Topic 5 Proper negotiation, misrepresentation and mistake

• What are Void contracts and what causes them?

  Created by mistakes results in as if a contract was never made (any benefits handed over needs to be handed back)
• What are Voidable contracts and what causes them, what are the consequences?

  Created by misrepresentation. Treat one party as the innocent party (party that is considered to have suffered a detriment and given a choice, carry on + compensation or void from that point)
• Mistakes renders contracts void
• Courts may not do anything if a party fails to communicate properly or bind them to what they were meant to say. This mean that a party is no longer bound if their intentions are not properly communicated.
• Courts may use an objective approach which is based upon facts. It is the View of the parties' intentions to how the terms were agreed. It aims to eliminate uncertainties related to subjective intention.
• Mutual mistakes


  When both parties are mistaken about the same material fact within the contract

  
  

  Raffles v Michelhause

  Claimant offered Defendant to deliver cotton to Liverpool from India on a ship called ‘Peerless’. However, there was 2 ships of the name and arrived at different times. ClaiThe claimantmant believed the ship would arrive later and defendant believed it would arrive sooner. Defendant never paid for the cotton so Claimant sued. It was unenforceable because it was a mutual mistake between parties that there was no agreement or ambiguity of the ship.
• What are Common mistakes, provide an example

  When both parties know what they are talking about, but both make the same mistake.

  
  

  Couturier v. Hastie

  Defendant sold corn to Claimant via stock exchange but the corn went off and sold before it was completely useless. Claimant sued for purchase price. The Defendant argued the exchange was the chance to get corn not actually get it so the damages fall under the insurance. The outcome was that both parties acted on false premises on the corn so was a common mistake.
• What are Unilateral mistakes and what is the courts approach, provide 2 case examples?

  This is where one party has made a mistake and the other party is silent about the mistake and carries on. The courts may prevent the knowledgeable party from relying on the obective if the mistake was genuine. Hartog v. Colin & Shields

  
  

  However, if it was a mistake caused by the other party, the Objective agreement may be overridden if one party causes the other to make a mistake. Scriven Bros & Co. v Hindley and Co. (1913)
• What is Mistaken identity and name a case.

  Mistaken identity of the counterpart not the person of dealing. There is a question which the courts have to ask which is whether there is a quality (attribute) or identity. Therefore, the title of goods is importance because it can rescind voidable contracts before a 3rd party acquires the title.

  
  

  Ingram v. Little
• What is Quality of goods and of the person, provide an example of quality of a person.

  When something isn't what is stated for goods

  For a person it must be done face to face. The law presumes an owner contracts with the person present (even if false). The owner has the option to rescind

  
  

  Philp v Brooks
• Misrepresentation


  False statement of fact by one party to induce another party to enter a contract with a loss towards one party.
• Types of misrepresentation


  • Fraudulent Misrepresentation- when a person makes a statement which is not true (they know it is false) Or makes it recklessly with no care if it is true or not
  • Negligence Misrepresentation-When a person makes a false statement which he may believe is true without reasonable grounds for believing it to be true.
  • Innocent representation- took reasonable care but things still occur (no blame to be attached)
• Elements of Misrepresentation (7)


  • Statement
  • of Present Fact
  • Reasonably inducing claimant to enter contract
  • False
  • Resulting in loss to the claimant
  • May be made fraudulently (tort of deceit), negligently (Misrepresentation Act 1967) or innocently
  • Renders contract voidable
• Remedies for fraudulent misrepresentation

  • Contract is automatically void
  • Damages amount to when the contract never occurred
• Remedies for innocent misrepresentation

  • Entitled to rescind the contract (complete undoing of the contract)
  • Damages in lieu of rescission if the right of rescission would've been lost
• What might courts do if there is a mistake in a contract?

  1. Courts may not do anything if a party fails to communicate properly or bind to what they are meant to say
  2. Courts may use an objective approach based upon facts (views of the parties and intentions to the terms)
• principles and case facts in Hartog v. Colin and Scriven Bros v Hindley and Co. 


  Hartog v. Colin & Shields Contract to buy hare skins. Colin sent a letter with a typo stating pound for a piece (Instead of single unit for a set price). Colin attempted to back out, so Hartog sued. Hartog knew of the mistake (custom of the trade), he was trying to get a bargain thus it was void.

  Scriven Bros & Co. v Hindley and Co. Sale of 2 bales one of tow and the other has hemp. Hindley thought they were both Hemp because they looked the same and overpaid. There was faults on both sides so no sale.
• What was the principle and facts behind Ingram v. Little?

  Henderson (Fraud) purchased a car from 2 sisters. He purchases the car via cheque which one of the sisters checks his identity. They agree and he sells the car in Blackpool. The sisters go to Blackpool and demands the car after the cheque bounces. The mistake is that the ownership never transferred so never had the right to buy or sell. The issue was the quality, because the dealership didn’t care about the identity. The sisters won because it was an identity mistake which was set up on the phone and during and after the contract 
• What was the principle behidn philp v Brooks?

  Quality of the person (doesnt matter if its a fake alias, as long as its in person)

  Philp v Brooks (scammer) goes to a jewellers shop, gives a cheque but wanted to take some jewellery away whilst the cheque clears. North leaves with the Jewelry because the shop owner knew of the (false) person. North sold the items to a pawn shop. Question on if the item still belonged to Philip or Brooke. Ruled that it was mistake of quality and was in favor of brooks sinces the transaction was face to face. There was misrepresentation.
• What type of principles are mistakes? Provide an example

  Mistakes are purely common law principles and applied strictly (not equitable)

  'The Great Peace shipping Ltd v Tsaviliris Salvage international Ltd’ 

  ship required help after it had structural damage, D looked for vessels to help so asked C to help but D made a mistake and the C was actually 400m away. D cancelled the contract and asked another ship. 

  C sued for contract fee, D argued it was a common mistake and would void the contract. Held it was not a common mistake and it was an issue of quality so equitable
• Which 2 cases represented the importance of being on a written contract?

  Boulton v Jones

  Brocklehurst signed contract with Jones but later sold the company to Boulton who delivered goods. Jones refused payment because he was not in contract which was upheld in court. (A reasonable person would realise they are not in contract)                 

  Cundy v Lindsay

  Even if a rogue uses a different name, any contract between the rogue(fake 3rd party) and party is void. Mr Blenkarn (rogue purchased items from Lindsey under fake name and sold it to Cundy) Lindsay won because she had the title.
• How are statements for misrepresentations made, provide an example.

  Statements can be made orally and can be made via conduct such as letters of negotiation, advertisement or statements. 

  Spice Girls Ltd v. Aprilia World Service BV

  Aprillia wanted the girls to represent them  but the band was going to split before the contract was signed but never told them. Aqrilia wanted to leave the contract but the contract stated ‘people known as the spice girls’ because the group still existed. However, Aprillia claimed misrepresentation and won. (statement to plant idea of false fact)
• What is the concepts of a fact in comparison to an opinion. (provide case examples.

  When referencing misrepresentation, it must be a Fact and not an opinion. shown in Bisset v Wilkinson.

  An opinion implies a speakers awareness of reasonable grounds for opinions where the other party does not have the same experience like in Smith v. Land & House Property Corp.
• What were the main facts and concepts in Bissett v. Wilkinson and Smith v Property Corp


  Bissett v. Wilkinson -was a statement of fact to buy a farm, farmer stated he thinks 2k sheep can be raised on land but he had no experience so was an opinion. C stated it was a fact but was not because the C had more experience with sheep

  Smith v. Land & House Property Corp - Claimant put a hotel for sale stating it was leased to a desirable tenant. They agreed to purchase. Tenant went to liquiation and D wanted to cancel so C wanted SP. It was an opinion because C knew of the tenant and the money owed
• What is the principle of 'duty to speak up'

  In general, silence and disclosure does not create liability because in the UK there is no requirement for good faith. However, if a state is true at the time of the contract which induces a person, then the seller must inform the buyer seen in With v. O’Flanagan

  Seller is a GP and reports that he is getting 2k from the practice. GP was ill and patients left later only eearnt £10 a week. D claimed it was misrepresentation and left the contract. 

  Held that a statement to induce the buyer then if things change, they must tell the other party.
• What is the concept of inducing a contract?

  To induce a contract, it must be relied upon, but not be the sole reason for the contract.

  Museprime Properties Ltd v Adhill Properties LTd- 3 properties rented out, with review required with notice of terms agreed if tenant did not respond. Request of double rent but there was complaints. The properties were sold to claimant who was under the belief that rent be negotiated. later rent was already agreed and C wanted to back out. C won because the notices were valid.

  Edgington v Fitzmarurice 
• What was the principle of 'no duty to investigate' (provide an example)

  Basis of ognorance is bliss so there is no need to investigate misrepresenation as long as you rely on it.

  Redgrave v Hurd

  Regrave was a solicitor who advertised a law partnership on the basis someone will purcahse the property. Hurd responded and was told the business was worth £300 pa and asked for evidence which showed £200. Hurd signed the property and later backed out so C sought SP. It was voidable because it was innoceny representation. He had no duy to investigate.
• What was the 2 types of Fraudulent misrepresentation?

  1. Innocent misrepresentation- This is where there was reasonable care but things still occur (no blame to be attached
  2. Negligence Misrepresenation- regulated under the Misrepresentations Act 1967 under S2 and S3 
• What was the principle behind Derry v. Peek?

  • delineated fraud from negligence. Fraud is defined as the absence of a genuine belief in the truth of one's statement.
  • Even if a belief is unreasonable, it doesn't constitute fraud as long as the person genuinely holds it. However, proving such belief can be challenging, with the burden of proof lying on the claimant.
• What was the principles of S2 and S3 of the Misrepresentations Act 1967?

  • S.2 carry on with the contract with award of damages or void the contract. (had the contract been performed) 
  • s.3: Invalidates terms in contracts that seek to exclude or restrict liability for misrepresentation unless they meet the test of reasonableness under the Unfair Contract Terms Act 1977 (UCTA).
• How do you prove negligent misrepresenation?

  Claimant must prove:  

  1.  state of mind, when there is an allegation of fraud, the defendant can insist on a jury.

  2.        Fraud such as innocent representation so the new act introduced a new middle ground

  3.        maker of the statement failed to take reasonable care or will in establishing the statement/ facts (easier to prove than wrongdoing)
• When might Recission be possible and not possible?

  Rescission is always available to cases of misrepresentation but Rescission may be barred if too much time elapses, but the timing depends on equitable considerations, not solely on the discovery of the misrepresentation and if restitution is impossible, such as when the subject matter has significantly deteriorated or improved in condition
• What was the principle established in Salt v Stratstone ?

  • Statstone car dealership (D), Salt (C )purchased a car as brand new. Years in the future Salt discovered it was in an accident and then repaired. Salt wants to rescind the car back; the courts allowed the rescind but the argument is that it the car was very high mileage and the person purchased it would be handed back as a very second hand vehicle which is not the same but the court disagreed and stated it as the same. On the one hand, it created uncertainty because the courts and do what they like. 
• What are the 2 different remedies for misrepresentation?

  Self-Help Remedy where it doesn’t need a court intervention and the purchaser can rescind a contract by the return of goods and payment. Indemnity for expenses incurred may be given alongside rescission, it’s a restitution remedy and applies to payments to third parties under contract.
• What are the limits on Recession?

  • Restitution Impossible: Rescission can't occur if restitution is impossible, such as when the subject matter has significantly deteriorated or improved in condition.
  • Third-party Rights: Rescission is a personal right against the representor and doesn't affect third parties.
  • Affirmation: Once the representee discovers the falsity of the misrepresentation, they must act immediately to avoid affirming the contract.
  • Lapse of Time/Laches: Rescission may be barred if too much time elapses
• What was the principle of Solle v Butcher?

  Denning tried to lay down equitable doctrine of mistake which made mistakes voidable and not void but was rejected by great peace (No longer Applicable)
• What was the principle behind Smith New Court Securities Ltd v Citibank NA?

  Citibank's employee made false representation to claimant to make them appear more valuable. Smith purchased shares double the value which dropped. Smith sold at a loss and sued. The LP is damages for deceit is compensation reflecting losses caused by entering the transaction and not during.
• What was the principle behind Leaf v international galleries?

  Time limits on Recission

  C purchased a picture that was painted by a specific artist. C attempts to sell it later to be told it was fake. Leaf attempted to rescind the contract but did not suceed because too much time had lasped and the mistake to the painter was fundamental but not enough to void the contract.
• Esso Petroleum v Mardon


  Mardon (C) entered contract with D to rent a petrol station. expert advisors estimated sales based on inaccurate info which rent was caluclated. This meant Mardon could not operate on a profit. The CA held the contract was not voidable for misrepresentation because it was an estimate and not a statement of fact. However, was allowed to recover losses from the defendants misstatement by 'experts' they employed

  SP: statement of fact is needed for misrepresentation