Fundamentals of Law (BL502)
Download
Report
Transcript Fundamentals of Law (BL502)
Fundamentals of Law (BL502)
Fundamentals of Law
Misrepresentation
Fundamentals of Law (BL502)
History
1880’s – Caveat Emptor – Let the buyer beware
Court of Equity
Relief for fraudulent misrepresentation
Recision 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
Fundamentals of Law (BL502)
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
Fundamentals of Law (BL502)
Categories of Misrepresentation
Fraudulent misrepresentation
Representor knew it to be false or was
reckless as to whether it was true or false
Innocent misrepresentation
Representor did not know it was false and
owed no duty of care to the representee
Fundamentals of Law (BL502)
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
Fundamentals of Law (BL502)
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 was intended to induce, and
did induce, the representee to enter into the
contract
Fundamentals of Law (BL502)
Statement was false
Silence will not normally suffice
Half truths
Re Hoffman; ex p Worrell v Scilling (p39)
Krakowski v Eurolynx (S&OR p40)
Altered circumstances
Lockhart v Osman (S&OR p40)
Misrepresentation can be made by conduct
Fundamentals of Law (BL502)
Statement was one of fact
Not a mere puff
Usually, not an opinion
An opinion can be a fact where the
representor has special knowledge
Smith v Land and House Property Corp (S&OR
p39)
The existence of an opinion can be a fact
Sola Optical v Mills (1987) 168 CLR 628
Fundamentals of Law (BL502)
Addressed to the Representee
A representee cannot sue on a representation
that was not directed to him and was not
intended to induce him into making the
contract
Peek v Gurney (S&OR p41)
But is sufficient if communicated to a third
party with the intention that it would be
communicated to the representee
Fundamentals of Law (BL502)
Statement Induced Representee to Act
Not necessary that it was the only reason for
entering the contract
But it must be one of the reasons
Representee cannot be aware of truth before
entering into the contract
Holmes v Jones (S&OR p40)
Representee is not required to investigate
Redgrave v Hurd (S&OR p41)
Fundamentals of Law (BL502)
Remedies for Misrepresentation
Recision
Contract is void ab initio
Not the same as termination
Damages
Fundamentals of Law (BL502)
Rescission
The parties must be capable of being
restored to substantially the position they
were in before the contract was entered into
Known as “Restitution”
Court can make consequential orders
Precise restitution is not necessary
Not possible where services already
supplied pursuant to a contract of service
Fundamentals of Law (BL502)
Rescission (cont.)
Innocent party must give notice of rescission
to other party
Notice can be implied from conduct
Academy of Health & Fitness v Power
(S&OR p218)
Fundamentals of Law (BL502)
Rescission (cont.)
Rescission is not permitted if the contract has
been affirmed
After discovering misrepresentation,
innocent party does any act which
indicates that he is treating contract as still
running
A delay in rescinding can amount to an
affirmation
Fundamentals of Law (BL502)
Rescission (cont.)
Not permitted if the legal rights of an innocent
third party will be adversely affected
For example, where goods have been on sold
to a bona fide purchaser for value
But, rescission will be effective where it
occurs before the third party gains an interest
Car & Universal Finance Co v Caldwell
(S&OR p218)
Fundamentals of Law (BL502)
Statutory Provisions
S52 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
S9 Fair Trading Act (Vic)
A person must not, in trade or commerce,
engage in conduct that is misleading or
deceptive or is likely to mislead or deceive
Fundamentals of Law (BL502)
Fundamentals of Law
Duress, Undue Influence and
Unconscionable Conduct
Fundamentals of Law (BL502)
Duress
A contract entered into due to coercion or
force can be rescinded
Coercion can be:
To the person;
To goods; or
Economic duress
Fundamentals of Law (BL502)
Duress (cont.)
Duress to the Person
Threats of physical punishment or
imprisonment to the person, his family or
friends
Duress to Goods
Threats that are made against a person’s
property
Fundamentals of Law (BL502)
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
North Ocean Shipping v Hyundai (p220)
A lawful threat may be illegitimate
Cockerill v Westpac (S&OR p220)
Fundamentals of Law (BL502)
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
O’Sullivan v Management Agency (S&OR p221)
Lloyd’s Bank v Bundy (S&OR p222)
Fundamentals of Law (BL502)
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
Fundamentals of Law (BL502)
Unconscionable Conduct
One party takes advantage of the other
parties special disability to the extent that the
contract is unfair or unconscionable
Blomley v Ryan (S&OR p219)
Commercial Bank v Amadio (S&OR p61)
Elements
Special disability
Absence of any equality between the parties
Disability evident to other party
Fundamentals of Law (BL502)
Unconscionable Conduct - Remedies
Originally, only rescission was available
s51AA Trade Practices Act and s7 Fair Trading Act
permits damages
A 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 Act
A 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.
Fundamentals of Law (BL502)
Fundamentals of Law
Illegal and Void Contracts
Fundamentals of Law (BL502)
Illegal Contracts
Prohibited by Statute; or
“Injurious to the public good” and therefore
illegal at common law
Injurious to public life
Contrary to the nations foreign affairs
(trading with the enemy)
Interference with administration of Justice
Fundamentals of Law (BL502)
Void contracts
Declared void by Statute; or
“injurious to the public good” but not serious
enough to be illegal
Immoral contracts
Prejudicial to family life
Restraint of trade
Fundamentals of Law (BL502)
Void contracts (cont.)
Differ from illegal contracts
Bad part of contract can be severed from
good part
Related contracts may still be enforceable
Transferred property is recoverable
Fundamentals of Law (BL502)
Restraint of Trade
All citizens should be free to ply their trade
A clause in restraint of trade is only enforceable to
the extent that it is reasonable
It will only be reasonable if it is no wider than is
reasonably necessary to protect the legitimate
interests of the party relying on it
Otherwise it is void
ICT v Sea Containers (S&OR p140)
Peters (WA) Ltd v Petersville Ltd (S&OR p140)
Fundamentals of Law (BL502)
Restraint of Trade (cont.)
3 Types of Contract where restraint of trade
often arises
Contracts of service
Sale of business
Restrictive trading agreements
Fundamentals of Law (BL502)
Restraint of Trade (cont.)
Contracts of service
Courts will look at respective bargaining
positions
Drake Personnel v Beddison [1979] VR 13
Buckley v Tutty (1971) 125 CLR 353
Restrictive trading agreements
See Part IV Trade Practices Act