DOCSLIB.ORG

Simmons Da Silva LLP - 1 / 3 - 31.07.2018 2

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Simmons Da Silva LLP - 1 / 3 - 31.07.2018 2 1 The Defence of Failure to Understand and Other Reasons for ILA admin · Friday, March 24th, 2017 By Bruce Duggan Independent Legal Advice One of the most frequent questions/irritants Borrowers raise/experience in a commercial transaction is the requirement for their spouse to obtain independent legal advice. Typically, the complaint is that the spouse knows that what they are signing is a guarantee and that it is an inconvenient and needless expense to have to obtain independent legal advice, especially if it is being repeated for a second time in the case of refinancing. The function of independent legal advice is to overcome defences that the Bank would not have been aware of. Defences such as failure to understand, mistake, undue influence, duress, fraud and misrepresentation are ready weapons available to guarantors. If successful, any of these defences would leave the guarantee or other loan documents signed by such person unenforceable. This article reviews the defence of failure to understand also known as non est factum. Failure to Understand/Non Est Factum Simmons da Silva LLP - 1 / 3 - 31.07.2018 2 The basis of this defence is that the person signing did not understand the document signed, that the document was represented as being different from what the person signing thought they were signing and they were not careless in signing. Where this defence is established it becomes the Bank’s obligation to prove that the person signing did know what they were signing. Such “at risk” people can include those who have, for example little formal education, a lack of fluency in English, little understanding of the purpose of the financing or a lack of understanding regarding the loan terms. This defence is demonstrated in these two examples: Bertolo v. Bank of Montreal: Mrs. Bertolo was the widow of a post office employee who died in 1965. She had no business experience and little formal education. She was not fluent in English and was unable to read and discern such documents as promissory notes, collateral mortgages and financial statements. She took no part in the negotiations for the loan and was unaware of the terms of either the business purchase being financed or the bank’s loan agreements. “All she knew”, the trial judge found, “was that her son was buying a restaurant and she was willing to help him”. The Bank required ILA but it was provided by the same lawyer acting for the Bank and the Borrower and so was not “independent”. The bank was unable to enforce its loan agreement against Mrs. Bertolo. Chaplin & Co., Ltd. v. Brammall: Chaplin & Co. agreed to supply goods to Mr. Brammall on credit if his wife would guarantee payment. Chaplin & Co. sent the husband a form of guarantee in order that he might obtain his wife’s signature to it, leaving the matter entirely to him. The husband obtained his wife’s signature without sufficiently explaining the nature of the document which she did not understand. No ILA was obtained. The company was unable to enforce its guarantee against Mrs. Brammall. The Consequences for the Bank The mere lack of independent legal advice does not invalidate lending agreements or guarantees but in the absence of ILA, the Bank becomes responsible for the manner in which the bank documents are signed. In the above case, when Chaplin & Co left it entirely up to Mr. Brammall to obtain his spouse’s signature to the guarantee, Chaplin & Co assumed the consequence of Mr. Bartolo obtaining his spouse’s signature without her understanding what she was signing. The “I” in ILA is critical. In Bartolo, above, the Bank did require ILA but Mrs. Bartolo received it from the lawyer representing both the Bank and the Borrower and so the legal advice could not be said to be independent. Given the evidence of Mrs. Bartolo, the Bank could not prove that the transaction was adequately explained to her. The bank had to abide by the consequences of Mrs. Bartolo signing without understanding the terms and consequences of the transaction. Defending against claims of non est factum Simmons da Silva LLP - 2 / 3 - 31.07.2018 3 Where a person signing loan documents does not receive a financial benefit from a lending transaction (for example, the spouse who is not a shareholder of the borrower), the Bank must always be in a position to prove that the person signing the guarantee, for example, knew what they were signing. In the absence of ILA, the Bank has to prove that the person who otherwise can credibly claim non est factum did, in fact, receive a proper explanation of or had an accurate understanding of the loan documents. Obviously, proving this can be very difficult. The adequacy or inadequacy of legal advice received by the person signing is never an issue: the Bank is not responsible for the quality of the legal advice provided by an independent lawyer. If the legal advice was wrong or insufficient then that is left as a problem as between the independent lawyer giving ILA and the person signing. It is not up to the Bank to enquire whether the ILA was sufficient. Bruce Duggan is a certified specialist in corporate and commercial law, a partner at Simmons, da Silva LLP and external counsel to a Canadian chartered bank for the past 25 years. Andrea Wong is a lawyer at Simmons, da Silva LLP and assisted with research for this article. This article by necessity is general in nature and is not legal advice. For more information please see www.sdslawfirm.com This entry was posted on Friday, March 24th, 2017 at 7:19 am and is filed under Business Law You can follow any responses to this entry through the Comments (RSS) feed. You can leave a response, or trackback from your own site. Simmons da Silva LLP - 3 / 3 - 31.07.2018.
Load more

Recommended publications
  • THE DOCTRINE of CARLISLE and CUMBERLAND BANKING CO. V
    661 THE DOCTRINE OF CARLISLE AND CUMBERLAND BANKING CO. v. BRAGG.* The facts of this well known case. are that Bragg was induced by the fraud of Rigg to, sign a guarantee of the latter's debts upon;. the representation that it was an insurance paper. On an occasion when Rigg and the defendant had been drinking together, Rigg produced a paper purporting to relate to insurance, and asked Bragg to sign it, explaining that a similar paper which Bragg had signed on a previous day had become wet and blurred by the rain. The defendant signed without reading it. In an action brought by the Bank an the guarantee,-Bragg pleaded non est factum. The jury found that the defendant did not know that the document was a guarantee, and that he was negligent in signing. The Court of Appeal held that, in contemplation of law, Bragg had never signed the instrument, and that his negligence did not estop him from setting up the plea of anon est factum. Before this decision there was a strong current of long recognized authority for the proposition that a person who negligently executes an instrument is estopped as against third parties who acquired rights under it.' Thoroughgood's Case is the first decision.. Lord Coke held that if a deed be explained in wards other than the truth it shall not bind the unlettered layman who is deceived.3 Skinner reports a case where the court commented on a defendant's liability under a carelessly signed lease; "being able to read it was his own folly, otherwise if he had been unlettered."3a Sheppard declares that if a party who can read seals a deed without reading it, or if illiterate or blind, without requiring it to be read over to him, then although the deed be contrary to his mind, it is good and unavoid- able.4 Thus, in the absence of negligence the illiteracy of the person *This article was submitted in the competition for the Carswell Essay Prize in Dalhousie Law School and was given first place by the Faculty.
    [Show full text]
  • The Objective Theory ®F Contract and the Rule in V Estrange V
    VOL. L11 SEPTEMBER 1974 SEPTEM RE No. 3 THE OBJECTIVE THEORY ®F CONTRACT AND THE RULE IN V ESTRANGE V. GRAUCOB Halifax, N.S. Introduction In a recent article, J. R. Spencer criticizes the so-called rule in L'Estrange v. Graucob' on the ground that it contradicts the settled theory of agreement which underlies the law of contract generally? It seems, he says, to be generally accepted that a person who signs a contractual document may not dispute his agreement to any of the terms which it contains, unless he can establish one of three defences : (a) fraud, (b) misrepresentation, or (c) non est factum.' Spencer submits that this rule is wrong, and that there is a fourth defence which ought to be open to the party who signed the document, namely the defence that he simply did not agree to the term in question. Everyone says that the common law theory of agreement is, "objective", which means that the parties have to be judged by what they outwardly ap- peared to decide rather than by what they inwardly meant to decide. But this, Spencer claims, is vague, and to see what this "objective" theory really means we must look at the cases upon which it is based. One of these cases is Smith v. Hughes.' Although it usually features under "mistake", mistake is often no more than the other side of agreement. According to Smith v. Hughes, * R. A. Salnek, of the Faculty of Law, Dalhousie University, Halifax, N.S. '[193412 K.B. 394. Signature, Consent, and the 11le in L'Estrange v.
    [Show full text]
  • Important Concepts in Contract
    Munich Personal RePEc Archive Practical concepts in Contract Law Ehsan, zarrokh 14 August 2008 Online at https://mpra.ub.uni-muenchen.de/10077/ MPRA Paper No. 10077, posted 01 Jan 2009 09:21 UTC Practical concepts in Contract Law Author: EHSAN ZARROKH LL.M at university of Tehran E-mail: [email protected] TEL: 00989183395983 URL: http://www.zarrokh2007.20m.com Abstract A contract is a legally binding exchange of promises or agreement between parties that the law will enforce. Contract law is based on the Latin phrase pacta sunt servanda (literally, promises must be kept) [1]. Breach of a contract is recognised by the law and remedies can be provided. Almost everyone makes contracts everyday. Sometimes written contracts are required, e.g., when buying a house [2]. However the vast majority of contracts can be and are made orally, like buying a law text book, or a coffee at a shop. Contract law can be classified, as is habitual in civil law systems, as part of a general law of obligations (along with tort, unjust enrichment or restitution). Contractual formation Keywords: contract, important concepts, legal analyse, comparative. The Carbolic Smoke Ball offer, which bankrupted the Co. because it could not fulfill the terms it advertised In common law jurisdictions there are three key elements to the creation of a contract. These are offer and acceptance, consideration and an intention to create legal relations. In civil law systems the concept of consideration is not central. In addition, for some contracts formalities must be complied with under what is sometimes called a statute of frauds.
    [Show full text]
  • Rectification Non Est Factum
    • Mistakenly advertised for $66 • True price in fact $3,854 • Online error corrected after a few hours • A’s (group of friends) purchased more than 1,600 printers • Held • A’s were aware of the mistake • Described as ‘predatory pack hunters’ • Knowledge of mistake + unconscionable conduct sufficient for equity to set aside contract Rectification Rectification, where available, will amend a contract to give effect to the true intention of the parties. In the case of unilateral mistake, rectification will only be ordered where: It is established by clear and conceiving proof that at the time of the execution of the instrument the relevant party or parties at the case may be had an actual intention as to the effect which the instrument would have which was inconsistent with the effect which the instrument as executed did have in some clearly identified way. The following prerequisites must be establishes: • One party must be mistaken about a particular term of the contract • The unmistaken party must be aware of the other party’s mistake • The unmistaken party must not have drawn the mistake to the other party’s attention The following elements are also required before rectification will be granted: • The unmistaken party must benefit from resisting rectification • The unmistaken party must be guilty of some sharp practice or fraud in not revealing the mistake Even in cases where fraud or sharp practice has not been established, the courts have generally required some sort of unconscionable conduct on the part of the unmistaken party before
    [Show full text]
  • Contents EXAM STRUCTURE
    Laws1075 --- Contracts Contents EXAM STRUCTURE ........................................................................................................................................................................... 2 CONTRACT ............................................................................................................................................................................................ 3 I. Identify term ................................................................................................................................................................................. 3 II. Incorporation ................................................................................................................................................................................ 3 III. Wholly in writing OR Partly oral or partly written ............................................................................................................. 5 IV. Construing term ........................................................................................................................................................................... 6 V. Terminate ...................................................................................................................................................................................... 6 A. Terminate by agreement ....................................................................................................................................................... 7 B. Terminate
    [Show full text]
  • Kinghorn, Sean and Kinghorn, Judy Ann V
    [2020] JMSC Civ 196 IN THE SUPREME COURT OF JUDICATURE OF JAMAICA IN THE CIVIL DIVISION CLAIM NO. 2017HCV04289 BETWEEN SEAN KINGHORN 1st CLAIMANT JUDY ANN KINGHORN 2nd CLAIMANT AND SILVER STAR MOTORS LTD DEFENDANT IN CHAMBERS Sean Kinghorn instructed by Kinghorn and Kinghorn for the Claimants. Christopher Dunkley instructed by Phillipson Partners for the Defendant. Heard: July 28, 2020 and October 2, 2020 Application for Summary Judgment – Striking Out – Non Est Factum – Real Prospect of Success – Privity of Contract – Mediation Agreement T. HUTCHINSON, J INTRODUCTION [1] There are two applications before me for ruling, the first in time was filed by the Claimants on the 9th of October 2018. It is supported by an affidavit and supplemental affidavit provided by the 2nd Claimant which were filed on the 9th of October 2018 and 10th of December 2019 respectively. In this notice the Claimants seek the following orders; - 2 - 1. That pursuant to Rule 26.3 (b) and (c) of the Civil Procedure Code Rules, the Defence herein be struck out on the grounds that: it is an abuse of the process of this Honourable Court and/or is likely to obstruct the just disposal of the proceedings; the Defence discloses no reasonable grounds for defending the instant Claim. 2. That pursuant to Rule 15.2, Summary Judgement (sic) in respect of liability be granted in favour of the Claimants on the ground that the Defendant has no reasonable prospect of successfully defending the instant Claim. 3. That a date be set for the hearing of an Assessment of Damages in this matter.
    [Show full text]
  • Non Est Factum
    Topic 7 - Factors affecting the contract Content& Topic 7 - Factors affecting the contract ..................................................................................................... 2 Factors affecting the contract - non est factum ...................................................................................... 3 Factors affecting the contract – mistake ................................................................................................ 3 Types of mistakes ................................................................................................................................................................. 3 Mistake – common mistake - void ....................................................................................................................................... 3 Mistake – mutual mistake ................................................................................................................................................... 5 Mistake – unilateral mistake ............................................................................................................................................... 5 Factors affecting the contract – Misrepresentation ................................................................................ 7 Factors affecting the contract –Undue influence ................................................................................... 8 Factors affecting the contract – Unconscionable conduct .....................................................................
    [Show full text]
  • Supreme Court Claim No.699 of 2008
    IN THE SUPRME COURT OF BELIZE, .A.D. 2010 CLAIM NO. 699 OF 2008 (BRUCE SANCHEZ CLAIMANT ( BETWEEN( AND ( (PAMELA ROBATEAU MARTINEZ DEFENDANT Before: Hon Justice Sir John Muria 1 March 2010 Counsel: Mr. E. Flowers SC for the Claimant Ms. A. Segura­Gillett for the Defendant J U D G M E N T CLAIM – contract – agreement to lease business – land tenancy principles not applicable – alleged signing of contract of employment, not business contract – defence of non est factum – principles applicable MURIA J.: This claim by the claimant arose out of a business lease agreement entered into between the claimant and defendant on 12 th July 2007. The business concern that was the subject of the business lease agreement was called Radiance Jewelry and ABC Framing. The claimant’s claim is for the sum of $39,905.79 being money payable by the defendant to the claimant for goods supplied to the defendant. The claim is denied by the defendant. 1 Brief background The claimant is the owner of the jewelry and framing business known as Radiance Jewelry and ABC Framing located in the Commercial Centre building in Belize City. Previously the claimant leased his same jewelry and framing businesses to other previous lessees until June 2007. Then on 12 th July 2007, the claimant entered into another lease agreement over his Radiance Jewelry and ABC Framing business. This time, it was with the defendant who was the lessee. It was a term of the agreement that the claimant would supply to the defendant all the merchandise to be sold in the business and the defendant would pay for them as per the invoices and at certain discount percentages.
    [Show full text]
  • Contracts February 2020
    PLEASE NOTE: As an enhancement to the materials we have created, where possible, external web links to those cases and legislation that were available on the CanLII website. Please note, however, that not all links are reliable. The incorrect links appear to be especially problematic for the statutes, especially if the complete citation for the statute is not present at that exact spot in the materials. If you use the web links, please always double-check to ensure that you are being directed to the correct place. ------ The Nova Scotia Barristers’ Society has prepared these Bar Review Materials for the sole purpose of assisting applicants to prepare for the Nova Scotia Bar Examination. These materials are reviewed and updated annually, and published May 1 each year as study materials for the upcoming July and January exams. These current materials are the study outlines for the July 2020 and January 2021 Bar Examinations and may be relied upon for that sole purpose. The materials are not intended to provide legal advice, and should not be relied upon by articled clerks, transfer applicants, lawyers or members of the public as a current statement of the law. Members of the public who access these materials are urged to seek legal advice and are specifically warned against reliance on them in any legal matter or for pursuit of any legal remedy. The Society will not be liable for any use you made of these materials, beyond their intended purpose. CONTRACTS FEBRUARY 2020 CONTENTS: I. WHAT IS A CONTRACT? .............................................................................................................................. 1 II. ESSENTIAL ELEMENTS OF CONTRACTS ..............................................................................................
    [Show full text]
  • The Supreme Court of Canada and the Common Law of Contract
    [Vol. 17 The Supreme Court of Canada and The Common Law of Contract by Philip Slayton* I Introduction On December 10, 1949, assent was given to "An Act to amend the Supreme Court Act." 1 This Act abolished appeals from Canada to the Judicial Committee of the Privy Council, making the Supreme Court of Canada the final court of appeal for Canada.2 The Supreme Court became judicial master in the Canadian house. Abolition of appeals was considered a mark of the maturity of the Canadian state. Many hoped that it would lead to development of a law more able to respond to Canadian conditions. The Ottawa Journal commented in 1938 that "in recent years in particular Privy Council decisions have shown hardly an inkling of things in Canada in consequence of modern and Empire change." 8 Canadian development was characterized by one commentator as "arrested by the judicial barrier to progressive change erected by the Privy Council, and raised even higher as time moves on and new conditions arise."' 4 Professor MacGuigan has described the Privy Council as sitting out its days in "judicial seclusion an ocean removed from the colony-state, with no knowledge of the geographic, eco- *B.A. (Hons.) (Man.), BA. (Oxon.), B.C.L. (Oxon.), Assistant Professor of Law, McGill University. 113 Geo. 6, c. 37. 1949, 2nd session, Vol. 1. 2 Section 7 of the Act read in part: "Notwithstanding anything in section three of this Act, an appeal from or in respect of a judgment pronounced in (a) a judicial proceeding that was commenced prior to the coming into force of this Act ..
    [Show full text]
  • Insurance a Daily Bulletin Listing Decisions of Superior Courts of Australia
    Tuesday, 10 March 2015 Insurance A Daily Bulletin listing Decisions of Superior Courts of Australia Search Engine Click here to access our search engine facility to search legal issues, case names, courts and judges. Simply type in a keyword or phrase and all relevant cases that we have reported in Benchmark since its inception in June 2007 will be available with links to each case. Executive Summary (1 minute read) Ell, Richard Austin v Ell, Stephen Maxwell (NSWCA) - Wills – testator intended to release debt unconditionally under Will Ramsay Health Care Australia Pty Ltd v Compton (NSWSC) – contract - signatures on signing pages bound party to guarantee – plea of non est factum failed Australian Vintage Ltd v Belvino Investments No. 2 Pty Ltd (as trustee of the McGuigan Simeon Trust ABN 76965280510) (NSWSC) – commercial lease of vineyard – expert determination clause - expert’s determination not set aside Campbelltown City Council v WSN Environmental Solutions Pty Ltd (NSWSC) – contract – dispute resolution regime – declaration that party not entitled to refer dispute to expert refused Chan v First Strategic Development Corporation Ltd (in liq) (QCA) – corporations – factual findings open to primary judge– appeal dismissed Simmons v Love (WASC) – contract for sale of land – buyers’ claim for damages for late settlement dismissed Page 1 Summaries with links (5 Minute Read) Ell, Richard Austin v Ell, Stephen Maxwell [2015] NSWCA 38 Court of Appeal of New South Wales Basten, Ward & Gleeson JJA Wills - contract - estoppel - testator made
    [Show full text]
  • Statutory Reform of the Law of Mistake Donald J
    Osgoode Hall Law Journal Article 3 Volume 18, Number 3 (October 1980) Statutory Reform of the Law of Mistake Donald J. Lange Follow this and additional works at: http://digitalcommons.osgoode.yorku.ca/ohlj Article Citation Information Lange, Donald J.. "Statutory Reform of the Law of Mistake." Osgoode Hall Law Journal 18.3 (1980) : 428-477. http://digitalcommons.osgoode.yorku.ca/ohlj/vol18/iss3/3 This Article is brought to you for free and open access by the Journals at Osgoode Digital Commons. It has been accepted for inclusion in Osgoode Hall Law Journal by an authorized editor of Osgoode Digital Commons. STATUTORY REFORM OF THE LAW OF MISTAKE By DONALD J. LANGE* Page I. INTRODUCTION 429 II. STATUTORY REFORMERS OF THE LAW OF CONTRACTUAL MISTAKE 430 I. THE LANGUAGE OF REFORM: COMPARING THREE STATUTORY MODELS OF CONTRACTUAL MISTAKE 436 A. Definitions of Mistake 436 B. Types of Mistake 440 C. Unjust Enrichment 445 D. Knowledge 450 E. Materiality 452 F. Risk of Error 455 G. Fault 456 H. Nature of Relief 459 I. Concluding Remarks 460 IV. STATUTORY MODELS REFORMING MISTAKE LAW GENERALLY 461 A. Background to the Statutory Models 461 B. Pomeroy's Model 464 C. American Models 465 D. New Zealand Model 470 E. Concluding Remarks 477 @ Copyright, 1981, Donald J. Lange. * Mr. Lange is a member of the 1980 graduating class of Osgoode Hall Law School. 19801 Law of Mistake I. INTRODUCTION The common law of contractual mistake has long been recognized as one of the most confused and complex areas of classical contract law, but only recently has there been a serious interest in the statutory reform of the area.
    [Show full text]