Law of Misrepresentation Quiz
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Questions and Answers

What is a requirement for a statement to be considered a misrepresentation?

  • The statement must be vague.
  • The statement must be an opinion rather than a fact.
  • The statement must be false. (correct)
  • The statement must be ambiguous.
  • What are the remedies available for negligent misrepresentation?

  • Monetary compensation only.
  • Only tort damages.
  • Rescission or tort damages. (correct)
  • Only rescission.
  • Which type of misrepresentation involves a deliberate intent to mislead?

  • Innocent misrepresentation.
  • Constructive misrepresentation.
  • Negligent misrepresentation.
  • Fraudulent misrepresentation. (correct)
  • What must be true about the statement for it to induce the aggrieved party to enter into the contract?

    <p>It must be significant to the decision.</p> Signup and view all the answers

    Under what condition can rescission of a contract occur?

    <p>When the misrepresentation is fraudulent.</p> Signup and view all the answers

    When a party actively conceals the truth, this is an example of which type of behavior?

    <p>Fraudulent representation.</p> Signup and view all the answers

    What is a common characteristic of a mistake in a contract?

    <p>It must seriously undermine the contract.</p> Signup and view all the answers

    What indicates a positive obligation to disclose information in a contractual relationship?

    <p>An existing statute imposes a requirement.</p> Signup and view all the answers

    What are pecuniary damages primarily concerned with?

    <p>Financial loss</p> Signup and view all the answers

    Which of the following statements regarding non-pecuniary damages is true?

    <p>They are for loss of enjoyment and mental distress.</p> Signup and view all the answers

    What must a claim for damages establish in order to satisfy the remoteness test?

    <p>The damages were anticipated as 'arising naturally' from the breach.</p> Signup and view all the answers

    In the breach of contract case involving Gabriella Nagy, what was a direct consequence of Rogers' actions?

    <p>Nagy losing her job due to distress.</p> Signup and view all the answers

    What rationale can be used to argue against the recovery of non-pecuniary damages in contract breaches?

    <p>They are often subjective and difficult to prove.</p> Signup and view all the answers

    Which statement about recovery of pecuniary damages is accurate?

    <p>They can be limited by specific contractual clauses.</p> Signup and view all the answers

    Who has the burden of proof in a civil action?

    <p>The plaintiff must prove their case is more likely than not.</p> Signup and view all the answers

    Under what circumstances can an employer be held vicariously liable?

    <p>For acts that are authorized or closely connected to authorized acts.</p> Signup and view all the answers

    Which of the following statements about joint tort-feasors is correct?

    <p>A plaintiff can recover 100 percent of the damages from any one joint tort-feasor.</p> Signup and view all the answers

    What is contributory negligence?

    <p>A defense alleging the plaintiff bears some responsibility for the harm.</p> Signup and view all the answers

    What is the primary goal of a tort remedy?

    <p>To provide compensation to the victim.</p> Signup and view all the answers

    In what situation are employers NOT vicariously liable?

    <p>When employees commit crimes unrelated to their duties.</p> Signup and view all the answers

    When can the damages awarded to a plaintiff be reduced?

    <p>If the defendant proves that the plaintiff was responsible for part of the loss.</p> Signup and view all the answers

    What distinguishes primary liability from vicarious liability?

    <p>Primary liability arises from one's own wrongdoing.</p> Signup and view all the answers

    What is the primary purpose of a statutory audit conducted by accountants?

    <p>To allow shareholders to evaluate the performance of management</p> Signup and view all the answers

    In the case of Deloitte & Touche v Livent Inc, what was a significant contributing factor to Livent's bankruptcy?

    <p>Massive financial fraud by Livent's directors</p> Signup and view all the answers

    What did the Supreme Court rule regarding auditors' liability for the use of audits beyond their intended purpose?

    <p>Auditors are only liable for losses when the audit is used for its intended purpose.</p> Signup and view all the answers

    What determines the auditor's duty of care according to the Supreme Court's ruling?

    <p>The proximity and reasonable foreseeability related to the auditor's obligations</p> Signup and view all the answers

    What resulted from Livent relying on the audit conducted by Deloitte & Touche?

    <p>Misguided investment decisions</p> Signup and view all the answers

    Which of the following aspects influenced the auditors' liability in the Livent case?

    <p>The secondary uses of the audit by Livent</p> Signup and view all the answers

    What was one of the primary results of the Supreme Court's decision in the Livent case?

    <p>Auditors must clearly define the scope of their audits.</p> Signup and view all the answers

    What is a secondary reason for which audits might be relied upon, according to the content provided?

    <p>To solicit investments</p> Signup and view all the answers

    What was the decision of the Supreme Court of Canada regarding the duty of care in Mustapha v Culligan of Canada Ltd?

    <p>Culligan owed a duty of care to Mustapha and breached it.</p> Signup and view all the answers

    What type of negligence is recognized when both the defendant and the plaintiff are at fault?

    <p>Contributory negligence</p> Signup and view all the answers

    In Kralik v Mount Seymour Resorts, what was the court's finding regarding Kralik's actions?

    <p>Kralik was found 50% contributorily negligent.</p> Signup and view all the answers

    What is a result of proving voluntary assumption of risk in a negligence case?

    <p>The plaintiff is barred from recovering any damages.</p> Signup and view all the answers

    In which case did a participant fail to read a waiver and was subsequently injured?

    <p>Crocker v Sundance Northwest Resorts Ltd</p> Signup and view all the answers

    What psychological damage resulted from the breach of duty in Mustapha v Culligan?

    <p>Severe psychological problems</p> Signup and view all the answers

    What is required for compensatory damages for mental injury to be awarded?

    <p>It must be established that mental injury occurs in an ordinary person.</p> Signup and view all the answers

    What was the total amount awarded to Mustapha for emotional upset and economic loss?

    <p>$317,600 in total</p> Signup and view all the answers

    What is meant by an innominate term in a contract?

    <p>A term that cannot easily be classified as either a condition or a warranty</p> Signup and view all the answers

    Under what condition can an exemption clause in a contract be unenforceable?

    <p>If it is found to be unconscionable due to unequal bargaining power</p> Signup and view all the answers

    What is an anticipatory breach?

    <p>A breach that occurs before the date for performance allowing immediate legal action</p> Signup and view all the answers

    What are expectation damages intended to provide?

    <p>Monetary equivalent of what contractual performance would have delivered</p> Signup and view all the answers

    Which statement reflects the 'bad man' theory in contract law?

    <p>Contract breakers can seamlessly decide to breach if compensation is lower than performance obligations</p> Signup and view all the answers

    What must a plaintiff demonstrate to be entitled to damages in a breach of contract case?

    <p>That they have a viable claim for damages supported by evidence</p> Signup and view all the answers

    What is the primary purpose of damages in contract law?

    <p>To compensate the innocent party for losses incurred due to the breach</p> Signup and view all the answers

    What type of damages is awarded to punish a defendant for malicious conduct?

    <p>Punitive damages</p> Signup and view all the answers

    What was the outcome of Martin's claim against Ontario Infrastructure and Land Corporation?

    <p>The claim was dismissed because the defendants fulfilled their duty.</p> Signup and view all the answers

    Which of the following is NOT a guideline established by courts regarding nuisance?

    <p>Nuisance typically arises from temporary interference.</p> Signup and view all the answers

    In TMS Lighting Ltd v KJS Transport Inc, what was the primary issue for TMS regarding KJS?

    <p>Dust particles from KJS's unpaved parking lot.</p> Signup and view all the answers

    What aspect of the defendants' actions contributed to the dismissal of Martin's claim?

    <p>They maintained a regular cleaning schedule.</p> Signup and view all the answers

    Which type of interference is not protected under the tort of nuisance?

    <p>Loss of sunlight due to a neighboring structure.</p> Signup and view all the answers

    What was a major cause of Livent's bankruptcy?

    <p>Undetected financial fraud</p> Signup and view all the answers

    According to the Supreme Court's ruling, what determines the auditor's liability?

    <p>The intended purpose of the audit</p> Signup and view all the answers

    What was Livent's primary reliance on the audit's outcome?

    <p>To evaluate management performance</p> Signup and view all the answers

    What aspect of duty of care did the Supreme Court emphasize in its ruling?

    <p>Proximity and reasonable foreseeability</p> Signup and view all the answers

    In the context of Livent, who were the primary individuals responsible for the fraud?

    <p>Two directors and their associates</p> Signup and view all the answers

    What type of audit were accountants hired to perform for Livent?

    <p>Statutory audit</p> Signup and view all the answers

    What secondary reason did Livent have for relying on the audit?

    <p>To attract new investors</p> Signup and view all the answers

    Which statement describes the relationship between negligent words and actions, as ruled by the Supreme Court?

    <p>The assessment is essentially the same</p> Signup and view all the answers

    What led the receivers to sue the auditor in the Livent case?

    <p>Livent’s continuous operations with fraudsters</p> Signup and view all the answers

    What legal outcome did the Supreme Court determine regarding the scope of auditor liability?

    <p>Auditors are only liable for intended audit purposes</p> Signup and view all the answers

    What was the Supreme Court's ruling regarding the duty of care in Mustapha v Culligan of Canada Ltd?

    <p>The defendant owed a duty of care.</p> Signup and view all the answers

    In Kralik v Mount Seymour Resorts, what percentage of fault was attributed to Kralik?

    <p>50%</p> Signup and view all the answers

    What does the defense of voluntary assumption of risk imply in a negligence case?

    <p>The defendant is entirely absolved of liability.</p> Signup and view all the answers

    What was the total amount awarded to Mustapha for emotional upset and economic loss?

    <p>$317,600</p> Signup and view all the answers

    What are the two main categories of torts?

    <p>Intentionally committed and negligently committed</p> Signup and view all the answers

    What was the primary cause of Kralik's injuries in the case against Mount Seymour Resorts?

    <p>He failed to step aside in time.</p> Signup and view all the answers

    What justification was cited by the Supreme Court in determining the recoverability of mental injury damages?

    <p>Recovery is based on the suffering of an ordinary person.</p> Signup and view all the answers

    What distinguishes tort law from criminal law?

    <p>Tort law requires compensation to the victim, whereas criminal law does not.</p> Signup and view all the answers

    What must the defendant demonstrate in order to establish the defense of voluntary assumption of risk?

    <p>The plaintiff was fully aware of the risks involved.</p> Signup and view all the answers

    In a criminal action, what is the burden of proof for the Crown?

    <p>Beyond a reasonable doubt</p> Signup and view all the answers

    What role does a plaintiff play in tort law?

    <p>Entity seeking compensation for injuries</p> Signup and view all the answers

    In the case of Crocker v Sundance Northwest Resorts Ltd, what critical action did Crocker fail to take?

    <p>He did not read the waiver before signing it.</p> Signup and view all the answers

    Which of the following is an example of an intentional tort?

    <p>False imprisonment</p> Signup and view all the answers

    What was a key finding regarding the lift operator's responsibility in Kralik's case?

    <p>The lift operator was deemed fully responsible.</p> Signup and view all the answers

    What is the key distinction in the legal roles of the accused and complainant in criminal law?

    <p>The complainant is the government prosecutor, and the accused is the wrongdoer.</p> Signup and view all the answers

    What is a common legal outcome for a conviction in criminal law?

    <p>Imprisonment or fines</p> Signup and view all the answers

    How are torts generally committed?

    <p>By any act that causes harm, whether intentional or not</p> Signup and view all the answers

    What must be established for a tort of negligence to be proven?

    <p>Existence of a duty of care</p> Signup and view all the answers

    What legal action initiates a tort claim?

    <p>Lawsuit</p> Signup and view all the answers

    Study Notes

    Misrepresentation of Relevant Facts

    • Parties may have a duty to disclose information without being prompted.
    • Partial information provided by one party can be considered misrepresentation.
    • Actively concealing the truth, like hiding a foundation crack, is misrepresentation.
    • Failing to correct an earlier true statement that is no longer valid is misrepresentation.
    • Relationships requiring utmost good faith, like insurance applications, necessitate full disclosure.
    • Statutes may impose a positive obligation to disclose information.

    Rescission Due to Misrepresentation

    • Parties can have a contract cancelled if they relied on a misrepresentation.
    • Rescission returns parties to their pre-contractual positions.
    • Prompt action is required to seek rescission.
    • Courts provide monetary compensation when rescission is not possible.

    Ingredients of an Actionable Misrepresentation

    • A statement must be proven false, clear, and unambiguous.
    • The statement must be material to the contract, influencing the decision to enter.
    • The statement must induce the aggrieved party to enter the contract.
    • The statement must be about a fact, not an opinion, unless the speaker claims expertise.

    Categories of Actionable Misrepresentations

    • Fraudulent misrepresentation: deliberate intent to mislead or reckless statements.
      • Remedy: Rescission or tort damages
    • Negligent misrepresentation: careless or negligent statements.
      • Remedy: Rescission or tort damages
    • Innocent misrepresentation: non-fraudulent or negligent misrepresentation of a fact.
      • Remedy: Rescission

    Mistake

    • A mistake is an error by one or both parties undermining the contract.

    Damages: Pecuniary and Non-Pecuniary

    • Pecuniary damages compensate for financial loss.
    • Non-pecuniary damages compensate for loss of enjoyment, mental distress, etc.
    • Non-pecuniary damages are rarely awarded for contract breach.
      • Pain and suffering are typically not considered a consequence of contract breach.

    Recovery of Pecuniary Damages

    • Monetary losses are recoverable unless limited or fixed by a clause.

    Recovery of Non-Pecuniary Damages

    • Traditionally, non-pecuniary damages are not recoverable for contract breach.
    • Exception: Fidler v Sun Life
      • The contract's purpose was to secure psychological benefit.
      • The mental suffering was severe enough to warrant compensation.

    Damages Must Not Be Too Remote

    • Damages must pass a remoteness test.
    • Plaintiff must prove that the damages:
      • Arose naturally from the breach.
      • Were reasonably foreseeable due to communicated unusual circumstances during contract formation.

    Breach of Contract and Reasonable Foreseeability

    • Gabriella Nagy sued Rogers for breach of contract.
    • Rogers changed her account without permission, which led to her husband discovering an affair.
    • Nagy experienced emotional distress and lost her job.

    Sunwing Charter to Cancun

    • Sunwing flight passengers violated Canadian Aviation and public health regulations by not masking, vaping, drinking excessively, and dancing on seats.
    • Sunwing cancelled the return flight.
    • Passengers filed a civil action.
      • Plaintiff must establish that the defendant committed the tort.
      • A successful action leads to the defendant paying damages.

    Liability in Tort: Primary and Vicarious Liability

    • Primary liability arises from personal wrongdoing.
    • Vicarious liability holds an employer responsible for an employee's tortious acts within the scope of employment.
    • Employers are typically liable for:
      • Acts authorized by the employer.
      • Unauthorized acts connected to authorized acts.

    Liability and Joint Tort-Feasors

    • Tort-feasor: a person committing a tort.
    • Joint tort-feasors: multiple individuals held responsible for the plaintiff's loss or injuries.
    • Legislation dictates:
      • Multiple negligent parties can be sued, and fault is apportioned.
      • The plaintiff can recover 100% from any joint tort-feasor.

    Liability and Contributory Negligence

    • Contributory negligence: the plaintiff partially responsible for the harm.
    • The plaintiff's damages are reduced proportionally to their fault.

    Damages in Tort

    • Tort remedies primarily aim to compensate the victim, usually through a money judgment.
    • Mustapha v Culligan of Canada Ltd:
      • Culligan breached its duty of care by providing contaminated water.
      • The breach caused significant psychological damage to Mustapha.
      • Damages are only recoverable if the mental injury would occur in a person of ordinary mental fortitude.

    Defences

    • Contributory negligence: reduces the plaintiff's award based on their proportion of fault.
    • Voluntary assumption of risk: a complete defence where the plaintiff knowingly accepted the risk.
      • Defendant must prove the plaintiff knew the risk and waived their right to sue.

    Kralik v Mount Seymour Resorts

    • Kralik, an experienced skier, was injured when he tried to clear snow from a chairlift and fell.
    • The lift operator was initially held 100% at fault for failing to stop the lift.
    • On appeal, Kralik was found 50% contributorily negligent for not letting the chair pass.

    Crocker v Sundance Northwest Resorts Ltd

    • Crocker entered an inner-tube race despite signing a waiver without reading it.
    • He was injured during the race.
    • The court found that Crocker had voluntarily assumed the risk by signing the waiver, even though it was not read.

    Negligent Misrepresentation and Auditors

    • Accountants conduct statutory audits primarily to allow shareholders to evaluate management.
    • Audits are sometimes relied upon for secondary purposes, like attracting investors.
    • Deloitte & Touche v Livent Inc:
      • Auditors failed to detect financial fraud, allowing Livent to operate with fraudsters.
      • Livent's receivers sued the auditors for losses resulting from reliance on the audit for investment purposes.
      • The Supreme Court ruled that the duty of care assessment is the same for negligent words and actions.
      • Auditors are liable for losses arising from the intended purpose of the audit, which was to evaluate management.

    Breach of Contract

    • A term that cannot easily be classified as either a condition or a warranty is an innominate term.
    • The court will review the circumstances to decide whether a term is a condition or a warranty.
    • Parties are free to expressly classify terms as warranties or conditions.

    Exemption and Limitation of Liability Clauses

    • Parties can include clauses in their contract that limit or exclude liability for breach.
    • For an exemption clause to be enforceable, the clause needs to apply to the situation, it should not be unconscionable (especially if there is unequal bargaining power), and it should not over-ride public policy concerns.

    Ethical Considerations

    • The "bad man" theory suggests that contract breakers can decide to breach and pay compensation, especially if it's less than continuing the contract.
    • Critics of the "bad man" theory believe businesses are generally moral and recognize the obligation to keep promises.

    Timing of the Breach

    • An anticipatory breach occurs before the date for performance.
    • The innocent party can sue immediately.
    • The innocent party is entitled to damages.
    • The innocent party can treat the contract as terminated if the breach is serious.

    Entitlement to a Remedy

    • The plaintiff must satisfy the court that they are entitled to damages.
    • Damages are monetary compensation for breach of contract or other actionable wrong.

    The Measure of Damages

    • Expectation damages are the most common way to award damages. These damages give the plaintiff the monetary equivalent of contractual performance.
    • Punitive damages, awarded to punish the defendant for malicious, oppressive, and high-handed conduct, are extremely rare.

    How Torts Are Categorized

    • Torts are generally classified as intentional torts or negligence torts.
    • Intentional torts are harmful acts committed deliberately or on purpose.
    • Examples of intentional torts include false imprisonment (unlawful detention or physical restraint or coercion by psychological means), and battery (intentional infliction of harmful or offensive physical contact).
    • When someone is negligent, they are liable for damages even if they did not intentionally cause the event.

    Tort Law and Criminal Law

    • The same event can result in both a tort law consequence and a criminal law consequence.
    • For example, an impaired driver who injures a pedestrian in a crosswalk may have committed a criminal offense and may also be liable for the tort of negligence.
    • The purpose of criminal law is to censure behaviour, and the prosecution of the crime is carried out by the government, usually without compensation to the victim.
    • The purpose of tort law is to require the wrongdoer to compensate the victim.
    • In criminal law, the legal action is called a prosecution and is brought by Crown prosecutors.
    • The wrongdoer is the "accused," and the victim is the "complainant.”
    • In tort law, the injured party sues in a civil action.
    • The injured person is the “plaintiff,” and the wrongdoer is the “defendant.”

    Proving The Actions

    • In a criminal action, the Crown must prove the crime “beyond a reasonable doubt.”
    • For conviction in criminal court, guilt must be a logical deduction from the evidence; it is not sufficient that the jury or judge believed the accused “probably” committed the act.
    • Conviction may result in imprisonment.

    Defences to Negligence

    • Contributory negligence, a defense where both the defendant and the plaintiff may have been negligent, may result in the plaintiff's award being reduced.
    • Voluntary assumption of risk, a complete defence, occurs when the plaintiff agreed to accept the risk inherent in the activity.

    Business Application of the Law: Negligent Misrepresentation and Auditors

    • Accountants are often retained by corporations to perform a statutory audit.
    • Although the audit's primary purpose is to allow shareholders to evaluate the performance of management, audits may also be relied upon for secondary reasons (such as to attract new investors or get a loan).
    • Auditors may be liable for losses arising from such secondary uses of the audit.
    • In Deloitte & Touche v Livent Inc (Receiver of), the Supreme Court of Canada ruled that the duty of care assessment is essentially the same whether the loss in question is caused by negligent words or negligent actions.
    • The auditor will not be liable for the use of the audit beyond the scope of what was undertaken to do.
    • Auditors are liable for losses when the statutory audit was used for its intended purpose (e.g., to oversee and evaluate management performance).

    The Tort of Nuisance

    • Nuisance is any activity on an occupier's property that unreasonably and substantially interferes with a neighbour's rights to enjoyment of their own property.
    • The general test is whether the impugned activity has resulted in an unreasonable and substantial interference with the use and enjoyment of land.
    • Interference must be substantial and unreasonable; nuisance typically does not arise where the interference is only temporary.
    • Not all interests are protected by the tort of nuisance (e.g., the right to sunlight).
    • Courts will consider tradeoffs in interest (e.g., when the noise in question is reasonable and for the public good, the action in nuisance may fail).

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    Test your knowledge on the principles of misrepresentation, including the duty to disclose, how rescission works, and the elements of actionable misrepresentation. This quiz covers essential concepts that are crucial in understanding legal agreements and the implications of false statements in contracts.

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