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Canada (158,032)
Accounting (74)
ACTG 2P40 (8)
P.Maloney (5)

Misrepresentation, Undue Influence, Duress

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Brock University

Chapter 9 – Misrepresentation/Undue Influence/Duress Misrepresentation and Contracts i. Material – could reasonably be expected to influence the decisions of a party to enter into a contract ii. Innocent Misrepresentation – if the misrepresentation is made innocently and without negligence, no damages are awarded, the wronged party’s remedy is restricted to the right to rescind.  Rescind – set the contract aside and out the party back in her pre- contract position Consequences of Misrepresentation in Contracts i. If a party relied on a innocent misrepresentation and learns the true facts, the contract is voidable at the option of the victim, but she must renounce the agreement promptly. She loses the right to rescind if she allows an unreasonable time to pass, or takes further benefits. a. Indemnity or compensation – a money award given as a supplement to rescission for loss sustained in performing a contract ii. Sale of land – the right to rescission for innocent misrepresentation is generally lost once title to the property is transferred and the transaction is completed. Opinion versus Fact i. A false assertion is a misrepresentation only if it is made as a statement of fact. ii. Opinions do not amount to misrepresentation and give no remedy for those who rely on it. iii. Expert opinion – an opinion given by a person who purports to have specialized knowledge of a subject Signed Documents and Misrepresentation by Omission i. Sometimes a party is expected to sign a document in a hurt and without an opportunity to read or understand it. ii. In this case, there is a special onus on the supplier to point out any terms in a printed form that differ from what the consumer might reasonably expect. If he fails to do so, he is guilty of misrepresentation by omission. Silence as Misrepresentation: Contracts Requiring Disclosure a. When one party has special knowledge i. Failure to disclose information because one of the parties has access to such information not available to other. ii. Utmost good faith – a duty owed when a special measure of trust is placed in one party by the other b. Contract of Insurance i. A party seeking insurance must disclose to the insurance company all pertinent aspects of the risk she is asking it to assume. c. Sale of Corporation Securities i. Prospectus – a statement issued to inform the public about a new issue of shares or bonds ii. Corporations are required to give out certain information to investors d. Sale of goods compared with sale of land i. A buyer of goods takes them with their defects unless some facts about the quality were misrepresented. ii. A buyer of land must take it with all faults if no representation is made. Undue Influence a. Special Relationships I. Undue Influence – the domination of one party over the mind of another to such a degree as to deprive the weaker party of the will to an independent decision. II. A contract formed as a result of undue influence is voidable at the options of the victim III. If he delays, hoping to gain some advantage, the court will refuse to assist him. IV. Usually when a special relationship is present; one party has special skill or knowledge causing the other to place confidence and trust in him. b. Dire Circumstances I. Sometimes under influences arises when one party is temporarily in dire straits and will agree to exorbitant and unfair terms because he is desperate for aid. c. Burden of Proof I. When a special relationships existed; the law presumes that undue influence was exerted in contracts advantageous to the party in the dominant position. II. Once proven that undue influence exists, the burden shifts to the dominant party to prove that undue influence was not exerted. III. Constructive fraud - the unconscientious use of power by a dominant party to take advantage of weakness of the other party d. Arrangements between Husband and Wife I. Raises if one spouses is more experienced than the other and persuades the other. e. Importance of Independent Legal Advice I. Example: when husband brings wife to sign loan papers, wife is offered lawyers to meet, she than visits the lawyers, has them fully explain the document. II. Basically, if undue influence can come up later, it is better to have the weaker party seek legal advice before mov
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