LAWS1120 Study Guide - Final Guide: Public Service Of Canada, Breach (Security Exploit), Dick Bentley
Chapter 4&5 - Genuine Consent (Mistake, Misrepresentation,
Unconscionable Contracts) and Contents and Interpretation of a Contract-
Contract Law
Offensive contracts →
1. Be declared void as per Public Service Employees Credit Union v Campion (1984)
pg 51
2. Be totally illegal and unenforceable as per Re Mahmoud & Ispahani (1921) pg 50
3. Still allow for legal rights for either or both parties as per Yango Pastoral Co Pty Ltd v
First Chicago Australia (1978) pg 50
Mistake → Existence of an element of mistake as per Leaf v International Galleries pg 58
1. Common Mistake, parties make the same mistake. Only some of common mistake
invalidate a contract. A and B agrees for sale of car which assume to be in existence,
before contract is made, has been destroyed by fire. Contract is void.
2. Mutual Mistake both mistaken but their mistakes are not the same. Cross-purposes. It
does not necessrily invalidate contract.
3. Unilateral Mistake where one party is mistaken as to terms of contract or identity of other
party and that mistake is known to the other party.
4. Unilateral mistake as to the promise of one party occurs where only one of parties
makes the mistake. Mistake must be as to the terms on which contract is offered, must
be known to other party to have a vitiating effect on contract,
Representations are statements of fact to induce entry into a contract. Misrepresentation →
parties have agreed but one of them has been motivated to agree by a statement to existing fact
or past event that is not true. A nature of misrepresentation was made:
1. Innocent Misrepresentation is an incorrect statement of fact made without an intention to
mislead or deceive, or made without realisation of its untruth.
a. Remedies of innocent misrepresentation
i. Right is lost if party entitled to rescind affirms contract after becoming
aware of falsity of representation
ii. Right is lost if third parties acting in good faith acquire rights in subject
matter of contract before right to rescind is exercised
iii. Does not exist, by reason of changes that have occured, no longer
possible to restore the parties to their former position/too much time has
elapsed after contract is made.
2. Fraudulent Misrepresentation
a. Fraud exists when its is shown that a false representation has been made
knowingly or without belief in its truth or recklessly, careless whether it be true or
false as per Derry v Peek (1889)
b. For fraud to succeed or for other party to have remedies given to a person
induced to enter into a contract by means of fraudulent misrepresentation:
i. Statement of fact - Statement of fact distinct from expression of opinion.
1. Opinion can be held to involve a misrepresentation when the
person making it really did not hold that opinion
2. A reasonable person could not have held that opinion
ii. Falsity - Necessary for statement to be false
1. If representation is true when made but becomes false to the
knowledge of the representor before contract is concluded, (and
representor concludes the contract without disclosing falsity of
representation, just as liable.
iii. Known to be false, or without belief in its truth, or recklessly
careless whether it be true or false
1. The representor is liable if they make the false statement when
they have no knowledge whether it is true or false.
2. Also liable when they do not verify the truth.
3. However, if person making representation genuinely believed the
statement to be true, there is no fraud even though it was formed
negligently.
iv. Intended to be acted upon - other party enter into a contract or do any
other act in reliance on the statement.
v. In fact acted upon - the misrepresentation must have induced the other
party to enter into the contract
vi. Resulting in damage - no action if false representation causes no loss or
damage.
Presence of these element is necessary in order to constitute grounds for an
action for fraud or to afford those remedies.
c.
Remedies for fraudulent misrepresentation
i. Refuse to be bound by the contract and bring an action for its recission
where such a course is necessary.
ii. Take advantage of the contract to the extent of retaining what benefits
they may have received and sue for fraud, claiming damages or loss
iii. Successfully defend any attempts to enforce the contracts against them.
3. Negligently
Duress is actual or threatened violence to, or the deprivation of liberty, of a person or their
immediate family or relatives to pressure such person into entering into a contract. A person
Document Summary
Unconscionable contracts) and contents and interpretation of a contract- Mistake existence of an element of mistake as per leaf v international galleries pg 58 invalidate a contract. A and b agrees for sale of car which assume to be in existence, before contract is made, has been destroyed by fire. Contract is void: common mistake, parties make the same mistake. Only some of common mistake does not necessrily invalidate contract: mutual mistake both mistaken but their mistakes are not the same. Mistake must be as to the terms on which contract is offered, must be known to other party to have a vitiating effect on contract, Representations are statements of fact to induce entry into a contract. Misrepresentation parties have agreed but one of them has been motivated to agree by a statement to existing fact or past event that is not true.
