LAWS-1030 Module 5 PDF - Legality and Voluntary Action

LAWS‐1030 ‐ Module 5 Contracts in Society LAWS-1030 Professor Josh Haug 1 Concepts From Last Class… Capacity and Consideration Not all persons in society may have the legal “capac...

LAWS‐1030 ‐ Module 5 Contracts in Society LAWS-1030 Professor Josh Haug 1 Concepts From Last Class… Capacity and Consideration Not all persons in society may have the legal “capacity” to contract They are… Mutual consideration is defined as an exchange of value! Except when… Value is subjective… Caveat Emptor! Tense… 2 Remember… A Valid Contract is a deliberate agreement between two (or more) competent parties, supported by mutual consideration, to do some legal act voluntarily 3 1  LAWS‐1030 ‐ Module 5 Legality, Voluntary Action, and Consent 4 Legality… 5 To be valid and enforceable… A contract must first be legal The consideration must be legal The ‘subject’ of the contract must be legal 6 2  LAWS‐1030 ‐ Module 5 ‘Legal’ refers to… Not contrary to current statute law Not contrary to the ‘public good’ or public policy Not in Restraint of Trade or Unnecessarily Restrictive 7 Contrary to Statutes… Criminal law or Administrative Law… If a contract is contrary to the criminal code… If a contract is contrary to other Acts it may render certain types of contracts illegal. Ex. Workers Compensation Legislation… or the Competition Act. 8 Public ‘Good’ or ‘Policy’ Public Policy: “The unwillingness of the courts to enforce rights that are contrary to the general interests of the public”(1). Ex. Interest rates charged by a private lender… (1) - Contemporary Canadian Business Law Pg. 162. 9 3  LAWS‐1030 ‐ Module 5 Restraint of Trade Three categories Contrary to the Competition Act Agreements between business sellers / purchasers, restricting vendor to engage in similar business in competition Agreements between employee / employer restricting the right of an employee to compete with the employer 10 Restraint of Trade These categories of contracts create Restrictive Covenants… They are Prima Facie or Void on first appearance 11 Also not Contrary to… Un-licenced work Or Un-permitted work 12 4  LAWS‐1030 ‐ Module 5 Un-licenced work… Contracts between unlicensed tradespersons / professionals, and a contracting party: Engineering… Architectural… Electrical… WSIB / Form 1000 / Insurance… 13 Un-permitted work… This can mean illegal work OR: Construction work without a permit… See: https://www.toronto.ca/services- payments/building-construction/building- inspections/working-without-a-permit/ 14 Voluntary Action and Consent… 15 5  LAWS‐1030 ‐ Module 5 Voluntary Action / Consent In order to create a valid contract one must be doing so with their genuine consent. Consent means acting voluntarily. There must be an absence of vitiating factors 16 However… One cannot be acting truly voluntarily when or where one of these situations exists: 1. The subject of the contract has been misrepresented; 2. One party is unduly influenced by another party to the contract; 3. There is the threat of violence for failing to act 4. A certain type of mistake has occurred 17 1. Misrepresentation If an item is not represented properly it could lead a person to believe they are contracting for something which they are not going to get; In this case they are not acting voluntarily! Misrepresentation must involve a material fact. 18 6  LAWS‐1030 ‐ Module 5 A ‘Material Fact’ is A fact which leads to or ‘brings about’ a contract. For example: When you buy a car, IF the colour matters it is a material fact, if it doesn’t matter, it is not a material fact. The type of stereo in a car is probably not a material fact 19 Categories of Misrepresentation: Innocent Fraudulent Negligent 20 Innocent Misrepresentation Is defined as: “A false statement of a material fact made by a party that honestly believed the fact to be true” Making a statement believed to be true. 21 7  LAWS‐1030 ‐ Module 5 Innocent Misrepresentation Example: The book refers to purchasing a parcel of land to develop high rises. Unknown to the seller the land was re-zoned and therefore a high rise would not be able to be constructed. The purchaser was entitled to rescission of the contract. Pg.199. 22 Innocent Misrepresentation Remedy Contract Rescission “the revocation of a contract or agreement”… The goal is to have parties returned to their pre-contract state. 23 Fraudulent Misrepresentation Is defined as: “A false statement of a material fact made with the intent to deceive” May incur other legal liability – tort of deceit 24 8  LAWS‐1030 ‐ Module 5 Fraudulent Misrepresentation Example: If a jeweler sells you a diamond ring which you later discover is crystal, that is a fraudulent misrepresentation 25 Fraudulent Misrepresentation Remedies: Contract Rescission – If possible! Sue for Damages! If a simple rescission of the contract is not possible Punitive Damages may be awarded. Equitable Rescission Tort of Deceit! 26 Negligent Misrepresentation Is defined as: “A false statement of a material fact made due to a persons negligence” Non-disclosure may fall into this category. Negligence is the opposite of Diligence! 27 9  LAWS‐1030 ‐ Module 5 Negligent Misrepresentation Negligence is defined as: “failing to take proper care in doing something” Example in the text refers to Esso providing franchise information that is completely inaccurate. 28 Negligent Misrepresentation Remedies here are the same as Fraudulent Misrepresentation… 29 2. Undue Influence In law, certain “power relationships” exist. Voluntary action and consent are precluded when a person uses their influence over another to compel them to contract. 30 10  LAWS‐1030 ‐ Module 5 Examples of “Power” relationships: Positions of elevated status Higher education People with family ties Medical professionals (Therapists) Any individual who is able to persuade another's decisions due to the relationship between the two parties 31 3. Duress Duress is defined as the application of some unlawful pressure (violence or threat of violence against a person or their family) which compels them to agree. 32 Duress… One cannot be acting voluntarily when under the threat of violence Must repudiate quickly 33 11  LAWS‐1030 ‐ Module 5 Duress… 34 4. Mistake The text defines mistake as: “a state of affairs in which [the parties have] formed an erroneous opinion as to the identity or existence of the subject matter, or of some other important term” 35 Mistake of Fact The text defines this type of ‘mistake’ as: “mistake as to the existence of the subject matter of a contract or the identity of a party” 36 12  LAWS‐1030 ‐ Module 5 Subject Matter… The boat is gone… http://www.sun-sentinel.com/local/broward/fl-sb-offshore-boat-fire-20170601-story.html 37 Identity of a Party… Parties to contract also cannot be mistaken as to the identity of the party with which they are contracting. “only the person to whom an offer is made can accept that offer”. 38 Unilateral vs Mutual Unilateral mistake – one party is mistaken Can resemble Misrepresentation… Gucci Bag… Mutual mistake – both parties are mistaken Rectification… 39 13  LAWS‐1030 ‐ Module 5 An Obvious ‘Mistake’… May also preclude a contract… For example… An obvious mistake on the face of a quote may render any potential for contract void on the basis that… It would be unjust to enforce it, and unjust to accept the benefit of it 40 Caution: This does not include… Unilateral negligent mistake! If one party to the contract makes an error with regard to the adequacy of consideration, for example… Caveat Emptor! 41 While you’re reading… 42 14  LAWS‐1030 ‐ Module 5 For Next Class Go to FOL: Review Reading Assignment #5 and answer questions Be prepared for Tutorial #5 Submit your Research Paper prior to class… 10am online as per the instructions. 43 Next Class Module 5 Tutorial Research Paper Submission 44 15