Contract Law II Lecture 1-5 Notes PDF

THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 2, 2024 Contracts Law 2 ( 5.10704 ) Lecture 1 1. Vitiating Factors Contract- An agreement between two or more persons which confers r...

THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 2, 2024 Contracts Law 2 ( 5.10704 ) Lecture 1 1. Vitiating Factors Contract- An agreement between two or more persons which confers rights and imposes obligations which the legal will enforce. Agreement: Latin – Consensus ad idem English – Meeting of the minds Pidgin – Yumi wan bel, laka? Motu – Mauro  Parties freely enter into contract  Parties freely agree to be bound by the terms of the contract Factor  No ad idem  No meeting of the minds  Oli no wan bel  Mauro lasi momokani Factor  Vitiating factor Four ( 4 ) types: a) Mistake b) Misrepresentation c) Duress or coercion d) Undue influence a. Mistake Presumption-everyone knows the law Legally operative-mistake of fact not Law Eg- mistake –nature of contractual obligations-law Holt v Markham ( 1923 ) 1 KB 504 a. Minority b. Drunkenness c. Insanity d. Vulnerable to manipulation. Illiterate.semi- educated. lack of sophistication. Ill health. Poverty b. Three types of legally operative mistakes: i) Common or shared mistake Same fundamental mistake Eg- existence of subject matter of contract Scott v Coulsen ( 1903 ) 2 CH 249 Res extincta cases Goods Act Section 8 ( 1 )-specific goods ( not generic ) Promise goods in existence-responsibility for non- Existence McRae v Commonwealth Disposal Commission ( 1951 ) 84 CLR 377: Jourmaund Reef 100 NM north of Samarai,TP&NG Quality or value-not render contract void Oscar Chess Ltd v Williams ( 1957 ) 1 ALL ER 325 Bell v Lever Bros Ltd ( 1932 ) 161 Note Contract set aside- mistake-equitable jurisdiction i. Not possible to restore parties to original or pre- contract positions Eg Third party acquired interest ii. Rectification Written agreement not express agreement-court order document rectified-true intent ion of parties Joscelyne v Nissen ( 1970 ) 2 QB 86 Prenn v Simmonds ( 1971 ) WLR 724  THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 2, 2024 Contracts Law 2 ( 5.10704 ) Lecture 2 Vitiating Factors Types of mistakes: 1.Common or shared mistake Same mistake Eg existence of subject – matter 2.Mutual mistake 3.Unilateral mistake 2. Mutual mistake. Parties at cross-purposes. Either party-different mistake IE one party – one thing other – different thing. Parties not ad idem  Raffles v Wichelhause ( 1864 ) 2 H&C 906 P---------------- Cotton India – Peerless-------D P---------------- September--------------Peerless D---------------- Nov /Dec----------------Peerless Peerless------- September----------D refused delivery P----------------- breach of k----------------------D Court: Parties-----cross purposes No K came into being D not liable for P’s losses Falck v Williams ( 1900 ) AC 176  Scriven Bros v Hindley ( 1913 ) 3 KB 564. mutual mistake-invalidate contract: i) Serious ii) Fundamental in nature 1. Unilateral mistake. Only one party mistaken: i) Terms of contract ii) Identity of contracting party(ies). Other party knows a) Terms of the contract. One party mistaken-other aware-contract void Webster v Cecil ( 1861 ) 30 Beau 62: W------2,000 pounds-------C—rejected C-------1250 pounds--------W—accepted Taylor v Johnson ( 1983 ) 45 ALR 265: Vendor of ten acres of land-$15,000 per acre Written contract-$15,000 total purchase price Purchaser aware of vendor’s mistake High Court of Australia: Mistaken party cannot rely on own mistake to void contract. Contract voidable only Riverplate Properties Ltd v Paul ( 1974 ) 2 ALL ER 656: Other party unaware-contract valid. Cannot be: i) Rescinded ii) Rectified Taylor v Johnson ( 1983 ) 45 ALR 265 P----------$15,000/acre------D Contract-----$15,000 total purchase price D-----knew Questions: 1. No contract came into being?  Court – Declaration – No contract came into being  Parties – Pre-contract positions  D – Return money to P  P – Return title and land to P  Justice? 2. Contract came in to being?  Contract – not properly reflect Parties’ intention  Rectification  Declaration – purchase price $ 15,000/acre  Order D – pay difference  Justice?  THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 2, 2024 Contracts Law 2 ( 5.10704 ) Lecture 3 1. Vitiating Factors – Four types: a. Mistake b. Misrepresentation c. Duress or co-ersion d. Undue influence Vitiating factors – Mistake – three types: 1.Common or shared mistake. Same mistake 2. Mutual mistake. Different mistakes 3. Unilateral mistake Unilateral mistake. One party mistaken. Other party knows Mistake:  Term of the contract  Identity of the other party a) Mistake as to the terms of the contract Egs of mistake – Terms Price Method of payment Currency for payment Time of manufacture ( present & future goods ) Time of harvesting ( present & future goods ) Time of delivery  Place of delivery Webster v Cecil ( 1861 ) 30 Beau 62 W----------2,000------------------C C----------- declined C-----------1,250----------------2,250 W------------accepted C------------refused to go ahead with sale W----------sued---breach of contract Court:  C--------mistake  W------knew C mistaken  W-------could not enforce K Taylor v Johnson ( 1983 ) 45 ALR 256 P---------------10 x acre property--------------V V--------------$ 15,000/acre Written K---$ 15,000 total purchase price V---------------mistake P---------------aware of V’s mistake HCA:  K---------------void However:  Party-----own mistake------K void ab initio  K-----------voidable  K binding------until set aside Riverplate Properties Ltd v Paul ( 1974 ) 2 ALL ER 656 Other party unaware of mistake  K valid  Cannot be rescinded  Cannot be rectified b) Mistake as to the identity of the other party A-----------wants to contract----------X A-----------contracts with Y-----thinking Y is X Mistake as to the identity of the other party Scenario: A----contract void-----prove: 1. Contract only with a definite and identifiable person 2. Other person ( con-man or con-woman ) aware of his intention 3. Negotiation---identity of other contracting party as a matter of importance  4. Reasonable steps to verify identity of that party Mistake as to the identity of the other party 1. Inter absentes - by correspondence Cundy v Lindsay ( 1878 ) 3 App Cas 459 Blenkarn ( conman )----------Lindsay------hankerchiefs Blenkarn----------W.Blenkiron & Co Lindsay------------------Blenkarn Blenkarn----------------Cundy Court:  Contract of sale void   Cundy derived no title  Cundy – return hankerchiefs Mistake as to identity of the other party 2. Inter presentes – face to face Phillips v Brooks Ltd ( 1919 ) 2 KB 242 North----------Phillips North----------Sir George Bullough of St James Square Phillips checked-------North – jewelry North----------Brooks Ltd Court:  Contract not void for mistake  Voidable for fraudulent misrepresentation  North----good title----Brooks Ltd  Brooks Ltd – void contract Lewis v Avery ( 1971 ) 3 ALL ER 907 L advertised car for sale Conman-----Richard Green of Pinewood Studios Proof of ID-----Special Admission Pass Conman---------Avery Court:  Contract not void for mistake  Contract voidable for fraudulent misrepresentation  Avery – void contract Not appreciate difference? Cundy v Lindsay-  void for mistake Phillips v Brooks Ltd & Lewis v Avery  Not void for mistake  Only voidable for fraudulent misrepresentation  Test Intention of party who initially deals with con-man or con-woman a)Deal only with a particular third party ( con- woman-2nd party ).Contract with con-woman void b)Deal with person making offer – even though fraudulently impersonates herself as someone else. Contract with con-woman will not be void for mistake. Contract with con-woman will be voidable for fraudulent misrepresentation Conclusion Identity of other contracting party of importance. Plea will succeed Identity of other contracting party not of importance Eg: Sale of goods. Plea not succeed Non est factum ( This is not my document ) Foster v Mackinnon ( 1863 ) LR 4 Saunders v Anglia Building Society ( 1971 ) AC Non Est factum Pleaded – defence   ‘ this is not my document ‘ Disowning a document Foster v Mackinnon ( 1863 ) LR 4 Old man – poor eye sight  Endorsed Bill of Sale  Believing – guarantee Court:  Not liable on the bill  Saunders v Anglia Building Society ( 1971 ) AC L ---- Nephew------Mrs Saunders P ----widow-------78 P---signed document---deed of gift----not read Document-------assignment of house-àL L-----mortgaged------ABS L-----defaulted on mortgage ABS---possession of house P-----declaration----assignment to L void P-----non est factum  Gift of property---nephew  Not assignment----L House of Lords: 1. Rejected –non est factum  2. Failed to:  Assignment fundamentally or radically different in character Plea – Non est factum – Will not succeed – D: 1. Entirely – essentially – fundamentally different in character or nature  Mistake legal effect of document  Document varies in some respect 2. Not careless or negligent – ascertain general effect of document Too busy – not rely – non est factum Precaution:  Innocent person   Not aware of circumstances Effect of Mistake 1. Common mistake 2. Mutual mistake  Contract void  One party insist – K subsists  Other – defence a. Defence b. Other parties – deal in ignorance  Acquire no rights Cundy v Lindsay c. One fully performed  Eg Payment of money  Recoverable Kelly v Solari ( 1841 ) 9 M&W 54 Insurance co------money Policy----------Lapsed Court:  Insurance Co  Recover 3. Unilateral mistake a. Term of the contract Taylor v Johnson  Contract not void  Contract voidable Unilateral mistake b. Identity 1) Important  Void Cundy v Lindsay 2) Not important  Voidable Phillips v Brooks Ltd Lewis v Avery Mistake  Not truly express intention  Rectification ( equitable )  Reflect parties’ intention Paget v Marshall ( 1884 ) 28 Ch D 255 Riverplate Properties Ltd v Paul ( 1982 ) 42 ALR 656 Pukallus v Cameron ( 1982 ) 43 ALR 243  THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 2, 2024 Contracts Law 2 ( 5.10704 ) Lecture 4 Vitiating Factors 1. Mistake 2. Misrepresentation 3. Duress or coercion 4. Undue influence 5. Vitiating Factors-Misrepresentation Mere representation –  Not part of contract  improve bargaining position Term ( S ) –  part of contract  Confer rights  Impose obligations Representation – untrue –  Misrepresentation ( MR ) Nature of MR:  untrue statement  time of contract  existing fact  past event  induce to contract a). Fact. NOT: Law Opinion Intention  Bisset v Wilkinson ( 1927 ) AC 177 P--------------land-----------D After contract signed----D:  2,000 sheep  Land unsuitable – sheep  Breach of contract Court:  Opinion  Smith v Land and House Property Corp ( 1884 ) 28 Ch D 7 P------land/improvements---D D:  Tenant  “ Mr Frederick Fleck, most desirable tenant “  Property – rental arrears  Breach of K Court:  Character of tenant  Not opinion  Fact->statement> untrue> MR  Edington v Fitzmarice ( 1885 ) 29 CH D 459 P------------loaned money-----D D:  Improve business  Expand business In fact:  Pay off existing debts Court:  Not intention  Fact > MR  Misrepresentation  Positives words  Conduct b) What about silence? Fletcher v Krell ( 1873 ) QB 55 P-----------governess-------D D------------------P a divorcee D----------non-disclosure-à MR Court:  No duty of disclosure  Non-disclosure---not MR  Termination----unlawful  Damages Some circumstances- silence –> MR (i) Change of circumstances With v O’Flanagan ( 1936 ) Ch 575 P------medical practice----D Negotiation---practice profit After-----D sick---patients left Time of K----D did not disclose Court:  Non-disclosure > MR  (ii) Half-Truths Statements:  Half true  Half false  MR R v Kylsant ( 1932 ) 1 KB 442  (iii) Contracts uberrimae fidei- > contracts of utmost good faith > insurance Eg Life Insurance cover:  Are you sexually active?  Are you have suicidal? (iv) Fiduciary and confidential relationships Egs Principal------------------Agents Partner -------------------Partner Promoter---------------Company  THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 2, 2024 Contracts Law 2 ( 5.10704 ) Lecture 5 1. Vitiating Factors- Misrepresentation Classes of misrepresentation: A. Fraudulent MR B. Negligent MR C. Innocent MR A. Fraudulent misrepresentation ( FM ) False statement  knowingly or without belief  carelessly, recklessly true or false Derry v Peek ( 1889 ) 14 APP Cas 337 Peck v Gurney ( 1873 ) LR HL 377. Contract –> FM  voidable Notice  words – oral - written  conduct Guilty party disappears  notice of avoidance  some other way Car and Universal Finance Co Ltd v Caldwell ( 1965 ) 1 QB 525 Owner---àfraudster-----àNorris Norris-----------à Caldwell Owner:  Police  Automobile Ass. Vehicle found  Refused to hand back Court:  Rescission B. Negligent misrepresentation ( NM )  “ Special relationship “  Special skill  Relies  business decision  Due and reasonable care Egs: Lawyer------lawful-------Client Client-----lawful? Unlawful lawyer  Negligent MR Accountant------solvency----Client Client-----solvent? More liabilities than assets  Insolvent Accountant  Negligent MR Esso Petroleum Co v Mardon ( 1976 ) 2 WLR 583 P-----------------------------Petrol station P-----------------------------Esso Petroleum Co  Profitability forecast Esso Petroleum Co  Negligent forecast  P---Loss Court: Esso:  NM  Damages C. Innocent Misrepresentation ( IM ). Not FM or NM. No intention  deceive  Mislead. IM  no damages  only rescission Regrave v Hurd ( 1881 ) 20 CH D 1 R-------lawyers practice------H R --- misstated value of practice H--------inspect accounts-----did not Court:  No damages  Contract rescinded Duress or coercion  Actualviolence  Threatened violence  Imprisonment Person  Not property To:  Contracting party  Immediate family  Near relative Kaufman v Gerson ( 1904 ) 1 KB 591 By:  Contracting party  Someone acting on his behalf Person-------à Contract  Actual violence  Threatened violence  Imprisonment Consent:  Not genuine  Contract voidable Barton v Armstrong ( 1975 ) 2 ER 465 A---------shares-------Company A---------death--------B-Shares B---------shares-------Company Court: B entitled to rescind contract Cummings v Ince ( 1847 ) 11 QB 112 Pao On v Lau Yiu Long ( 1980 ) AC 614 Undue Influence Improper pressure Improper influence 1. Not duress 2. K party---------K party  Free & deliberate judgement  Contract disadvantageous Effect:  Contract voidable UI – presumed: 1. Not on equal bargaining positions: a) Rich----------Poor b) Educated----Illiterate c) Healthy------Sick 2. Trust and confidence 3. Position of dominance UI – presumed: a) Parent------Child b) Guardian-----Ward c) Religious-----Disciple d) Doctor-------Patient e) Lawyer------Client f) Trustee------Beneficiary UI – presumption  Not husband----wife Mackenzie v Royal Bank of Canada ( 1934 ) AC 468 K party-------UI---------Other Onus--------other Discharge onus:  Independent advice  Fair price