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Mistake

Mistake. Mistake A party cannot get out of a contract because they made a mistake Exceptions: Mistake due to other party’s misrepresentation, unconscionable conduct etc. Common mistake Mutual mistake Unilateral mistake. Mistake Common mistake Both parties make the same mistake

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Mistake

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  1. Mistake

  2. Mistake • A party cannot get out of a contract because they made a mistake • Exceptions: • Mistake due to other party’s misrepresentation, unconscionable conduct etc. • Common mistake • Mutual mistake • Unilateral mistake

  3. Mistake • Common mistake • Both parties make the same mistake • Mutual Mistake • An objective test • Unilateral Mistake • One party is mistaken as to a fact; and • Other party is aware of the mistake

  4. Misrepresentation

  5. Elements of Misrepresentation • The statement was false • The statement was one of fact • Statement was addressed to the representee before or at the time that the contract was entered into • The statement induced the representee to enter into the contract • See Attwood v Small (Outline p 8-8)

  6. History • 1880’s – Caveat Emptor – Let the buyer beware • Court of Equity • Relief for fraudulent misrepresentation • Rescission was only remedy • Common Law Courts • Relief for innocent misrepresentation only if it became a term of the contract • Tort of negligent misrepresentation • Only remedy was damages

  7. History • 1970’s – Statutory Reform • S52 Trade Practices Act & s11 Fair Trading Act • Removed distinction between fraudulent, negligent and innocent misrepresentation • Built upon previous law regarding misrepresentation

  8. Categories of Misrepresentation • Fraudulent misrepresentation • Representor knew it to be false or was reckless as to whether it was true or false • If Representor believed it to be true, no action for fraudulent misrepresentation even if negligent

  9. Step 3 Step 1 Step 2 A false representation The representation was of fact was made (beware intended to (and did) The representor knew the statement was promises, opinions or a induce the representee to untrue, or was reckless as to mere puffery) act ; (eg, by creating a its truth contract) Fraudulent misrepresentation (deceit) • Liability for fraud cannot be excluded • Remedy for fraudulent misrepresentation is damages.

  10. Categories of Misrepresentation • Negligent Misrepresentation • Representor owed a duty of care to representee • Representor failed to exercise the required standard of care • Loss, which was a reasonably foreseeable consequence of the misrepresentation, was caused by misrepresentation • Originally restricted to cases where there was a physical loss – now can claim for pure economic loss – Hedley Byrne v Heller

  11. Step 1 Step 2 Step 3 Were the representee’s Did the Has the representor losses caused by the representor owe failed to exercise the negligence and were the a duty of care to required standard of losses reasonably the r epresentee? care? foreseeable? Negligent misrepresentation • Liability for negligence can be excluded by an exemption clause • Remedy for negligence is damages.

  12. Categories of Misrepresentation • Innocent misrepresentation • Representor did not know it was false and owed no duty of care to the representee • No remedy at common law or equity

  13. Categories of Misrepresentation • Misleading & Deceptive Conduct • Section 52 Trade Practices Act • No need for fraud or negligence

  14. Misleading & Deceptive Conduct • Section 52 Trade Practices Act ‘A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive’ • Section 9 Fair Trading Act ‘A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive’

  15. Misleading & Deceptive Conduct • No requirement for: • Fraud; or • Negligence • Will not be liable if: • Not the source of the information; and • Disclaims responsibility

  16. Remedies for Misrepresentation • Common Law • Recission • Contract is void ab initio • Not the same as termination • Damages • Trade Practices Act • Recission, damages, injunctions

  17. Duress, Undue Influence and Unconscionable Conduct

  18. Duress • A contract entered into due to coercion or force can be rescinded by the victim • Coercion can be: • To the person; • To goods; or • Economic duress

  19. Duress (cont.) • Duress to the PersonActual or threatened • Violence or • Unlawful imprisonment to the person, his family or friends • Duress to Goods • Threats that are made against a person’s property

  20. Duress (cont.) • Person threatening violence must show that it was not a contributing cause to victim’s decision to enter into the contract • Violence must occur at or before the time that the victim entered into the contract

  21. Economic duress • An economic threat that is not “legitimate” • No rule that that commercial parties have to be fair to one another • A threat to break a contract can be economic duress • A lawful threat may be illegitimate

  22. Undue influence • The unconscionable use by one person of power possessed by him over another in order to induce the weaker party to enter into a contract • Presumed in special relationships and where one party is in a position of dominance or confidence

  23. Undue influence (cont.) • There must be more than mere reliance or influence • Innocent party must show that the contract would not have been made without the undue influence • Court will look at: • The equality of the bargain • The weaker party’s ability to make free and independent choices • Whether the weaker party received independent advice

  24. Undue influence (cont.) • Court will presume undue influence for contracts between: • Parent and child • Trustee & beneficiary • Physician & patient • Solicitor and client • Guardian and ward • Religious advisor and devotee • Any fiduciary relationship • Tasker v Algar (Outline p 8-9)

  25. Unconscionable Conduct • One party takes advantage of the other parties special disability to the extent that the contract is unfair or unconscionable • Commercial Bank of Australia Ltd. V. Amadio [1983] HCA 14 • Louth v. Diprose [1992] HCA 61 • Elements • Special disability • Absence of any equality between the parties • Disability evident to other party

  26. Unconscionable Conduct - Remedies • Originally, only rescission was available • s51AA Trade Practices Act and s7 Fair Trading Act permits damagesA corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories. • S82 Trade Practices Act & s159 Fair Trading ActA person who suffers loss or damage by conduct of another person … may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.

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