Contract Law Indemnity Quiz

A statement that is false or misleading, made by one party to another before entering into a contract, which influences the other party's decision to enter the contract.

Generally, silence does not constitute misrepresentation. However, there are certain exceptions to this rule, where remaining silent can be considered misleading.

A duty to disclose information arises when there is a special relationship of trust between parties, like a solicitor and their client. Failing to disclose relevant information in these situations can be a misrepresentation.

A contract made in good faith requires complete transparency and honesty. Failing to disclose all relevant information can be a misrepresentation.

Providing only part of the truth in a way that distorts the whole truth can be a misrepresentation, even if the statement itself is true.

A statement that was true at the time it was made, but becomes false due to a change in circumstances, must be disclosed. Failure to disclose the change can be a misrepresentation.

Misrepresentations must relate to facts, not opinions. An opinion is a subjective belief that cannot be verified, whereas a fact is something that can be proven true or false.

A statement of intention, which is a person's plan or goal, cannot amount to a misrepresentation unless the person never intended to carry out their stated intention at the time they made the statement.

A legal remedy that cancels a contract, restoring parties to their pre-contractual positions.

A misrepresentation that is made without the intention to deceive but is still false.

A statement made during contract negotiation that is untrue and intended to deceive.

Rescission may be used to address both fraudulent and non-fraudulent misrepresentations.

The process of formally ending a contract through legal action, particularly when the other party refuses to cooperate.

The process of informing the other party that you are rescinding the contract. This can be done through actions like reporting the incident to the police.

The legal concept that states a party cannot rescind a contract if they have already taken significant actions that indicate they accept the contract's terms.

The restoration of both parties to their positions before the contract was formed. This includes returning any money or property exchanged and ending future obligations.

An indemnity is a promise to compensate another party for potential losses or expenses. It's like an insurance policy against specific risks.

The claimant wanted to rescind the contract, meaning they wanted to cancel the lease agreement and be free from its obligations

Damages are financial compensation awarded to a party who has suffered harm due to another's wrongdoing. It's a way to restore the harmed party to their original position.

In some cases, damages may not be a sufficient remedy for a claimant. An indemnity can be sought to cover additional losses that are not covered by damages.

The claimant sought an indemnity for losses that were not strictly tied to the lease, like expenses related to the chickens.

An innocent buyer acquiring an interest in a property before a contract is annulled prevents the contract from being rescinded.

Confirmation of a contract can be explicit (stated directly) or implied (deduced from actions). Actions suggesting continued agreement with the contract imply affirmation.

Unreasonable delay in asserting a right to rescind a contract can be an obstacle to rescission. The court considers when the misrepresentation should have been discovered, not just when it was actually discovered.

The case of Leaf v International Galleries demonstrates that delay in rescinding a contract can be detrimental. The buyer waited 5 years to discover the paint wasn't original before trying to rescind, leading to the claim being denied.

If a misrepresentation is fraudulent, the time for discovering the misrepresentation starts at the actual discovery, not when the party should have discovered it.

The court considers the time frame from when the misrepresentation should have been discovered, not the time of actual discovery, for non-fraudulent misrepresentations.

The court considers various factors like the nature of the misrepresentation, the delay, and the prejudice to the other party when determining if a delay is undue.

A legal remedy that allows a party to cancel a contract and return to their pre-contractual positions.

In this instance, the court will aim to put the injured party back in the position they would have been in if the misrepresentation hadn't occurred.

If the innocent party can prove reasonable grounds for believing the misrepresentation was true, they may not be awarded damages.

To prove fraudulent misrepresentation, a party needs to show that the false statement was made knowingly, without belief in its truth, or recklessly, careless whether it was true or false. A statement made honestly won't be considered fraudulent.

The court aims to put the innocent party back in the position they would have been in if the misrepresentation hadn't occurred, essentially calculating the financial loss caused by the misrepresentation.

Unlike typical tort cases, the 'remoteness rule' doesn't apply in fraudulent misrepresentation. This means the claimant can recover for all losses directly stemming from the defendant's misrepresentation, not just those that were reasonably foreseeable.

East, the buyer, was misled by Maurer, the seller, who falsely claimed he was closing his other salon. This resulted in East's business failing due to unexpected competition. The court determined East was entitled to damages for the difference in profit he would have made had he purchased a different, less competitive, salon.

A deliberate false statement made by one party to another during contract negotiation, with the intention to deceive, is considered fraudulent misrepresentation.

A statement made during negotiations that is exaggerated or obviously untrue, with no legal consequences. Think of it as a sales pitch that no one takes seriously.

A statement that becomes part of the contract itself, creating a legal obligation for the parties. If false, it can lead to breach of contract claims.

A statement made before entering a contract that influences the other party's decision, but is not legally part of the contract. If it's false, it may lead to misrepresentation claims.

A clause in a contract that aims to limit or exclude liability for false statements made before the contract is signed.

Financial compensation awarded to a party who has suffered harm due to another party's misrepresentation. This is intended to put the injured party back in the position they would have been in without the misrepresentation.

A statement made as a fact, but is actually an opinion, can be considered a misrepresentation if the speaker has special knowledge or information about the matter and the listener relies on their expertise.

A statement about a future intention can be a misrepresentation if the speaker never truly held that intention when they made the statement.

In cases where both parties are unaware of the true facts, an opinion expressed about something they both know is uncertain, is not considered a misrepresentation.

A statement of opinion that is knowingly false or made without reasonable grounds for belief can be considered a misrepresentation.

The claimant wanted to cancel the lease contract and be free from its obligations.

Financial compensation awarded to a party who has suffered harm due to another's wrongdoing. It aims to restore the harmed party to their original position.

A false statement of fact made by one party to another which induces the other party to enter into the contract.

A statement about something that can be proven true or false.

A statement about a person's belief or judgment.

A delay in exercising the right to rescind a contract may prevent the party from doing so.

Section 2(1) of the Misrepresentation Act 1967 provides a remedy for misrepresentations made during contract negotiations.

It is only applicable when a misrepresentation is made by one contracting party to another.

The claimant must prove that a misrepresentation was made.

The defendant can escape liability by proving they honestly believed the facts presented were true, and had reasonable grounds for that belief.

Section 2(1) gives the claimant the right to damages, similar to those available for fraudulent misrepresentation.

The court in Royscot Trust Ltd v Rogerson interpreted the words 'so liable' literally, meaning it's as if the misrepresentation was made fraudulently.

The policy behind Section 2(1) was to introduce damages for negligent misrepresentations, not intentional ones.

The amount of damages awarded under Section 2(1) might need to be reconsidered, as it could exceed the intended scope of the law.

The case of Smith New Court Ltd v Scrimgeour Vickers Ltd highlights concerns about damage assessment in misrepresentation cases. Lord Steyn questioned whether the statute should treat morally innocent parties as guilty of fraud when determining damages. He criticized the Royscot case for diminishing the importance of deceit in contracts, as the burden of proof shifts to the defendant to prove their belief in the truth of a statement.

The Misrepresentation Act of 1967 places a significant burden on the defendant when attempting to prove they had reasonable grounds to believe in the truth of a misrepresentation. The defendant must demonstrate that not only did they believe in the truth of the statement, but they also had reasonable grounds for that belief. This burden is particularly challenging for the defendant if their belief was based on faulty or incomplete information.

The case of Howard Marine & Dredging v Ogden showcases the difficulty for defendants in proving their case under the Misrepresentation Act. The defendant based a capacity claim on incomplete information from Lloyd’s Register, failing to consult ship documents. This failure resulted in the court finding that the defendant lacked reasonable grounds to believe the statement was true, making them liable for damages.

In cases of misrepresentation, the claimant can seek damages to be placed in the position they would have been in if the misrepresentation had never occurred.

When a party to a contract makes a misrepresentation, the burden of proof shifts to the defendant to demonstrate that they had a reasonable basis for their statement and genuinely believed it to be accurate at the time the contract was made. This means the defendant must prove both the presence of reasonable grounds and their actual belief in the truth.

The Misrepresentation Act 1967 outlines a framework for addressing false statements made prior to contract formation. Under section 2(1), if a claimant proves a misrepresentation that caused loss, the defendant bears the burden of demonstrating their belief in the truthfulness of the statement. This burden includes not only showing the defendant believed the statement to be true, but also that they had justifiable grounds for this belief.

This case illustrates that the defendant must diligently investigate and have a reasonable basis for making a statement, beyond relying solely on readily available sources.

The defendant in Howard Marine was found liable because they couldn't prove they had reasonable grounds for their statement about the barge's capacity. They relied on Lloyd's Register but failed to check the actual ship documents. This highlights the importance of thorough investigation before making representations in a contract.

A promise to compensate another party for potential losses or expenses. It acts like a guarantee of coverage for specific risks.

When one party uses illegitimate pressure to force another party into an agreement, leaving the affected party with no realistic alternative.

A situation in which a party is coerced into an agreement because of a threat or pressure that leaves them with no realistic alternative.

A contract that cannot be enforced due to pressure or coercion used during its formation.

The burden is on the defendant to prove that they genuinely and reasonably believed the statement made to be true. This is more than simply believing, they must show they had reasonable grounds for that belief.

Duress in contract law occurs when one party is pressured into entering a contract by threats, illegitimate threats, or unlawful actions that force them to agree.

A party cannot generally complain about ordinary commercial pressure or mere inequality of bargaining power.

Undue influence occurs when one person takes advantage of their position of power over another, causing them to enter into a contract.

In a situation where there's a risk of undue influence, financial institutions need to be cautious and ensure the person offering security is acting independently and not being pressured.

The essence of agreement is free consent. If a party was pressured into a contract, they may be able to get out of it.

A contract can be deemed voidable when it was formed under duress or undue influence, allowing the innocent party to cancel it.

Traditionally, duress meant threats of violence or damage to property to force someone into a contract.

A party who was pressured into a contract by threats or undue influence may not be bound by it. They can have the contract set aside (rescinded).

A confirmation by the innocent party that they accept the contract or variation despite the duress. This can be expressed through words or actions, and may prevent them from later claiming duress.

When the innocent party delays in seeking to set aside the contract or variation after the duress has disappeared. If the delay is unreasonable, the court may not allow rescission.

In the context of duress, this occurs when the innocent party has made a payment or performed an act under duress, but later seeks to recover the money or undo the act. The court may not allow this if the innocent party has affirmed the contract or there has been undue delay.

The court's holding that the claimants had affirmed the contract by making the payment under duress eight months later, as market conditions had changed and the shipbuilders were no longer under pressure to refuse delivery. They had also left it too long to seek repayment.

The most sensible thing for the ship owners to have done in The Atlantic Baron Case was to not have paid the extra money in the first place. This would have allowed them to raise duress as a defence if they were later sued for the payment.

The fact that only the later variation of the contract (the promise to pay the extra money) was affected by duress, and therefore only that part of the contract was capable of being rescinded.

A change in an existing contract that requires the same elements as forming a contract: agreement, intention and consideration.

The price the claimant pays for the defendant's promise in a contract. It needs to be sufficient but doesn't have to be fair.

Performing an existing duty under a contract is not enough to be considered new consideration for a change in price. A party needs to offer something extra.

When a party agrees to a change in terms due to pressure or threats, the contract may be voidable. This applies even if there was no intention to deceive.

George had no realistic alternative. His delivery deadline was tight, and other haulage firms couldn't help. He was forced to agree to Mercator's higher price.

George may be able to argue he was pressured into the new deal, meaning the higher price may be unenforceable, allowing him to reclaim the extra money.

Undue influence happens when someone takes advantage of their power over another to get them to agree to a contract.

A contract made under undue influence can be set aside (made void), meaning it's not legally binding.

Banks or finance companies need to be extra careful about loans where there's a risk of undue influence, to make sure the person signing the security isn't being pressured.

The court takes the borrower's situation into account when deciding if undue influence was used. They consider the position of power, trust, and any unfair advantage.

A mortgage taken under undue influence can be set aside, meaning the lender can't enforce the loan against the pressured party.