Textbook Notes (363,140)
Canada (158,217)
Accounting (74)
ACTG 2P40 (8)
Books (1)


66 Pages
Unlock Document

Brock University

Chapter 1 Introduction to Law (2 contrasting theories of law) 1.Natural law(2 steams, religious view and nonreligious)  1 stream of natural law is based on ‘religious belief’, when a religion sets moral and ethical values, it also makes rules of conduct- religious leaders!  2 stream of natural law is based on ‘nonreligious belief’ based on belief that people are rational and will arrive at the basic principles of justice- ancient Greek’s! 2. Legal Positivism (law is positively created my man, legal common sense)  Scottish thinker David Hume made significant contribution, Hume identified different between Physical Laws and Normative Laws.  Physical laws (law of gravity, law of physics) can not be broken and exist out of HUMAN NATURE  Normative Laws , not physical , law made up by government to create standards of behavior and regulating human conduct.  Hume made distinguished b/w Normative laws themselves- some normative rules were ‘LAW’ cause they created a rule of behavior backed up by punishment and some normative rules were ‘MORAL’ and did not have a punishment if followed.  (LEGAL POSITIVIST- those who insist upon clear distinction b/w law and moral) Role of Law ( response to human need) 1.Goverence of Conduct  the law is needed to prevent anarchy, to control human conduct to protect society , enforces punishment for deterrence 2. The Authority of the Government to Act for Benefit of Society  it authorizes government to act for society for benefits such as , providing policing, health care, fire fighters and education BUT GOVERNMENT STILL FOLLOWS THE ‘RULE OF LAW’  (Rule Of Law-means that legal principals treat all persons equally under the law , including the government – NO ONE IS ABOVE THE LAW) 3. Governance of Legal Relationships  Law also governs legal relationships so that people can assure that contracts and promises made are legally binding and enforced with punishment if some act of breach occurs. Sources of Law in Canada (3 sources) 1. The Constitution  The constitution is the higher law in Canada by which all laws are governed , developed in England (a)Federal and Provincial Powers split by Constitution – Constitution Act of 1867 – both powers have own jurisdiction (section 91 92)  Ultra Virus- outside jurisdiction  Residual Powers- to the Federal Gov , left over areas  Concurrent Powers- both fed and prov have jurisdiction, fed always overcomes (b) The Canadian Charter of Rights and Freedoms  Entrenched into the constitution In 1982 voted by fed and prov gov  The Charter is a legal base of protection of human rights in Canada such as – Fundamental Freedoms, Legal Rights, Equality Rights, Democratic rights and Mobility Rights  The Charter governs the government in making sure the government does not violate these rights in the Charter, Gov can not change these rights only if 2/3’s of provinces agree in which 50% of all prov have to agree of each prov 2. Legislation  Legislation is known as ‘statutory law’ or ‘acts’ passed by Parliament, or by Provincial legislation in compliance with the constitution  Legislation are man made laws, usually with ‘Act’ attached to them or Acts of Parliament or Statue (a)Purpose of Legislation  Purpose of legislation it to create a set of laws, acts or statues to govern a certain area , for example ‘ Employment Standards Act’ (b)Regulations – Legislation  Legislation passed by government – supplementary to legislation usually passed after a statue created to fix or provide more detail (c)Administrative Tribunals  Legislation also creates bodes or agencies or administrative tribunals to help fed/prov gov to help regulate certain area Acts or Statues ‘Liquor License Act’ (d) Statutory Interpretations  Sometimes acts or statues passed by legislation can be very difficult to interpret and this may cause acts to cross each other and time so most of the time the presents of a lawyer is needed to interpret the act/statue 2. Common Law  common law is ‘man made law’, court decisions , common law generally refers to the body of decisions made , common law uses the ‘theory of precedents’ (a) Development of Common Law  common law imposed from Britain (England), England 1200-1900 they used law system call “The Circuit” but this was causing inconsistency of judge made decisions (b) The need for Consistency and Predictability in Law “WE NEED LIKE CASES TO BE TREATED ALIKE”  ‘Stare Decisis’ the use of precedence in court decisions in common law (c) Courts of Equity (courts based on ‘fairness’)  During England 13 century if an individual felt they decision made was unfair, but truthfully unfair , then they could appeal to the courts of Equity/ Courts of Chancery developed the ‘Principals of Equity’  BUT one problem with Equity is that it under minded ‘Stare Decisis’ and discouraged goals of Consistency and Predictability. Chpt 2 Systems of Courts in Canada The Systems of Courts in England 1. The Court of First Instance 2. The Court of Appeal 3. The House of the Lords ( Supreme Court of Cnda) The Systems of Courts in Canada  in Canada there are basically 3 ranks of Courts 1. The Court of First Instance 2. The Intermediate Provincial Courts of Appeal 3. The Supreme Court of Canada 1. The Court of First Instance ( Provincial Courts) (a)Small Claims Courts (b)Provincial Division  Hears most criminal cases , except serious offences , murder (c)General Division / Ontario Superior Court of Justice  ultimate jurisdiction in civil and criminal law cases  may serve as appeal court summary convictions made for lesser sentences (c)Ontario Divisional Court  exclusive only to Ontario, created in 1972 , this court only hears appeals from various lower provincial courts and administrative tribunals. 2. The Intermediate Provincial Courts of Appeal (a)Ontario Courts of Appeal  If not satisfied by the decision made by ‘ the Ontario superior court of justice then you may appeal to the Ontario Court of Appeal ( same level in England as ‘Court of Appeal in England) 3. The Supreme Court of Canada(Federal Courts) (a) Tax Court of Canada (b)The Federal Court of Canada  the federal court of Canada has jurisdiction on federal matters such as ships, navigation and lawsuits against the Federal Government ( also areas like patents,trademarks,franchises) (d)The Supreme Court of Canada  the supreme court of Canada is the final appeal court of Canada , the highest level of court in Canada which consist of 9 judges( same level as the House of the Lords in England) Class Action - an action in which one individual represents a group to decide a case. Res Judicata- an already decided case that can not be brought before the courts again. Litigation (Sue) in the Courts – Procedure before Trial  most lawsuits start at around $10,000  a trial does not always happen automatically during action 1. ‘ statement of claim’ or Writ is issued by the court and then served to the defendant, gives all plaintiffs facts 2. ‘statement of defense’ is obligated by the defendant to give defendants side of the story – 20 days to make 3. Both Plaintiff and Defendant are able to counter argue claims and defenses made 4. ‘Document of Discovery’ in which both parties offer all relevant documents they are going to use to argue case  usually after ‘document of discovery’ a settlement is reached 5. ‘ Oral Discovery’ is when a the plaintiffs lawyer interviews the defendant and vice versa 6. ‘Pre Trial Hearing’ this takes place in front of the judge m which is very informal , but the pre trial hearing gives the parties the chance to see the likelihood of winning 7. If no settlement reached then the parties go to Trial!  Appeals must be given within less than 30 days! Chpt 3 Tort Law 1. The Scope of Tort Law (tort= wrong)  Tort – is a wrong doing by one person to another, 2 types of torts ‘unintentional and intentional’  The Role of ‘Tort Law’ – is to compensate the victim for harm/suffer/loss for action committed by other person  The Role of ‘Criminal Law’ – is left to punish the wrong doer 2. The Development of Tort Law  Earlier in England finding out the fault to a tort done was easy because ‘Strict Liability’ was used , who ever directly caused the wrong action to happen was at fault but then later it was thought that if a person not responsible shall not be at fault  Tort law then developed 2 concepts to determine Liability  Fault & Causation – 2 types of torts we developed – 1. Intentional Torts and Unintentional Torts. 3. Basis for Liability ( responsible , fault of action ) Fault – fault in the context of tort law, is who is blameworthy in the eyes of the law for the wrong action committed or tort. th Strict Liability-strict liability was used earlier in England 13 century but then was seen as unfair , but it may be seen today for example someone with a dangerous job. Vicarious Liability – the employer has full liability over his employees while they are employed 2 reasons. 1 employees have limited assets 2. based on fairness, a person who makes the profit shall pay for the damages. Intentional Torts ( FET DNA )  Intentional torts are wrongs done to one person by another with intention. 1. Assault & Battery ( usually come hand in hand ) 2. Trespass 3. False Imprisonment & Malicious Prosecution 4. Defamation  Slander ( spoken defamation )  Libel ( written defamation )  Defenses to Defamation  1. that the statements are true  2. Absolute Privilege ( words spoken in Parliamentary debate or legal proceedings )  3. Qualified Privilege ( words said in a letter of reference) 5. Nuisance 6. Economic Torts  Most recent developed tort in statue  2 areas of Economic Torts, 1. ‘relating to carrying on with business’ & ‘related to false advertisement of product’ 1. ‘ relating to carrying on with business’ (a) Unlawful interference with Economic Relations (b)Inducing Breach of Contract 2. ‘ related to false advertisement of product’ (a) Conversion ( pretending you own product , stolen goods selling) (b)Product Defamation ( saying harmful things about another product, can only hint ) (c) Passing Off ( passing off a product as its urs but belongs to another business , like using similar labels or packaging ) Unintentional Torts (negligence, carelessness) Negligence – is a careless act that causes another person to endure some form of loss, pain or damage  By far negligence is the most common basis for legal action in the courts 3 Elements of a Negligent Action  In order for a plaintiff to succeed in a negligent case, the following 3 elements must be proven by the plaintiff in order to win case, thus if one element is missing then the plaintiff does not have a case.  So to establish the right to compensation , the plaintiff must prove 1. The Defendant owed the Plaintiff a ‘Duty of Care’ 2. The Defendant Breached that ‘Duty of Care’ 3. The defendant’s breach of that duty caused the plaintiff injury/loss/suffering. ‘Duty of Care’  the plaintiff must prove that the defendant should have reasonably foreseen that his actions might cause harm to the plaintiff  “what would the normal intelligent person , the reasonable person have done?”  Golden Rule- the duty owed is only when “ the defendant could have reasonably foreseen that his actions would have caused harm to the plaintiff”  Was there a close relationship b/w the parties??? ‘Standard of Care’  the law require that everyone take reasonable care not to cause harm to each other to avoid reasonably foreseeable harm  standard of care is that of an average person out in society “ the person on young st”  standard of care caries though with jobs and professionalism 2) The Defendant Breached that ‘Duty of Care’  to determine if a breach has occurred in the duty of care the courts will look at what the reasonable person would have done and also use precedence to determine outcome of case. 3) The Defendants Beach of duty of care CAUSED the injury/loss to Plaintiff  if the plaintiff has no loss or injury , then there is no case for the plaintiff.  The courts will look at ‘Causation’ to determine whether the defendants negligence cause the plaintiffs injury/loss ‘Causation’  to determine if the defendant did cause the injury/loss  Courts will look at the ‘ Proximate cause Test’ , that is that the defendants negligence had to substantially contribute to the plaintiffs injury.  The defendant must have substantially contributed to the harm/loss to the plaintiff to be held liable , no matter how blameworthy the defendant may be  the more closer in time the injury and act of negligence occurs , the easier it is to find who CAUSED the loss/injury – also the more time between the injury/loss and the act of negligence , the more chain reaction can occur than the harder it is to put the CAUSE on the defendant. Thin Skulled Plaintiff Rule ( theory of Causation )  this rule means that in an act of negligence you take the plaintiff as they are , despite any medical conditions that the plaintiff has and despite of the defendant knew or not about the conditions- “ take the plaintiff as you get them” in act of negligence – applied to damages as well ( boy wit hammer to his friend) Defenses for Defendant in cases of Negligence  If the plaintiff is able to prove all 3 elements than the Burden of Proof shifts to the Defendant! 1) Burden of Proof 2) 3 Defense Claims 1) Burden of Proof  Once the plaintiff has proven all 3 elements the defendant can now argue his side and claim “ res ipsa loqiuta” “ the facts speak for them selves 2) 3 Defense Claims (a) Voluntary Assumption of Risk ( sporting events, courts do not favor this defense because it leaves the plaintiff with nothing “all or nothing”) (b) Contributory Negligence ( courts favor this because it is able to split the remedy b/w both parties , a case in which the plaintiff also is guilty of negligence that contributed to his/her own harm/loss.) (c) Remoteness of Loss ( this defense tries to prove that the plaintiffs negligence substantially contributed to the plaintiffs own injury/loss or that the defendants own negligence did not contribute substantially) More Unintentional Torts………………… Product Liability ( negligence )  Product liability is an important area of tort law for business , product liability governs the producers or manufacturers of goods for injury/loss caused by a product. 1) Defective Product  Case of negligence in which the plaintiff has suffered a loss/injury due to a defective product. ( England 1800’s old lady ginger beer with rat- Donoghue V. Stevenson ) 2) Inherently Dangerous Products  Cases of negligence in which the product is inherently dangerous, and might cause the plaintiff serious harm, usually cases in which directions are not on label , warnings , such as cigarettes. Occupier’s Liability ( negligence )  This is a case of negligence that deals with the duty owed to an individual when they are on an owners land.  Invitee  Licensees  Trespasser  The amount of duty owed for each visitor varies in each case.  The holds that even in the case of a trespasser the occupier must have some form of duty. Chpt 4 Professional Liability Professional Liability – is the area of tort law in cases of negligence (unintentional torts) that applies to professionals such as Doctors, Lawyers, Accountants, Engineers and Pharmacist. 1) Contractual Duty 2) Fiduciary Duty 3) Duty in Tort Tort of Deceit – Misrepresentation  Misrepresentation is when someone makes an untrue statement knowing it is untrue with the intention to mislead someone or a group or if someone intentionally conceals valid information to mislead. Extending Liability to the Third Person???  The courts feared that extending the liability to the third person would hold almost strict liability on the professionals and limit the freedom to practice the professional field  Leading case decided by the House of the Lords in 1951 – Lord Dennings decision “ the duty of care need not be owed to every person but owed to the particular person or group of people that the maker of the statement may reasonable might expect to look at it” Hedley Byrne Principle 1963  The Hedley Byrne Principal established in 1963 (12 yrs after) in Hedley Byrne V. Heller and Parnters.  The Hedley Byrne Principal was established on the basis of Lord Dennings decision what said “ the duty of care need not be owed to everybody but be owed the particular person or group in which the maker of the statement could reasonably expect to look at the statement”  Also the Hedley Byrne Principal established that in a case of a ‘Disclaimer’ that the duty of care is only owed to those who are mentioned in the disclaimer.  More over the Hedley Byrne Principal established the principal for liability for the third person in case of Deceit. Limits to the Hedley Byrne Principals  to determine if the duty of care was owed to the third person, there are 2 test 1) Prima Facie – duty of care  If there is a close relationship b/w plaintiff & defendant, and if the carelessness of the defendant may have cause the damage to the plaintiff 2) Policy Issue – Duty of Care  Liability should be restricted to the use of the information for the same purpose in which it was prepared for. Professional ‘Standard of Care’  With professional liability the standard of care is much more higher than the regular case of negligence , the question now must be asked , what would the Reasonable Professional have done in the same Situations?  to determine the standard of care owed by the professional the courts will compare what really happened to what would the professional have done? 1) The professional must practice the same amount or degree of professionalism that is generally expected 2) Many professions provide Codes of Conduct or Guidelines for their members to act by.  Both of these methods are used in determining the standard of care Professionals ‘Causation’  to determine causation in a case of professional liability the questions must be asked  Did the client act upon and rely on the professional??  Would the client have acted in this may had he/she not taken the professional advice?? Chpt 5 Formation of a Contract: Offer and Acceptance What is a Contract?  A contract is a voluntary agreement b/w two sides to go into a legal relationship ( a contract may be created through verbal or writing, a contract to be written is NOT a requirement of a contract for it to exist) Full Binding Contract  in order for a fully binding contract to exist you must have 3 elements. 1) OFFER 2) ACCEPTANCE 3) CONSIDERATION  All elements must exist in order to have a fully binding contract.  ALL ELEMNTS MUST BE VOLUNTARY 1. Offer (a) Offer vs. Invitation to Treat (b) Basic Rules that Apply to the Offer i) Knowledge of the Offer ii) Lapse  An offer may lapse in 3 ways 1) The offeror may set a Lapse date 2) If offer is silent, then the offer will lapse at a reasonable time. 3) An offer may lapse if either of the partied have died or gone insane before the acceptance. iii) Revocation ( with draw from offer )  Revoke before acceptance even if promised to keep offer open , even before lapse date BUT not after acceptance (a)Option  “ contract within a contract” to keep offer open by paying money , this is full binding iv) Counter Offer(Negotiation) 1) Original offer falls off the table, no longer exist ever! 2) New offer on the table v) Counter Offer vs. Mere Inquires  Mere inquires are not new offers but just mere inquiries about the original offer , questions about the 1 offer??? 2. Acceptance  An acceptance is in indication made to the offerer that the offer made is accepted by the offeree , the acceptance must be made is some form of positive conduct to communicate the consent of the acceptance of the contract. (a) Basic Rules that Apply to Acceptance i) Communication of Acceptance ( same form as offer , words or conduct ) ii) Postal Rule ( mail to mail offer & acceptance ) iii) Silence Can Not Be Acceptance iv) Unilateral Contracts ( acceptance by performance ) (b) Terms and Provisions Contained in The Specific Contracts and the Acceptance There Of i) Tickets ( deemed accepted reasonable terms NOT unreasonable unexpected ) ii) Standard Form Contracts iii) Insurance Contracts Required Notice Terms-------- > deemed to Accepted Unreasonable or Unexpected -------- > not deemed to accepted unless brought to your attention. Chpt 6 Formation of a Contract: Consideration 3. (a) Consideration  Consideration in its most basic form is the exchange of promises; rights, interest or some form of benefit accruing to both parties involved in the contract- on the other hand some detriment or loss that is giving to a party.  in order to have a fully binding contract , the contract must entail consideration to both sides of the party  consideration generally comes after the Offer and Acceptance  consideration may also be a promise not to do something (b) Consideration vs. Gratuitous Promise ( gratuitous promise ------- > Gift ) (c) Adequacy of Consideration ( irrelevant to court) i) exceptions to adequacy to consideration may be if evidence points to duress, fraud or if one of the parties are under the influence (d) Past Consideration ( “ past consideration is no consideration ) (e) Performance of an Existing Duty i)Performance of Existing Contractual Duty ( only if fresh consideration) ii)Performance of Existing Statutory Duty (f) Promissory Estoppel or Equity Estoppel  promissory estoppel is an exception to performance of exiting contract----- it holds that if existing contract exist and one party agrees to forgo rights or all rights in contract and the promisee relies in this to the point in which it would cause great hardship if the promisor were to go back on it---- defence is Promissory Estoppel ( the Hightrees Landlord tentant case $5000->$2500)  “ promissory estoppel may one be used as a shield and not a sword” (g) Contracts Under Seal ( need no consideration)  coat of arms , use signet ring in was to seal (h) Gratuitous Reduction of Debt  in a gratuitous reduction of debt, it basically is just a gratuitous promise , thus the creditor may still sure the debtor for breach of contract even after a reduced amount was promised on  5 ways to get around the common law gratuitous promise of reduction of debt 1) if the debtor pays the reduced amount before the maturity date, this creates fresh consideration flow and holds the payment binding 2) if while paying the reduced amount the debtor also gives some small product of any value in order to create fresh consideration 3) if a third party who owes no money to the creditor offers to pay the reduced amount if the creditor cancels the debt , after the creditor accepts this offer it is held binding and he may no longer sue 4) if the reduced amount it paid under SEAL thus eliminating the need for fresh consideration 5) if the amount is paid under ‘ The Mercantile Law Act’ and all procedures are followed I) Quantum Merit: Request for G&S’s 3. The Overriding Element: The Intentions to Create Legal Actions  Must be a VOLUNTARY legal relationship!  Even though an OFFER has been ACCEPTED and there is CONSIDERATION ------- there is NO contract in law unless both sides have VOLUNTARY went into the relationship ----- and have intended to create a legally binding contract.  To determine if the contract was voluntary the courts look at the state of mind the parties or party was in during the making of the contract. Chapter 7 Formations of a Contract: Legality A contract is considered legally binding after there is Offer, Acceptance and Consideration BUT 2 elements that are assumed to be present are 1) the party has the CAPACITY to be in a contract 2) the contract is legal 1) Illegality with Respect to Parties: Capacity Capacity: the competence to enter into a contract a) Minors/Infants  The general rule with minors and contract is that the contract is enforceable by the minor but not enforceable against the minor. i) Contracts for Necessaries  An exception to the general rule (food, clothing, lodging, medical attention, legal advice and normal transportation) ii) Contracts for Non-Necessaries  The general rule is held, for non necessaries the minor may repudiate the contract even if beneficial towards the minor. iii) Beneficial Contracts of Service  An exception to the general rule, minors are held to contracts of beneficial service such as employment or apprenticeship BUT not contracts that exploit the minor. iv) Contractual Liability Upon Attaining the Age of Majority  The minor can repudiate the contract or ratify the contract. B) Mental Incompetence ( Capacity )  Individuals who have disabilities or head injuries(pending on ability to reason) sometimes the elderly, people under the influence of drugs or alcohol or all people who LACK THE CAPACITY to enter into a contract.  Same general rule as applied to minors, contracts with people who are mental incompetent are enforceable by the incompetent person but unenforceable against the incompetent person.  The mental incompetent person can repudiate or ratify the contract once they become competent again.  Bound to pay reasonable price for necessaries and not bound to non necessaries. Under the Influence If a person wishes to repudiate the contract once they sober up, they must prove 1) they were not able to make a rational decision 2rdhe other party was aware of the other party being under the influence ( hopefully 3 party present for witness) C) Incompetence Due to some other Factors 1) Bankrupt Debtors (lack) 2) Corporations 2) Illegality with Respect to Contracts: Contracts Void or Illegal by Statue Difference b/w a VOID or ILLEGAL contract????? 1)Void Contract “Void Ab Initio” when contracts are void it means the contract never existed from the beginning, when contracts are void the courts will ‘ SET ASIDE THE CONTRACT” meaning they will try and restore the parties at positions they were in before the contract. 3) Illegal Contacts An illegal contract is one that is entered into and violates a law when formed or performed. When contracts are illegal the courts will not bother to help the parties at all. a) Contracts that are Void by Statue  A provision in a contract may be void by Statue – ‘ The Workers Compensation Act’ and ‘The Tenants Protection Act’ – no pets void. (c) Contracts Illegal by State 1) Illegal when Formed ( contracts goal to break the law, planned to break law) 2) Illegal when Performed( a contract perfectly legal when formed but somehow breaks the law) 2 Examples of contracts that are illegal when performed when contracts are illegal when performed the courts might take 2 approaches 1) Traditional Approach ( Common law – any contract that violates any law can not be enforced by law ) 2) Modern Approach ( Equity – contract may have been illegal when performed but had a legal valid subject matter and no intentions by either party of illegal actions so the courts will enforce.) Modern Approach Example 1. C. Battison & Son V. Mauti (1986)  C. Battison & Son was a renovation company who didn’t use the proper contracts before starting the renovation-courts took the modern approach. Modern Approach Example 2. Johnson V. Lazzarino ( 1998 )  Johnson an accountant forgot wasn’t able to use contingency agreements-courts used the modern approach. 3) Illegality With Respect to Contracts: Contracts Illegal by Common Law and Public Law a) Contracts Illegal by Common Law  contracts that are illegal by common law are contracts with goal to perpetrate a private wrong or tort (FETDNA) or inducing breach of contract (hockey player)- these go against judge made law (common law) b) Contracts Illegal by Public Policy  Contracts that go against Public Policy (made by common law) the contracts are illegal by Public Policy. 1) Contracts that are Fraud 2) Contracts that injure the State 3) Contracts that injure Public Services ( a bribe and don’t pay ) 4) Contracts that pervert Justice 5) Contracts that are bets are wages. 6) Contracts in Restraint of Trade  Contracts in restraint of trade or contacts with ‘restrictive covenants’ against one party to not open business or work in a certain area or in a certain amount of time in protection of the purchaser.  Contracts on restraint of trade tend to become illegal because they go against public policy and restrict a person from making a living by having unreasonable restrictions. i) Agreements B/W a Vendor and Purchaser of Business  When a vendor sells a business to a purchaser, the purchaser is buying the GOODWILL of the business as well. A restrictive covenant is put on the vendor to protect the purchaser that 1) the vendor will not compete with the business 2) the vendor will not take all the clients of the business  Because this is a provision in restraint of trade the courts will allow to certain extents – as long as restrictions are reasonable. – the courts will look at 1) Geographical Scope 2) Time Scope ( both scopes must be reasonable ) ii) Agreements B/W Employer and Employee  A lot harder for these restrictive covenants to prove reasonable.  Compare a McDonald’s employee to a CEO in a large corporation??  These 2 jobs will have different restrictive covenants.  Again courts will look at Geographical & Time Scope. If any Restrictive Covenants found unreasonable then the contracts are illegal by Public Policy. Chapter 8 Impeaching Contracts: Mistake Mistake in the “eyes of the law”  We must not confuse a ‘Legal Mistake’ with ‘Mistake’ in its general more non legal meaning such as “ I made a mistake in not putting my jacket on” such mistakes in judgment do not legally justify avoiding ones legal obligations under a contract. The Law recognizes 2 meanings of Mistake 1) Mistake in the TERMS of a contract. 2) Mistakes in the ASSUMPTION of a Contract. The law will grant relief for the following Mistakes. 1) Mistakes about the Terms a) Words used Inadvertently  If a party uses the wrong word inadvertently in stating the terms of a contract then the contract is void at the option of the party who used the word wrong- the wrong word must have caused a material misfortune and clearly unreasonable.($10----$500) b) Errors in Recording an Agreement  Once parties have already reached an agreement and later intend to put the contract into a formal written contract and find that an error was made in the recording.  Pending if the error is material enough the court it most cases will grant RECTIFICATION (fix the contract) RARE!!  In order to get rectification you must prove 1) there was a clear complete agreement accomplished with out any ambiguity 2) the parties didn’t engage in any further negotiation 3) the error in the recording is in fact an error any clear to see was an honest mistake ( if looks fraudulent will not grant rectification ) c) Misunderstanding about the Meanings of Words  When parties both have a misunderstanding of the meaning of a word in a contact.  In some cases both parties are equally reasonable or unreasonable as to the mistake in the meaning of the word ----- Peerless Boat with Cotton  In this case the courts will set the contract aside because of the mutual mistake BUT if one party is misunderstood diff outcomes in court. 2) Mistakes Arising from Assumptions a) Mistakes as to the Existence of the Subject Matter  A mistake made when both parties believe that the subject matter exist when it fact it does not( fruit gone bad) both parties are unaware of the damages and at the time the contract was entered into the goods were fine – the courts will set the contract aside. ( unless fraud it detected ) b) Mistake as to the Value or Quality of the Subject Matter  This is a mistake in assumption by both parties in believing that the subject matter is a certain value or quality but in fact the value/quality is RADICALLY different ( painting worth $100 sold for $50000)  Courts will rescind or set the contract aside (unless fraud detected) 3. Mistake and the Innocent Third Parties nd nd In a situation where a rogue has deceived a 2 party in a contract, the 2 party can gain back loss if quick enough to catch the fraud – But usually the rogue has sold the goods to a 3 party and the contest remains B/W the victim and 3 party. a) Void Contracts – Common Law  When a contract is void this means the contract did not exist in the 1 place  When a contract is void B/W 2 parties it is usually fair. rd  In a case that the rogue sold the goods to a 3 party the cordon law will hold the contract void and therdictim can get goods back from 3 party. This is harsher to the innocent 3 party. b) Voidable Contracts – Law of Equity rd  When a contract is found voidable it is considerate to the innocent 3 party  In this case the 2dparty victim may only sue the rogue for loss and may not sue the innocent party – if the victim was dumb enough to get tricked then its his fault. rd rd  But the 3 party must be an 3 PARTY INNOCENT PURCHASER OF VALURD 1) 3 Party ( the party is detached from the victim and unaware of situation) 2) Innocent ( unaware of item being illegal – not willful blindness ) 3) Purchaser of Value ( the price paid for the item is equal or close to the market value – cant be sued for something you paid market value for ) b) Non Est Factum “ not my doing “  when a party signs a contract that has been misrepresented innocently or fraudulently  the only time the courts will allow “non est factum” is when a party relied on the advice of someone they trusted before signing the contact such as a lawyer, accountant or doctor or someone in the family.  The elderly is an example being pressured to sign – but carelessness is not non est factum. 4. Mistake in Performance  In the event when a party pays too much or over performs in a contract, if honest the courts will order a payment of the excess amount or restitution. Chapter 9 Impeaching Contracts: Misrepresentation, Undue Influence and Duress 1. Representation VS. Terms in a Contract Term  A term in a contract is a provision that both parties intend and agreed to bind as part of the contract.  If a term is breached then the party can sue for Breach of Contract Representation  A representation to a contract is a statement of fact made by a party during negotiation prior to the time the contract was entered into – representations are not part of the contract.  A party may sue for breach of representation but not a breach of contract.  Breach of representation and breach of term are different remedies.  Common law holds that you can sue for representation because the representation was not part of the contract BUT equity holds Misrepresentation and may set aside. To determine if Representation or Term 1) If the statement is made prior to the contract is most likely will be representation. 2) If the statement was made late in negotiations it is most likely a term. 3) If written in black and white it is a term or if not could be a representation. 4) The relevance of the statement to the contract- minor or big? 2. Requirements to find Misrepresentation ( 5 ) a) The statement must be Material  If the statement is minor it wont likely be misrepresentation but the more material the statement is the more it may be misrepresentation. b) The Misrepresentation must be a statement of Fact and Not Opinion  One exception of this is the opinion of an expert because the opinion of an expert is equal to a statement of fact. c) The statement has to be Intended to be Acted on  The person making the statement must have intention for the other party to act upon to try and induce the party to enter into the contract  But it is difficult to know someone’s intentions?  Courts will look at the stage of negotiations the statement was made – the closer the statement was made to the entering of the contract the more it is misrepresentation.  Or they will look at if they knew the parties intentions for entering the contract d) The Statement must be False e) The Aggrieved party must Renounce the Agreement Promptly  As soon as the aggrieved party suspects misrepresentation the party must take action immediately – if they party waits to see what benefits may be gained this is considered fraudulent 3. Types of Misrepresentation a) Negligent Misrepresentation  Negligent misrepresentation is a false statement made 1) knowledge of false 2) reckless disregard  if a false statement is made with knowledge of being false then the courts will not help parties.  If a false statement is made recklessly disregard then the courts will rescind or set the contract aside  In certain cases the courts will allow aggrieved party to sue for damages b) Innocent Misrepresentation  A false statement made by a party in honest belief that it was true.  In this case the courts will set the contract aside. 4. Misrepresentation by Omission This means that if a party neglects to give any relevant information needed. a) Contracts Signed in Haste  When a party signs a contract in haste everything in the contract must be reasonable and anything unreasonable must be brought to the person’s attention.  It is misrepresentation if anything out of the ordinary is not brought to attention. b) When one party has Special knowledge  When one party to a contract has expert or special knowledge of the nature to the contract and the relationship b/w the parties showed that party trusted in them – the party with the special knowledge is obligated to put forward any relevant information in relation to the contract  If the person omits any relevant information then this is misrepresentation and the courts will set the contract aside c) Insurance Contracts  A person seeking any kind of insurance must disclose all relevant information in relation to the contract and must not omit any important information otherwise this is misrepresentation through omission d) Sales of Corporate Securities  When shares or bonds are publicly traded under the ‘Securities Act’ all information about the corporation must be disclosed in a ‘Prospectus’ – if not this is misrepresentation through omission e) Sales of Goods and Sales of Land  The general rule is ‘ CAVEAT EMPTER’ ( buyer beware )  Sales of Land is more Caveat Empter  Sales of Goods has little exceptions. Impeaching Contracts: Misrepresentation, Undue Influence and Duress 1. Undue Influence: Definition and Burden of Proof Undue Influence  Undue influence is the domination of one party of over the mind of another to such a degree as to deprive the victim of the ability or will to make an independent decision  A situation when one party influences another party to enter into to a contact that they otherwise wouldn’t have  Contracts like this are voidable at the option of the victim  To get equity the party must repudiate the contract promptly  Undue influence usually arises out of the victim Burden of Proof  So the burden of proof starts with the victim  Must prove in those circumstances that domination was possible  Easier to prove is a special relationship exist between parties such as lawyers and clients  Once victim has proven – then burden of proof moves to the defendant – must prove undue influence did not occur 2. Situations where Undue Influence may Arise a) Dire Circumstances  This is when one party is in a very desperate situation in such that they would do anything to get out of it – the other party will take advantage of the desperate party b) Treat of Prosecution  A kind of black mail – threatening a party to charge them c) Family Relationships  With family relationships undue influence arises in cases where a family members uses emotional bond to an agreement – a rich parents will – husband and wife entering into a contract d) Inequality of Bargaining Power  A case where one party clearly has a higher level of knowledge of contract law and puts the party in situation in which they feel they must sign 3. Independent Legal Advice  Banks will require a party to get independent legal advice from a lawyer to explain contract clearly – so the party can not claim ‘non est factum’ or ‘undue influence  The lawyer will give a certificate of independent legal advice 4. Duress  Duress is the actual or threatening of violence against a party to sign the contract  Undue influence is more influence – Duress is more of open threat  When duress in contract – it is voidable at the option of the victim Chapter 13 Impeaching Contracts: Discharge A discharged contract means to cancel the obligations of a contract or to make a contact legally void 4 ways to discharge a contract; Performance, Agreement, Frustration and Operation of Law 1. Discharge by Performance  When a contract is discharged by performance this means that the parties have performed all the obligations under the contract and the contract has come to an end. 2. Discharge by Agreement a) Waiver  When parties to a contract agree not to perform the rest of the obligations under the contract by singing a waiver- signing the waiver discharges the contract. b) Accord and Satisfaction  When a party to a contract finds they can no longer perform the obligations under the contract and they offer some benefit to the other party such as a payment of money and the party accepts – the contract is then discharged. c) Novation = new  Novation is a form of discharge in which a party to a contract is replaced by a new 3 party – this discharges the old party from the contract and a new contract is created with the new party  The new 3 party is agreeing to take the exact placement of the old party such as all liabilities by signing an ‘Assumption Agreement’. d) Condition Precedent ( Before )  in the event that a contract has a condition precedent this means that if a certain event does or does not happen before liability under the contract then the contract is discharged ( Job Offer accepted only if find me a place to live ) e) Condition Subsequent ( After )  In the event that a contract has a condition subsequent this means that if a certain event does or does not occur after liability comes under the contract then the contract is discharged ( lease agreements and don’t pay rent ) f) Option to Terminate  This is a condition set in a contract giving the choice of one or all parties to terminate the contract before all the obligations are performed. ( mortgage agreement to pay off early ) 3. Discharge by Frustration Frustration: an act of hindering plans or events. a) Doctrine of Frustration  The doctrine of frustration is looked into with great detail by the courts and rarely awarded. Only under EXTREME circumstances this is granted.  The doc of frustration excuses a party to perform obligations under a contract – discharges the contract.  The doc of frustration is granted only when ‘ external causes beyond the control of the party has made the performance impossible to perform or radically different then expected by parties ‘  IMPOSSBLE OR RADICLLY DIFFERENT!  Courts will set the contract aside  Diff b/w Mistake and Frustration is that frustration happens after contract is formed  Economic difficulties are not considered frustration. B) Self-Induced Frustration  Self inflicted frustration is not frustration at all but in fact is breach of contract. C) The Frustrated Contracts Act  When a courts finds that a contract is frustrated any payments or deposits must be restored to parties – the courts try to put the parties back in the positions they were in before entering into the contract. 4. Discharge by Operation of Law  Ontario has the ‘Limitations Act’ – this act states that a lawsuit in relation to a contract can only be brought to court within 2 years of the cause of action- 2 years from the constraint- 2 yrs from the breach of contract  If not bought to court within 2 years then the suit is ‘Statue barred’ Chapter 14 Breach of Contract – Effect of a Breach  All prior topics are basically equity remedies for when a contract is impeached Effect of a Breach  Breach of Representation = Misrepresentation  Breach of Term = Breach of Contract Terms divide into 2 separate categories 1. Degrees of Breach ( 2 different types of terms to breach ) (a) Minor Breach ( Breach of Warranty – less important )  Some terms are less important than other terms in a contract  Non-Essential terms and Essential terms  A minor breach can happen in 2 ways 1) A Breach of a Non-Essential term of a Contract 2) A Breach of an Essential term of a contract in a Minor respect  A minor breach will only allow the aggrieved party to sue for breach of contract to get damages and does not give the aggrieved party the right to terminate the contract ( end the contract )  With a minor breach the aggrieved party must sue at the end of the contract ( what is essential to a term will tell you what is minor or major, like in the Barbie example, the clothing may be a non-essential term if not specified or not important- vice versa – if they wanted 10,000 units and you only send 9,900 this is an essential breach ) (b) Fundamental (Major) Breach ( Breach of a Condition )  if the term that is breached completely changes the benefits of a contract or changes the contract RADICALLY – prolly a Major Breach ( essential term )  in a minor breach the aggrieved party has a choice 1) the aggrieved party can treat the contract to an end and sue for damaged right away 2) the aggrieved party can keep the contract going and sue for damages after the contract is over  it all depends what is FUNDALMENAL to the contract  In most cases the party will take option 2) because the party will not have any other choice or option ( lack of other suppliers )  Once the aggrieved party has made a choice, they may not change their mind 2) How a Breach May Occur (a) Repudiation and Anticipatory Breach Repudiation Breach – this is a breach with out any notice to the party in advance, the party just simply says with no prior warning “I can’t perform under the contract” Anticipatory Breach – this is a breach when the party that is about to breach warns the other party in advance that they are going to breach the contract  Anticipatory breach allows for the party to see if they have any other option to mitigate any losses about to occur – cut losses Aggrieved party can then take 2 options 1) treat the contract to an end and sue for breach of contract for damages 2) wait until the end of the contract and then sure for breach of contract Beware of Option 2)  if the party keeps the contract open  both parties are still bound to the contract  other party may breach the contract  the contract may be frustrated – which puts the aggrieved party from being in the position to being able to sure for ‘breach of contract’ to having the contract set aside by the courts as a result from the breach (b) One Party Renders Performance Impossible  If a party causes the performance under a contract to be impossible on purpose – this is simply self-induced frustration can breach of contract (c) 0ne Party Fails to Perform  when the time for performance comes and the party fails to perform or the party performs in an inadequate manner ( very crappy job )  this is not like anticipatory breach because there is no warning to the party in advance for the breach Doctrine of Substantial Performance  when a party only substantially performs obligations under the contract – the aggrieved party can not argue that they completely failed to perform  the aggrieved party may sue for a minor breach 3) Exemption Clauses and their Effects on Breach  An exemption clause it a clause within a contract that attempts to limit or remove a party’s liability in the event that the party breaches the contract Exclusion Clause  a negotiation in a contract that limits or removes a party’s liability in the event that the party breaches a contract  courts a rare to enforce an exemption clause because they completely under mine the whole concept of a contract – if in the extreme case all contracts had exemption clauses for all terms then there would be no incentive for the party’s to not breach a contract  courts will only enforce an exemption clause in the most narrow cases  MUST BE NARROW AND A MINOR BREACH 1) the exemption clause must be extremely narrow in scope with very specific detail – it must not be broad 2) if the party trying to uphold the exemption clause new exactly what they were signing – if both parties are not aware of the clause then it will not be enforced 3) courts will never enforce an exemption clause against a Fundamental Breach – or one that relieves a party from a fundamental breach Chapter 15 Remedies for Breach In the event of a Breach there are 3 types of Remedies
More Less

Related notes for ACTG 2P40

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.