Copyright Guy Harley 2004 Mistake

Copyright Guy Harley 2004 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

Copyright Guy Harley 2004 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

Copyright Guy Harley 2004 Misrepresentation

Copyright Guy Harley 2004 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)

Copyright Guy Harley 2004 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

Copyright Guy Harley 2004 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

Copyright Guy Harley 2004

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

Copyright Guy Harley 2004 Fraudulent misrepresentation (deceit)  Liability for fraud cannot be excluded  Remedy for fraudulent misrepresentation is damages. of fact was made (beware Step 1 A false representation promises, opinions or a mere puffery) Step 2 The representation was intended to (and did) induce the representee to act ; (eg, by creating a contract) Step 3 The representor knew the statement was untrue, or was reckless as to its truth

Copyright Guy Harley 2004 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

Copyright Guy Harley 2004 Negligent misrepresentation  Liability for negligence can be excluded by an exemption clause  Remedy for negligence is damages. Did the representor owe a duty of care to the representee? Step 1 Has the representor failed to exercise the required standard of care? Step 2 Were the representee’s losses caused by the negligence and were the losses reasonably foreseeable? Step 3

Copyright Guy Harley 2004 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

Copyright Guy Harley 2004 Categories of Misrepresentation  Misleading & Deceptive Conduct  Section 52 Trade Practices Act  No need for fraud or negligence

Copyright Guy Harley 2004 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’

Copyright Guy Harley 2004 Misleading & Deceptive Conduct  No requirement for:  Fraud; or  Negligence  Will not be liable if:  Not the source of the information; and  Disclaims responsibility

Copyright Guy Harley 2004 Remedies for Misrepresentation  Common Law  Recission  Contract is void ab initio  Not the same as termination  Damages  Trade Practices Act  Recission, damages, injunctions

Copyright Guy Harley 2004 Duress, Undue Influence and Unconscionable Conduct

Copyright Guy Harley 2004 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

Copyright Guy Harley 2004 Duress (cont.)  Duress to the Person Actual 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

Copyright Guy Harley 2004 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

Copyright Guy Harley 2004 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

Copyright Guy Harley 2004 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

Copyright Guy Harley 2004 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

Copyright Guy Harley 2004 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)

Copyright Guy Harley 2004 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

Copyright Guy Harley 2004 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.

Copyright Guy Harley 2004 ProvisionTPAASICAFTA Misleading or deceptive conduct 5212DA9 Predictions51A12BB4 Injunctions8012GD149 Damages8212GF159 Other remedies8712GM158 Unconscionable conduct51AA12CA7 Unconscionable conduct – consumers 51AB12CB8 Unconscionable conduct – small business 51AC12CC8A & 8B