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BUS 393 (52)
Chapter 4

CHAPTER 4 enforcing contractual obligations.docx

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Business Administration
BUS 393
Robert Adamson

CHAPTER 4: ENFORCING CONTRACTUAL MISTAKES - Shared mistake (common mistake): both parties have made the same serious error o May destroy consensus + result in no contract (void) o Courts may RECTIFY (correct mistake) to take place the actual terms of the original interpretation of the terms - Misunderstandings (mutual mistakes): both parties have different understandings of the terms of a contract o most common, usually resolved by court imposing most reasonable interpretation - One-sided mistake (unilateral mistakes): o doesn’t normally affect existence of contract  CAVEAT EMPTOR (let the buyer beware)  NON EST FACTUM (it is not my act)  Negligence  E.g. mistaking a mortgage for a guarantee because you haven’t read it  CAN = VOID CONTRACT CONTRACT INTERPRETATION - Courts to use most reasonable interpretation - Ambiguity? Courts look at rest of document to try to discern the intention of the parties - PAROL EVIDENCE RULE – requires that where the terms of the agreement are clear and unambiguous, no outside extrinsic evidence will be considered o Exceptions: evidence of fraud, duress EXEMPTION CLAUSES (exculpatory, exclusion, limitation clauses) - Provisions that favour one side o Limit liability o Strictly interpreted o Must be brought to other part’s attention - STANDARD-FORM CONTRACTS contain exemption clauses o E.g. airlines, car dealer warranty - Fundamental breach no longer good law o Exemption clauses = unfair, unreasonable result MISREPRESENTATION - False/leading statements that induce person to enter a contract - False statement term of contract? Remedy = SUE FOR BREACH - Usually statement of fact not opinion - Silence not misrepresentation except where duty of good faith/relationship 1. INNOCENT MISREPRESENTATION o Misrepresentation is innocent, no such intention or knowledge of error being made o Remedy: RESCISSION – court attempting to restore the parties to their original positions  Reimburse party in temporary possession their expenses = keep appropriate balance between 2 innocent parties  Not possible if goods resold, destroyed, not available for return  If victim has done something inappropriate (cheating another party)  Remedy only good if person comes “with clean hands” 2. FRADULENT MISREPRESENTATION o One person intentionally and knowingly misleads another and induces them into entering contract o If can be shown you didn’t believe what you were saying was true? Can be accused of FRAUD o Remedies? Damages + rescission  Innocent misrep easier to prove than fraud and intent 3. NEGLIGENT MISREPRESENTATION o Innocent misrep but courts can establish that wrongdoer should have been more careful o Remedies? Damages + rescission  Damages established that misrep was fraudulent, negligent, misleading 4. CRIMINAL FRAUD (MISSTATEMENT) o Inducing someone to enter transaction through intentionally misleading statements o Crime! Criminal code  Include falsifying, destruction, manipulation of books, employee records, prospectuses, other docs with intent to defraud  Impersonating others / passing off o Over $5000 OR fraud affects market price of shares, stocks, offered to sale to public = indictable offence o Potential prison term up to 14 years o Less than $5000 o Summary conviction o Potential imprisonment up to 2 years DURESS AND UNDUE INFLUENCE Duress: free will to bargain is lost because of coercion, involving threat of violence, imprisonment, scandal, damage to property, inappropriate financial pressure exercised by one of the parties - Voidable: victim can get out of contract unless third party involved - E.g. economic duress o Forced to sign lease increase Undue influence: loss of free will to bargain causing resulting contract to be voidable - Presumed in situations o E.g. lawyer advises - UNCONSCIONABILITY – on basis of vulnerability (mental impairment/poverty) that allows one party to unfairly take advantage of the other o Bargaining positions of parties unequal PRIVITY & ASSIGNMENT Privity: only the parties to contract are bound by it - EXCEPTIONS o 1. Interests in land that go with the land  A lease will bind original owner, tenant, person who land was sold o 2. Trust arrangements rd  Person puts property in trust with trustee for benefit of 3 party  3 party can enforce trust through stranger to contract
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