the contract - going to try to argue misrepresentation - going to say the thing they told us is not true, the whole reason we got into the contract, but its not written - can we get out because weve been told something its not true? A) Innocent Misrepresentation 3.3 - the misrepresentation of a material fact that the party making the statement honestly believes to be true, but is discovered to be false after the parties enter into the contract Criteria - material - Fact (not opinion unless expert opinion) - False - Honest mistake As soon as we find out were a victim of misrepresentation - we have a duty to go right away to claim we have been misrepresented Remedy: only rescission (restore parties to original state, e.g. Goods and payment returned), no damage - can not sue, can only get money back that we lost Lakeside Land Development, and High Rise Construction Ltd enter into negotiations for the purchase of a building lot that lakeside land development ltd. Owns. The president of High Rise Construction Ltd.As the president of Lakeside if the land is suitable for the construction of a small apartment buildingl The president of Lakeside who iquired about this recently said YES>. Land has been zoned now it cant be. The contract was created but not Lakeside needs to return the deposit because the contract was created for only one reason. B) Negligent Misrepresentation i. Material (induced) ii. Fact (not opinion unless expert opinion) iii. False iv. Beached standard of care (e.g. Careless) Remedy: rescission or damages C) Fraudulent Misrepresentation - a false statement of fact made by a person who knows, or should know, that it is false, and made with the intention of deceiving another - The innocent party must prove fraud on the part of the party making the mistake Based on the tort of Deceit - a tort that arises when a party suffers damage by acting upon a false representation made by a party with the intention of deceiving the other - 3.4 i. Material (induced) ii. Fact (not opinion unless expert opinion) iii. False iv. Intention to deceive or reckless - Punitive damages Remedy: rescission or damages D) Misrepresentation by Non-Disclosure (i.e. Omission) - the law does impose a duty of disclosure in certain circumstances where one party to the contract possesses information that, if undisclosed, might materially affect the position of the other party to the agreement - Contracts of Utmost Good Faith: Relationship leads to trust causing duty to inform party of facts - Examples: insurance, mortgage, partnership E.g. Say someone is buying our car, we dont need to tell them how crap it is unless they ask E.g. Have a lawyer, the lawyer has to tell us everything Exception: when we get insurance, insurance company asks us all types of questions, they dont ask us if were diabetic - we still need to tell them - we have a duty of UTMOST GOOD FAITH Misrepresentation? Which Type? Im told the house has no termites. It does. Owner knew the house had termites. - Fraudulent Im told a car has a V8 engine and buy it. Salesperson should have known it has a V6 engine. - Negligent Im told if I take the LSAT preparation course I will most likely get into law school. I do terribly and dont get in. - I enter into a partnership agreement with my friend. I fail to inform him/her that I am currently bankrupt - Non-disclosure Caution - Watch out for clauses in contracts which say the following: - this contract constitutes the entire agreement, no verbal representation made at any time shall form part of this contract - practical note:ALWAYS make sure the agreements are IN WRITING and contain the terms that have been discussed
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