Contract Law Principles Overview

Questions and Answers

What must be present for an untrue statement of fact to be considered misrepresentation?

The contracting party must have no knowledge of the statement.

The statement must have been documented in writing.

The statement must have been made by the contracting party or their agent. (correct)

The statement must be made publicly.

In which situation can silence be considered misrepresentation?

When the contract is signed before witnesses.

When utmost good faith is required in the contract. (correct)

When both parties agree to the contract terms.

When a contract is made verbally.

What is a consequence of failing to disclose a material fact in a contract requiring utmost good faith?

The contract remains in effect regardless.

The innocent party can rescind the contract. (correct)

The innocent party can claim damages.

The contract becomes void from the start.

Which type of misrepresentation occurs when a true statement becomes false due to changed circumstances?

Subsequent falsity. Signup and view all the answers

In which scenario does a party have a duty to disclose the whole situation, even when the statement made is true?

Partial revelation. Signup and view all the answers

Which situation obligates a party to disclose material facts about a contract due to their relationship?

Fiduciary relationship. Signup and view all the answers

What outcome occurs when a party has voluntarily assumed responsibility for a matter that later proves to be misleading?

They are held liable for damages. Signup and view all the answers

Which of the following is true regarding silence in contractual agreements?

Silence may lead to misrepresentation under specific circumstances. Signup and view all the answers

What is the primary effect of a misrepresentation in contract law?

It makes the contract voidable. Signup and view all the answers

Which of the following statements is true regarding inducement in the context of misrepresentation?

Inducement can be a contributing factor for a claim of misrepresentation. Signup and view all the answers

What is the difference between a common mistake and a cross-purpose mistake?

Common mistakes are based on objective facts, while cross-purpose mistakes stem from misunderstanding. Signup and view all the answers

Which case established that delivering an opinion does not create an actionable misrepresentation?

Bisset v Wilkinson (1927) Signup and view all the answers

Recission in contract law refers to which of the following?

Restoring parties to their pre-contractual position. Signup and view all the answers

In cases of misrepresentation, a party has the right to claim for what type of loss?

Any loss suffered due to reliance on the misrepresentation. Signup and view all the answers

What legal principle do courts follow when determining the validity of a mistake in contract law?

Objective principle, assessing the facts objectively. Signup and view all the answers

Which of the following is NOT a characteristic of a statement of fact in misrepresentation?

It can merely be an opinion or sales talk. Signup and view all the answers

What is the effect of a contract declared void?

The contract is considered as if it never existed. Signup and view all the answers

Which of the following is NOT a recognized vitiating factor?

Unfair competition Signup and view all the answers

What does it mean when a contract is voidable?

The innocent party has the option to enforce or terminate the contract. Signup and view all the answers

For a misrepresentation to be actionable, which of the following is required?

An untrue statement must have induced the other party. Signup and view all the answers

Which element is NOT necessary for a misrepresentation to be actionable?

It must be a statement of opinion. Signup and view all the answers

What type of mistake occurs when both parties share the same incorrect assumption about a vital fact?

Mutual mistake Signup and view all the answers

Under which condition can a representation be considered a misrepresentation?

It must be a statement of a fact that is untrue. Signup and view all the answers

Which of the following scenarios would likely result in a claim of duress?

One party threatens to harm the other if they do not agree. Signup and view all the answers

Study Notes

Misrepresentation

A misrepresentation is an untrue statement of fact that induces another party to enter a contract.
For misrepresentation to be actionable, it must meet three criteria: be untrue, be a statement of fact (not opinion), and induce the other party's decision.

Types of Mistakes

Two main types of mistake: common mistake and cross-purpose mistake.
Courts employ an objective principle to determine if a mistake is substantial enough to void a contract, referencing Smith v Hughes (1871).

Untrue Statements

An untrue statement must be made by either the contracting party or their agent, or the other party must be aware of the falsehood.
Silence typically does not constitute misrepresentation unless special circumstances apply.

Circumstances Leading to Misrepresentation

Contracts Requiring Utmost Good Faith: In contracts like insurance, failure to disclose relevant information allows for rescission without damages.
Subsequent Falsity: A statement true at the time it was made may become untrue due to changed circumstances, and silence about the change can be misrepresentation (With v O’Flanagan (1936)).
Partial Revelation: True statements that misrepresent a situation due to omitted information can lead to misrepresentation (Dimmock v Haller (1866)).
Fiduciary Relationships: Relationships may create a duty to disclose important contract facts.

Inducement

For a statement to be actionable under contract law, it must be a reason for entering the contract, as established in Redgrave v Hurd (1881).

Remedies for Misrepresentation

A misrepresentation typically makes a contract voidable, allowing it to continue until the innocent party chooses to rescind it.
Recission: An equitable remedy that nullifies the contract and restores parties to their pre-contract position.
Damages: If misrepresentation induces a contract, the aggrieved party may claim damages for losses incurred.

Vitiating Factors

Contracts can be invalidated by vitiating factors despite meeting requirements for offer, acceptance, consideration, and legal intent.
Recognized vitiating factors include misrepresentation, mistake, illegality, duress, and undue influence.

Effects of Vitiating Factors

A contract declared void means no enforceable agreement ever existed, while a voidable contract allows the innocent party to decide on its validity.

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Description

This quiz covers essential principles of contract law, focusing on misrepresentation and liability. Key cases like Bisset v Wilkinson are discussed to illustrate the difference between fact and opinion in contractual agreements.