Defects in Contract (I)

Defects in Contract (I)

1. When a contract is void, it is invalid and cannot be enforced. When a contract is voidable, treated as valid until innocent party chooses to rescind(cancel)/set aside the contract.

2. Misrepresentation

   • False Statement of fact.
   • Effects
     • Voidable.
   • Elements
     • Representor made a false statement of face
     • Statement made must be material
     • Representee rely on statement when deciding
   • Silence cannot amount to misrepresentation. (General rule)
     • Exception
       • 1. Change in circumstances. (True at time when made, when statement become no longer a truth, must inform before making the contract.
       • 2. Half-truths. (Representor suppresses anything disadvantageous which is relevant
   • Types
     • 1. Innocent Misrepresentation. Statement made honestly WITH reasonable grounds for believing in its truth.
       • Remedies: Rescission. IF fairer, court may award damages (Misrepresentation Act)
     • 2. Negligent Misrepresentation. Statement made honestly WITHOUT reasonable grounds for believing in its truth. or not
       • Remedies: Rescission and/or Damages under Misrepresentation Act
     • 3. Fraudulent Misrepresentation - Statement dishonestly, knowing it to be untrue/reckless as to whether it was true
       • Remedies: Rescission and/or damages for tort of deceit
   • Remedies Limitation
     • 1. Lapse of time (Within reasonable timing) 2. Party misled affirms the contract. (With full knowledge but ahead) 3. Restitution = Impossible. (Restore something to it's proper owner) 4. Rights of 3rd parties affected.

3. Must Know Terminology

   • Representor - Offer negotiation Representee - Accepting the negotiation

4. Unenforceable contracts

   • Made by minors ( <18 years old)
     • Exception
       • Contracts for Necessaries
       • Educational & Employment Contracs

5. Duress (Under Pressure)

   • When forced into a contract under a threat / does not give his free consent to the terms of the contract
     • VOIDABLE
   • Types
     • Duress to the person. Threats or physical violence to cause bodily injured/ loss of life. (To the person/immediate family)
     • Duress to the Goods. Threaten to damage the innocent party's goods
     • Economic Duress. One party uses illegitimate commercial pressure to get another party to agree to certain contractual terms

6. Undue Influence

   • Got pressure, coercion, influence, did not enter into contract on his own free will. VOIDABLE
   • Types
     • Actual undue influence, The one that want to set aside the contract, have to prove that he acted under influence of the other party, and entered without exercising his free will.
     • Presumed Undue Influence. Parties are in a relationship of trust and confidence, Transaction is one that cannot be explained on the basis of the relationship alone.
     • Undue influence and Third Parties. MUST BE ADVISED by a lawyer about the risk involved and the fact that she have a choice to proceed or not to.