Textbook Notes (363,507)
Canada (158,391)
BUS 393 (52)
Chapter 8

Chapter 8 – Factors Affecting the Contractual Relationship

5 Pages
Unlock Document

Simon Fraser University
Business Administration
BUS 393
Richard Yates

Chapter 8 – Factors Affecting the Contractual Relationship Mistake • Misunderstanding that destroys consensus voids contract • Bad bargain (or bad advice) is simply error in judgment, not void • Courts will try give effect to the reasonable expectations of the parties • Mistake must be serious and a central issue, go to the nature of the agreement or existence of the subject • Courts less likely to remedy a mistake in law than mistake in facts Shared Mistake • Shared mistake – both parties agree but make the same mistake • Most common: subject matter of contract no longer exists at time of contract; or purchaser of property already owns it • Mistake will only void contract if fundamental to contract – not just the value  Rectification • Courts will correct/rectify if clear that both understood agreement, but wrote something different from that understanding • If one party intended something different, court will not rectify • If agreement is only improperly recorded, courts will correct it Misunderstanding • Misunderstanding – each party has different idea of the meaning of the terms • Court will adopt the more reasonable position of interpretation • Only where equally reasonable interpretations and the error is serious will it be void One-Sided Mistake • Unilateral mistake – only one party makes mistake with respect to contract • If there was no misrepresentation or misleading information => no remedy • When offeror makes obvious error, purchaser not allowed to snap up offer • If one-sided mistake is profound (eg. identity) => contract void; otherwise, caveat emptor (buyer beware) applies  Non Est Factum (“It is not my act”) • If one party is unaware of nature of the document being signed => void (but not if contract was not read – negligence) Rules of Interpretation • Court applies reasonable person test to interpret contract – apply literal meaning to specific wording, ambiguous wording interpreted reasonably • Parol Evidence Rule – when terms are clear and unambiguous, outside evidence cannot be used to contradict clear wording in the contract itself o Exceptions: fraud, duress, undue influence, condition precedent, collateral contract, subsequent agreement, absence of intention • Courts will imply terms reasonably, where appropriate; statues may also imply terms Misrepresentation • Misrepresentation – misleading statement that induces a contract o May be fraudulently (on purpose), negligently (person should have known), or completely innocently (without fault) Allegation of Fact • Statement must be factual, not opinion or promise. Exceptions: o If it is a future promise, only misrepresentation if clearly shown that promiser had no intention of honouring the promise when it was made o If it is opinion, only misrepresentation if it is an expert’s opinion Silence or Non-disclosure • Silence or non-disclosure by itself usually not actionable, unless there is duty to disclose • Exceptions: insurance contracts require disclosure of information; corporations selling new shares have obligation to disclose information in prospectus; professionals required to act in utmost good faith; actively hiding important information • Misrepresentation must have misled the victim False Statement • Fact must be incorrect and untrue; withholding parts of truth may also be misrepresentation Statement Must Be Inducement • Victim must show he/she was induced into contract by the false statement • If victim knew statement was false and entered anyway (b/c he/she did not believe or did not think it made a difference) => misrepresentation not actionable • If victim thought it was true but would have entered even if false, not misrepresentation either As a Term of the Contract • Breach of contract actionable may be appropriate if misrepresentation is part of contract • Even if not in contract, consumer protected contains special provisions (eg. advertisements) Innocent Mispresentation • Innocent misrepresentation – false statement made honestly and without carelessness, by someone who believed it to be true => remedy is rescission  Rescission • Rescission – attempt to return both parties to original positions – property and monetary benefit (minus expenses) returned • Not available in certain situations: 1. Affirmation – if victim affirms contract after knowledge of misrepresentation 2. Impossibility of restoring – if subject matter has been destroyed/damaged 3. Third-party involvement – if it adversely affects third party 4. Failure on the part of the victim – if plaintiff not blameless – also misled/cheated, or caused unreasonable delay Fraudulent Misrepresentation • Fraud is committed 1) knowingly, 2) without belief in its truth, or 3) recklessly, careless whether it was true or false • Victim can sue for damages under the tort of deceit, and/or rescission • If person innocently makes false statement and then discovers mistake (or true statement becomes false), he must inform other person without delay => if not, it turns into a fraud • Possible remedies: 1. Rescission/avoidance – victim has right to return to original position and be reimbursed 2. Dama
More Less

Related notes for BUS 393

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.