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Misinformation ADVANCED CONTRACT NOTES • Identify legal issues and claims each party might want to make (avoid reproducing facts unless to support your arguments) • State principles with cases • Reach a tentative conclusion on each relevant issue, and indicate to the party what chance they have in prevailing in any litigation. • If any ambiguity in facts given, or more facts are needed, then say so and indicate how you have interpreted the facts to solve the problem. • Think outside the box/ put yourself in parties’ shoes. • Say why you’re ruling something out • IRAC Might Be Useful: • Termination by Frustration (contract is enforceable until time of frustrating event e.g. building collapsing) • Termination by Breach (must be a breach of an essential term; aggrieved party must elect to terminate) • Termination clause: where either party can terminate the contract with a certain period of time notice • Damages in contract are typically to put you in the same position as if the contract went through (gotten the profit). Damages in tort put you in the position you’d be in if the tort was never committed. • Condition/essential term= can terminate and get damages. Non essential/warranty= only get damages, contract still in place. MISINFORMATION Pre-contractual misbehaviour by one party in providing misinformation to the other. Damages for breach of contract through (terms) Pre-contractual statement: term or mere representation? o Objective test of intention (Oscar Chess v Williams) o Test determined by the following factors (Ellul v Oaks): ▪ (a) time of statement (lapse of time between statement and final entry into contract- shorter the lapse, the more likely it is a contractual term, as a long lapse will haveless inducement into contract) ▪ (b) importance of statement (in the minds of the parties; more important, more likely to be contractual term) ▪ (c) oral statement followed by written memorandum (if statement is not mentioned in memorandum, obviously not important to parties, therefore unlikely to be contractual) ▪ (d) parties knowledge/expertise (more expertise, more likely to be contractual, as lesser party is more induced to believe their authority) ▪ Do not need all 4; if 2 or 3 indicate term is contractual, then it is likely the court will determine the term as contractual (they are simply guiding factors) o This test also applies to collateral contracts (JJ Savage and Sons v Blakney) Parol Evidence Rule (becomes relevant when there’s a written contract): extrinsic evidence cannot be admitted to add to, subtract from or contradict the written document (Codelfa Construction v State Rail Authority) o To determine whether the written contract is the exclusive/only written record of the deal, you can look at extrinsic evidence (the totality of the dealings)- Norwest Beef v P & O Steam Navigation o Merger/entire agreement clause help avoid parties bringing up extrinsic evidence e.g. “This written agreement is an entire body of what the parties agree to.” (Leyland Motor v Wauer)- can go against these clauses with estoppel or arguing a collateral contract. Collateral Contract: A one-term contract; way of bypassing the Parol evidence rule. “A contract made when one party makes a promise, connected to, but independent of, a main contract and, as consideration for that promise, the other party agrees to enter into the main contract. (Heilbut Symons v Buckleton). For a pre-contractual oral statement to be a collateral contract, the statement must be: • “Promissory and not merely representational” (JJ Savage and Sons v Blakney), • Intended to induce entry in contract (JJ Savage and Sons v Blakney), and; • Consistent with the terms of the main contract (Hoyt’s v Spencer)- if they contradict, main written contract prevails *All terms of collateral contracts are considered mere warranties; this means if the breach is a breach of just the collateral contract, all you can get is damages for breach of contract (it is a warranty). However, it’s a term of the main contract, determine status of the term: essential/condition or non-essential/warranty? If it’s essential/condition, you can elect to terminate and claim damages. Example of collateral contract: One party promises that there are no termites, therefore the other party promises to buy the house as consideration (main contract is promising to give money in exchange for the house). Promissory Estoppel: Another way of bypassing the Parol Evidence rule. “Not suing for breach of contract, but using estoppel to prevent other party from denying that they had made that representation, and party had relied upon it to their detriment, and therefore they should be awarded damages for their reliance loss. The minimum equity will do, to undo that harm.” Prevents a party from denying the creation of an assumption and hiding behind written contract (State Rail Authority v Heath Outdoor). Promissory estoppel can also protect against merger/entire agreement clauses if the other party does not have clean hands (Saleh v Ramanous). Rescission for misrepresentation If unable to argue that there was a breach of contract (whether a collateral contract or term of main contract), you may want to allege misrepresentation (remedy is rescission; this is an equitable remedy, so it is at the discretion of the court- rescission is cancelling contract and returning parties to original position). It must be proved that a precontractual statement was a misrepresentation. The alleging party bears the burden to prove that: • it was a representation of fact (past or present) • it induced them to enter the contract (causal effect between misrepresentation and the entry into the contract- party had to know of the representation they thought to be true) and was material (had effect of inducing, doesn’t have to be the sole inducement). Also, the party had to have allowed the inducement to affect their judgement entering the contract (Holmes v Jones) • and that none of the rescission limitations apply (see below) Misrepresentation CANNOT be: • statement of opinion (not saying conclusively that it is true e.g. “I think it’s in good condition”) HOWEVER if they implicitly imply it is fact e.g. saying they are an expert or deliberately lying, it could be misrepresentation (Fitzpatrick v Michel) • statement of law (everyone is presumed to know what the law is, you cannot be misled by what a party says to be law) • statement of future intentions (if they change their mind to what they said were their intentions, you cannot hold them bound to it, UNLESS it can be proved they never intended it anyway- Edgington v Fitzmaurice) • non-disclosure (e.g. silence- you cannot assume anything, UNLESS they have done something to encourage your assumption). Something more than silence is needed for misrepresentation, even if just a single word, a nod, a wink, a smile- W Scott Fell v Lloyd. More exceptions: o Half-truth can be misrepresentation (omitting some information to do with what was said) o If something that was true at the time becomes false, party has a duty to disclose this, otherwise it is misrepresentation (Jones v Dumbrell) .
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