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MIDTERM Sheet #9.docx

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Ryerson University
Law and Business
LAW 122
Sari Graben

Chapter 9: Representation & Terms of Contract Pre-Contractual Statements (pg 202) • Statements made during negotiations: o Puffs: mere sales words => no consequences. o Contractual terms: provisions in the contract that create legally enforceable obligations.  Certain consequences: if failure => breach of contract. o Pre-contractual representations: statements that one party makes (by words or conduct) with the intention of inducing the other party to enter into the contract.  Possible consequences: if falsely induce contract => misrepresentation. • Test: parties’ objective intentions. Misrepresentation (pg 202) • Misrepresentation: o a statement of an existing fact; o that is false or incorrect when made; o may be actionable if it induced a contract:  Sufficient that misrepresentation was one inducement.  Inducement presumed if inducement intended.  Recipient not obliged to investigate. • Misrepresentation is not: o Personal opinion, unless opinion contains fact. o Prediction of future, unless prediction contains fact. o Statement of law, unless statement contains statement of fact. Silence as Misrepresentation (pg 205) • General rule: parties are not required to disclose material facts during pre-contractual negotiations. • Silence cannot be misrepresentation. • Exceptions: o Silence distorts previous assertion o Statement is half-truth o Contracts of “utmost good faith” (e.g. insurance contracts) o Special relationship between the parties (e.g. trust or influence) o Statutory provision requires disclosure (e.g. insurance, securities, directors, domestic contracts) o Facts are actively concealed. Remedies (pg 207) • Rescission = cancellation of contract o Contract treated as if it never existed. o Discretionary remedy of the court. o Available for all types of misrepresentation (innocent, negligent, fraudulent). o Often accompanied by an order for restitution. • Restitution = restoring parties to pre-contractual state. o Available for all types of misrepresentation. o Not available if impossible, if contract has been affirmed by the innocent party, or if rescission will affect a third party. • Damages = monetarily reparation of losses o Claim lies in tort and not contract. o Available for fraud or negligence only. Types of Misrepresentation & Possible Remedies (pg 209) • Innocent misrepresentation: a statement made carefully and without knowledge that it is false  rescission and restitution. • Negligent misrepresentation: a statement made unreasonably or carelessly that induces recipient to enter into the contract  rescission, restitution and damages in tort (fraud or negligence) • Fraudulent misrepresentation: a statement made recklessly, knowing it is false, or having no reason to believe that it is true  rescission, restitution and damages in tort (fraud or negligence) Contractual Term (pg. 211) • Enforceable obligation within contract: o Promise of future performance o Actionable breach if not fulfilled • Types of contractual terms: o Express terms: a statement made by one of the parties that a reasonable person would believe was intended to create an enforceable obligation. o Implied terms • Where contract is oral, the parties may encounter problems of evidence. • With written contracts, a common problem is conflicting documents. Parol Evidence Rule (CONCEPT SUMMARY PG. 212) • Where a contract is written, oral evidence cannot usually be used to add to, subtract from, qualify, or vary the ter
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