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LAW 122 (625)
Chapter 9

Chapter 9Representations and TERMS.doc

7 Pages

Law and Business
Course Code
LAW 122
Theresa Miedema

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Chapter 9 Representations and TERMS PRE-CONTRACTUAL AND CONTRACTUAL STATEMENTS  Not every statement communicated during the negotiation process is a contractual term  Contractual Term: is a provision in an agreement that creates a legally enforceable obligation  Contractual term is a promissory statement  Pre-Contractual representation: is a statement one party makes by words or conduct with the intention of inducing another party to enter into a contract  It does not impose a contractual obligation, it could induce the creation of a contract, it does not form part of that contract MISREPRESENTATION  The distinction between contractual terms and pre-contractual representation is especially important if a statement is false  If a non contractual statement is false, we say that one of the parties has made a misrepresentation  Incorrect statement of fact (incorrect when made) that MAY BE actionable if it induced the contract Nature of Misrepresentation  Misrepresentation: is a false statement of a fact that causes the recipient to enter into a contract  A contractual term cannot be false when it is given,  A breach occurs when one party fails to perform precisely as promised Statement of fact CANNOT be a Puff ,Not an opinion, and cannot be a legal statement or about existing law Misstatement of fact  Not every misstatement during pre-contractual negations is a misrepresentation  Misrepresentation occurs only if the speaker claimed to state a fact  People often make non-factual statements during negations  Give their own Opinion: is the statement of a belief or judgment  During a pre-contractual negation a person may describe how they will act in the future Future Conduct- is not a statement of fact as it is only an indication of a person’s future intentions A non-promissory statement as to a party’s future conduct is not usually treated as a misrepresentation  A court may find a misrepresentation if you inaccurately describe the consequence of a law, because those consequences are treated as a matter of fact rather than law Silence as Misrepresentation  As a general rule, parties are not required to disclose material facts during pre contractual negotiations, no matter how unethical non disclosure may be  six occasions when the failure to speak will amount to misrepresentation 1. When silence would distort a previous assertion  Party’s silence sometimes has the effect of falsifying a statement that was previously true 2. When a statement is a half truth • Misrepresentation may also occur if a party tells half truth and remains silent on the other half 3. When the Contract requires a duty of utmost good faith  Some contracts require a party to make full disclosure of the material facts(ex. Insurance)  Law imposes an obligation of good faith that requires the customer to disclose all of the relevant facts 4. When a special relationship exists between the parties  A friend u trust have to tell them all information and questions that they need 5. When a statutory provision requires disclosure • Require the disclosure of material facts in a contractual setting 6. When facts are actively concealed • If a party hides truth it is treated as misrepresentation Inducement  For a statement to be actionable as a misrepresentation, the deceived party must prove that the false statement induced the contract  The statement must have misled its recipient into creating the contract THE LEGAL CONSEQUENCES OF MISREPRESENTATION 1. The remedy of rescission 2. the right to damages RESCISSION  Rescission -is the cancellation of a contract with the aim of restoring the parties to the greatest extent possible, to their pre-contractual state.  It can be done by parties or by courts  Often difficult to know in advance whether a court will grant rescission because it is a discretionary remedy, one that is not available as of right.  The remedy of rescission is often accompanied by an order of RESTITUTION: which involves a giving back and taking back on both sides  The victim of misrepresentation may be barred from rescission in certain circumstances. i. If the misled party affirmed the contract, then rescission is not available. 1. Affirmation: occurs when the misled party declares an intention to carry out the contract or otherwise acts as though it is bound by. 2) Rescission may be barred if restitution is impossible • If unable to return to pre-contractual position court reluctant in giving recession 3) Rescission may be unavailable if it would affect a third party DAMAGES  a court may respond to a misrepresentation by awarding damages against the party that made the statement  Damages: are intended to provide monetary compensation for the losses that a person suffered as a result of relying upon a misrepresentation TYPES OF MISREPRESENTATION Innocent misrepresentation  Innocent Misrepresentation: is a statement a person makes carefully and without knowledge of the fact that it is false  If the speaker is innocent of any fraudulent or negligent conduct, the general rule is that the deceived party is not entitled to recover damages,still might get recession (only when a substantial difference between what the deceive party bargained for and what was obtained) Negligent misrepresentation  Negligent Misrepresentation: is a false, inducing statement made in an unreasonable or careless manner  Remedies are rescission of contract and damages in tort (of negligence) Fraudulent Misrepresentation  Fraudulent Misrepresentation :occurs when a person makes a statement they know is false or that they have no reason to believe is true or that is reckless (sue in tort of deceit)  Remedies are same as negligent CONTRACTUAL TERMS Express terms  An Express Term: is a statement made by one of the parties that a reasonable person would believe was intended to create an enforceable obligation Proof of Express Terms  Can be o
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