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1、chapter 7 DEFECTS IN THE CONTRACT,A number of different defects which may affect the validity of the contract: Misrepresentation Mistake Duress and undue influence,1,合同法英文版,Effect of vitiating factors,Void contract = no legal effect (it means empty) - there never was a contract at all Voidable contr
2、act = capable of being set aside contract is binding unless and until innocent party chooses to set it aside The difference is whether a good title can be passed to a 3rd party,2,合同法英文版,Misrepresentation,Representation is a statement of fact made by one party in the course of negotiation inducing th
3、e other party to enter into a contract. misrepresentation is Consequences: May make the contract voidable,3,合同法英文版,Actionable statement is 1. a statement of fact, which 2 is a material inducement to enter the contract statement is not necessarily to be taken literally, a gesture, a nod or a wink can
4、 constitute statements of fact.,Misrepresentation,4,合同法英文版,statement of fact Gordon v Sellico (1986) Facts:The seller of property deliberately concealed dry rot i.e. his action deceived the buyer Held:This was misrepresentation,5,合同法英文版,Statement of fact (not opinion),Bisset v Wilkinson (1927) Selle
5、r sold land to the buyer, having told buyer that, if properly worked, he estimated the land could support 2,000 sheep but hed never used the land to keep sheep himself. Held : He was voicing only an honest opinion. statement of opinion, not fact not misrepresentation,6,合同法英文版,However, Statement of o
6、pinion may be treated as statements of fact if maker with knowledge of the underlying circumstances, could not reasonably have held the opinion.,Statement of fact (not opinion),7,合同法英文版,Smith v Land and House Property Corp (1884),statement of fact,8,合同法英文版,Statement of fact not intention,Statements
7、of intention may be treated as statements of fact if it can be shown that the intention never existed in the mind of the representor. Edgington v Fitzmaurice (1885) “Company prospectus wants to raise money to improve buildings”, however,9,合同法英文版,Statement of fact 2 not intention,Estimation of future
8、 performance as statement of fact if it was reasonable to be relied on by other party. Esso Petroleum v Mardon (1976),10,合同法英文版,Statements of law,Statements of law are not usually regarded as statements of fact. However, if the statements relates to existing civil law rights of misrepresentor, it is
9、 like to be treated as a statement of fact. Lawrence v Lexcourt Holdings Ltd (1978) A statement by a vendor that existing planning permission covers use of this building as an office was treated by the court as a statement of fact,11,合同法英文版,(3)Effect of silence?,As a general rule: you do not have to
10、 volunteer information; Silence is not a misrepresentation, even if the representee is clearly under a misapprehension. Smith v Hughes (1871) If there is duty of disclosure and silence or incomplete disclosure will be actionable where: (1) half truth(2) If circumstances change between making the sta
11、tement and acceptance. (3) the parties are in a fiduciary relationship.,12,合同法英文版,(1) half truth Nottingham Patent Brick and Tile Co Ltd v Butler (1886) A solicitor told the buyer of some land that he did not know of any restrictive covenants upon it. In fact he had not checked to see if there were
12、any. This was a misrepresentation. Half truth didnt know because didnt check.,13,合同法英文版,(2) If circumstances change With v OFlanagan (1936) Changed circumstances - Silence distorts a positive representation,14,合同法英文版,(3) If there is a special (“fiduciary”) relationship Certain relationships impose a
13、 duty of full and frank disclosure between parties in all their dealings. Examples: agents-principals, director-company, partners, solicitor-client. Doctor-patient, insurer-policy holder.,15,合同法英文版,Material inducement,The “innocent” party must know of the statement and rely on it, but it does not ha
14、ve to be the only reason for entering into the contract. Inducement must be “material” i.e. play major part persuading buyer into contract,16,合同法英文版,The misrepresentation is legally harmless if the plaintiff (1) did not know of its existence (2) did not allow it to affect his/her judgment ; (3) was
15、aware of untruth of the misrepresentation.,Material inducement,17,合同法英文版,(1) did not know of its existence Re Northumberland Durham District Banking Co, ex parte Bigge (1858) A contract with a shareholder was not voidable: he was unable to prove his decision of buying share was misled by false repor
16、ts. (2) did not allow it to affect his/he judgment ; Attwood v Small (1838) Seller misled mines capacity but buyer had own survey no reliance on seller,18,合同法英文版,(3) was aware of untruth of the misrepresentation. (plaintiff is entitled to take statement at face value and has no obligation to check t
17、he truth) Redgrave v Hurd (1881),19,合同法英文版,Remedies for misrepresentation,Fraudulent = guilty party knows statement is untrue or is reckless and does not care whether it is true or not Careless / negligent = guilty party believes the statement is ture but it is not a reasonable belief Wholly Innocen
18、t = guilty party believes statement is true and has reasonable grounds for belief.,20,合同法英文版,Remedies for misrepresentation,Fraudulent欺诈性错误陈述 sue in the tort of deceit and obtain damages andor rescission of contract (return to precontractual position) Careless / negligent过失性错误陈述 obtain damages andor
19、 rescission Wholly Innocent无辜的错误陈述 Rescission or obtain damages,21,合同法英文版,(1)Fraudulent misrepresentation,innocent party can “affirm” (go ahead with) or Rescission “rescind” (get out of) the contract i.e. the contract is voidable,22,合同法英文版,(2)Negligent careless misrepresentation,Damages and / or res
20、cission i.e. voidable Howard Marine and Dredging Co Ltd v Ogden and Sons Ltd,23,合同法英文版,(3) Innocent misrepresentation,an innocent misrepresentation is one which the person who makes it believes to be true and which he has reasonable grounds for believing to be true. William Sindall plc v Cambridgeshire County Council (1994),24,合同法英文版,