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Copyright Guy Harley 2004

Mistake


Mistake A party cannot get out of a contract because

they made a mistake Exceptions:

Mistake due to other party’s misrepresentation, unconscionable conduct etc.

Common mistake Mutual mistake Unilateral mistake


Mistake Common mistake

Both parties make the same mistake

Mutual Mistake An objective test

Unilateral Mistake One party is mistaken as to a fact; and Other party is aware of the mistake


Misrepresentation


Elements of Misrepresentation The statement was false The statement was one of fact Statement was addressed to the representee

before or at the time that the contract was entered into

The statement induced the representee to enter into the contract See Attwood v Small (Outline p 8-8)


History 1880’s – Caveat Emptor – Let the buyer beware Court of Equity

Relief for fraudulent misrepresentation Rescission was only remedy

Common Law Courts Relief for innocent misrepresentation only if it

became a term of the contract Tort of negligent misrepresentation Only remedy was damages


History 1970’s – Statutory Reform

S52 Trade Practices Act & s11 Fair Trading Act Removed distinction between fraudulent, negligent

and innocent misrepresentation Built upon previous law regarding

misrepresentation


Action for misleading or deceptive conduct (breach of TPA s 52, Fair Trading Act or

ASIC Act)

Action for damages for tort

of deceit (fraud)

Action for damages for

tort of negligence

common law misrepresentations

statutory misrepresentations

Causes of action for misrepresentation

Action for breach of contract

contract law


Categories of Misrepresentation Fraudulent misrepresentation

Representor knew it to be false or was reckless as to whether it was true or false

If Representor believed it to be true, no action for fraudulent misrepresentation even if negligent


Fraudulent misrepresentation (deceit)

Liability for fraud cannot be excluded Remedy for fraudulent misrepresentation is damages.

of fact was made (beware

Step 1 A false representation

promises, opinions or a mere puffery)

Step 2 The representation was

intended to (and did) induce the representee to

act ; (eg, by creating a contract)

Step 3

The representor knew the statement was

untrue, or was reckless as to its truth


Categories of Misrepresentation Negligent Misrepresentation

Representor owed a duty of care to representee Representor failed to exercise the required

standard of care Loss, which was a reasonably foreseeable

consequence of the misrepresentation, was caused by misrepresentation

Originally restricted to cases where there was a physical loss – now can claim for pure economic loss – Hedley Byrne v Heller


Negligent misrepresentation

Liability for negligence can be excluded by an exemption clause

Remedy for negligence is damages.

Did the representor owe a duty of care to the representee?

Step 1

Has the representor failed to exercise the required standard of

care?

Step 2

Were the representee’s losses caused by the

negligence and were the losses reasonably

foreseeable?

Step 3


Categories of Misrepresentation Innocent misrepresentation

Representor did not know it was false and owed no duty of care to the representee

No remedy at common law or equity


Categories of Misrepresentation Misleading & Deceptive Conduct

Section 52 Trade Practices Act No need for fraud or negligence


Misleading & Deceptive Conduct Section 52 Trade Practices Act

‘A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive’

Section 9 Fair Trading Act ‘A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive’


Misleading & Deceptive Conduct No requirement for:

Fraud; or Negligence

Will not be liable if: Not the source of the information; and Disclaims responsibility


Remedies for Misrepresentation Common Law

Recission Contract is void ab initio Not the same as termination

Damages Trade Practices Act

Recission, damages, injunctions


Duress, Undue Influence and

Unconscionable Conduct


Duress A contract entered into due to coercion or

force can be rescinded by the victim Coercion can be:

To the person; To goods; or Economic duress


Duress (cont.) Duress to the Person

Actual or threatened Violence or Unlawful imprisonment

to the person, his family or friends Duress to Goods

Threats that are made against a person’s property


Duress (cont.) Person threatening violence must show that it

was not a contributing cause to victim’s decision to enter into the contract

Violence must occur at or before the time that the victim entered into the contract


Economic duress An economic threat that is not “legitimate” No rule that that commercial parties have to

be fair to one another A threat to break a contract can be economic

duress A lawful threat may be illegitimate


Undue influence The unconscionable use by one person of

power possessed by him over another in order to induce the weaker party to enter into a contract

Presumed in special relationships and where one party is in a position of dominance or confidence


Undue influence (cont.) There must be more than mere reliance or

influence Innocent party must show that the contract

would not have been made without the undue influence

Court will look at: The equality of the bargain The weaker party’s ability to make free and

independent choices Whether the weaker party received independent

advice


Undue influence (cont.) Court will presume undue influence for

contracts between: Parent and child Trustee & beneficiary Physician & patient Solicitor and client Guardian and ward Religious advisor and devotee Any fiduciary relationship

Tasker v Algar (Outline p 8-9)


Unconscionable Conduct One party takes advantage of the other parties

special disability to the extent that the contract is unfair or unconscionable Commercial Bank of Australia Ltd. V. Amadio [1983]

HCA 14 Louth v. Diprose [1992] HCA 61

Elements Special disability Absence of any equality between the parties Disability evident to other party


Unconscionable Conduct - Remedies Originally, only rescission was available s51AA Trade Practices Act and s7 Fair Trading Act

permits damagesA corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories.

S82 Trade Practices Act & s159 Fair Trading ActA person who suffers loss or damage by conduct of another person … may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.


Provision TPA ASICA FTA

Misleading or deceptiveconduct

52 12DA 9

Predictions 51A 12BB 4

Injunctions 80 12GD 149

Damages 82 12GF 159

Other remedies 87 12GM 158

Unconscionable conduct 51AA 12CA 7

Unconscionable conduct – consumers

51AB 12CB 8

Unconscionable conduct – small business

51AC 12CC 8A & 8B

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