Consent

LECTURE 3 LECTURE 3 LECTURE 3 LECTURE 3

Meeting of the Minds Meeting of the Minds Meeting of the Minds Meeting of the Minds
Consensus ad Idem
2 22 2
Genuine Consent Genuine Consent Genuine Consent Genuine Consent
There must be a genuine agreement between the parties to a contract for the
contract to be binding and enforceable.
If one of the parties has not given genuine consent, then the contract can be declared
by the courts:
Void; or
Voidable
The distinction is important if 3
rd
parties get involved
Note: The language here is slightly misleading.
When a contract is voidable and is 'repudiated by the innocent party it does not become Void in
the sense that it never existed, rather it becomes null in the sense that it has no more legal force
into the future
3 33 3
Genuine Consent Genuine Consent Genuine Consent Genuine Consent
Consent
Mistake Misrepresentation Duress Undue
influence
Unconscionability
Fraudulent Innocent Negligent Special
relationship
No special
relationship
Against the
person
Against
goods
Economic
Common
Mutual
Unilateral Non est factum
4 44 4
Mistake Mistake Mistake Mistake
What happens when a contract is formed but it is later discovered that
one or both of the parties were mistaken about something involved in
the transaction or its very nature?
Different types of Mistakes may arise in agreeing to a contract
Common Mistake (both parties mistaken about same thing)
Unilateral Mistake (only one party mistaken)
Mutual Mistake (misunderstanding)
Non est Factum (Not My Deed)
5 55 5
Common Mistake Common Mistake Common Mistake Common Mistake
There is agreement but both parties make the same mistake as to identity or
existence of subject matter.
The mistake must go to the existence or identity of the subject matter (Pritchard
v. Merchants and Tradesmans Mutual Life Assurance Society (1858) (p349) Unknown
dead policy holder) and not accidental qualities or attributes
(see also Leaf v. International Galleries [1950] painting by famous painter called
Constable purchased. When it was discovered that the painting was not by that
famous painter, the owner wanted to sue the gallery for misrepresentation. The
court considered if the entire contract was void because of common mistake. The
Court determined it was irrelevant to the original purchase who painted it. It
was purchased because of the paintings quality rather than because of who
painted it therefore no common mistake (p 349)).
Lesson: Mistake must be in relation to something central to the contract
6 66 6
Common Mistake Common Mistake Common Mistake Common Mistake
McRae v. Commonwealth Disposals Commission (1951) (p350) Government asked
for tenders in relation to a tanker it claimed was at the bottom of the ocean on a
reef. McRae paid for the rights to find the ship. The ship was not there and
McRae sued the government. The government claimed Common Mistake in
defence the
argument was not accepted)
Lesson: If there is an implied promise
about the existence of the subject matter
of a contract and the other party acts in
reliance on that promise to their detriment,
common mistake cannot be established
Generally contracts suffering from a
Common Mistake are Void
7 77 7
Unilateral Mistake Unilateral Mistake Unilateral Mistake Unilateral Mistake
There is a lack of agreement between the parties:
A
B
C
Mistakenly makes offer to B
B knows (or ought to
know) of As mistake
Intends to make offer to C
8 88 8
Unilateral Mistake Unilateral Mistake Unilateral Mistake Unilateral Mistake
Only one of the parties is mistaken, and the other is, or ought
to be, aware of this.
Usually arises in relation to mistakes about the identity of
contracting parties or subject mater
For example twins or people with similar sounding names; or
It may also occur in relation to subject matter that is very similar (i.e. 2
cars that look the same or have similar names
9 99 9
Mutual Mistake
The parties misunderstand each other and are at cross-purposes (talking
about different things) so there is no genuine agreement between the parties
Raffles v. Wichelhaus (1864) (p352) misunderstanding of ships name for
cotton delivery to England and when the cotton ships would arrives.
Contract was void the parties never had a meeting of the minds.
The court will apply an objective test based on the reasonable person
standard to try and preserve the agreement.
If the evidence is so conflicting that it would be impossible to infer any
agreement between them, the contract will be declared void.
10 10 10 10
Non Non Non Non est est est est factum factum factum factum
Non est factum (it is not my deed as in not my contract)
Only applies to written contracts
There is a mistake as to the nature of agreement and the mistake arises
because of a misunderstanding based on a parties understanding of a
document.
The signer must show that the document signed is essentially or
fundamentally different from what they thought it was and that their failure
to read the document was not due to carelessness on their part (Petelin v
Cullen (1975) (p358) old man told to sign to confirm receipt of $50 but no
mentionof agency extension) See also Ford v Perpetual Trustees [2009]
(p359).
11 11 11 11
Language or interpretation issues are usually Non est factum issues
There are only two groups of persons who can raise the defence:
those who are unable to read owing to blindness or illiteracy and who
must rely on others for advice as to what they are signing; and
those who through no fault of their own are unable to understand the
meaning of a particular document (cannot read the language).
If there is no consent because of this issue the contract is void
Non est factum
12 12 12 12
Types of Misrepresentation Types of Misrepresentation Types of Misrepresentation Types of Misrepresentation
Misrepresentation
Fraudulent
(intentional deceit)
Innocent
(Lack of intention to
deceive)
Negligent
(Reckless and careless
statement special
relationship)
13 13 13 13
Misrepresentation Misrepresentation Misrepresentation Misrepresentation
An essential element of misrepresentation is the making of a representation by a
REPRESENTOR to a REPRESENTEE
What is a Representation?
1. A representation is a statement of fact made by one party to another, either before or
at the time of contracting; and
2. The statement of fact induces the contract.
Is it ok to make representations? Yes of course, as long as they are true
Note: conduct (as opposed to just verbal statements) may also be a representation and
could also give rise to promissory esstoppel if the belief created by a party causes loss and
the party creating that belief does not follow through with the representation
14 14 14 14
Misrepresentation Misrepresentation Misrepresentation Misrepresentation
The following representations are generally excluded under the Common
Law
Statements as to future conduct or intention;
Statements of Opinion;
Mere Puffs (extreme advertising);
Silence or non-disclosure.
Statements of Law
Note: Remedies may exist under the Australalian Consumer Law
15 15 15 15
Fraudulent Misrepresentation
There must be an intention to deceive. The court is mainly concerned with
the state of mind of the representor at the time of making the
representation.
There must be a false statement of fact that the representor knew was false
or did not believe was true, which it was known would be acted upon, and
which was in fact acted upon by the representee.
See Derry v Peek (1889) (p362)
A contract induced by fraud is actionable under statute law
(consumer protection law and criminal law) as well as the tort of
deceit.
16 16 16 16
Innocent Misrepresentation
A misstatement of a material fact, not known to be false, made by
one party to another, which induces the other to enter into a
contract.
It is distinguished from fraudulent misrepresentation by the lack of
an intention to deceive by the person making the representation
i.e. Saying something wrong without knowing it to be wrong or
intending to deceive
See Whittington v Seale-Hayne (1900) (p364) (involved chicken
farm that was not actually in a sanitary condition as was honestly
thought)
17 17 17 17
Innocent Misrepresentation
Remedies
Statute Law remedies (ACL)
The appropriate remedy depends on whether the representation is a
Condition orWarranty of the contract
If Condition You are able to sue for damages/or for a total failure to
perform the contract.
If Warranty You are able to sue for damages only/no order for
rescission in equity.
18 18 18 18
Negligent Misrepresentation
You may sue a party for an innocent but negligent
misrepresentation only when a special relationship can be shown
to exist between the parties. (see Hedley Byrne & Co Ltd v. Heller &
Partners Ltd [1964] (p 365) and Esso Petroleum Co. Ltd v. Mardon
[1976] (p365)).
Special relationship based on the principles of negligence and
the idea of a duty of care
19 19 19 19
Negligent Misrepresentation Negligent Misrepresentation Negligent Misrepresentation Negligent Misrepresentation
Guidelines in establishing Negligent Misrepresentation (similar to Negligent
Misstament but in the context of Contract Law)
A special relationship exists between parties such that the person providing
the information or advice must exercise a duty of care;
Subject matter is of a serious or business nature;
Person providing the advice realises that the recipient intends to act upon
that advice or information;
It was reasonable for recipient to rely on the advice or information; and
Damage was suffered by the recipient usually, monetary loss.
20 20 20 20
Statutory Modifications Statutory Modifications Statutory Modifications Statutory Modifications
The Australian Consumer Law (ACL) Competition and Consumer Act 2010
(Cth)(formerly the Trade Practices Act 1974)(see week 12) has impacted on the area
of Misrepresentation by targeting various types of conduct
For example, relevant sections under the ACL include:
s18 misleading or deceptive conduct;
s30 false representations in relation to land;
s31 false representations in relation to employment;
s29 misleading conduct regarding services;
s37 misleading statements about business activities.
21 21 21 21
Summary of Misrepresentation Summary of Misrepresentation Summary of Misrepresentation Summary of Misrepresentation
Type Description Remedy
Fraudulent
A false statement of fact made knowingly or
without belief in its truth, or recklessly, or
carelessly as to whether it is true or false with
the intention to induce a person to enter into a
contract and which did in fact induce the
contract, causing the innocent party to suffer
loss
The remedy is not in contract but in
the tort of Deceit. Rescission
and/or damages at the option of the
injured party. May be remedy ACL
Innocent
The maker of a statement of fact believes it to
be true there is a lack of intentional deceit.
Injured party has right to damages.
Right in equity to rescind or resist
an action for specific performance.
Negligent
The maker of the statement innocently but
carelessly makes a false statement which the
innocent party relies on and suffers loss.
Remedy in tort of negligence for
damages; contract may be
rescinded.
22 22 22 22
Duress Duress Duress Duress
Duress involves use of threats or violence against a person, their goods or
economic interest to force them to enter into a contract against their will.
Lack of voluntary agreement.
It only has to be one of the reasons for a person to enter into a contract and the
effect on the contract is that it will be voidable at the option of the injured party
(Barton v. Armstrong (1973) (p 368)).
23 23 23 23
Types of Duress Types of Duress Types of Duress Types of Duress
Duress
To the person
(Actual or threatened
violence to immediate
family)
To goods
(Threat against
goods or property)
Economic duress
(Economic pressure to
gain a benefit not in
contract
24 24 24 24
Summary of Duress Summary of Duress Summary of Duress Summary of Duress
Type Description Remedy
To the person Actual or threatened violence to
one contracting party, or their
immediate family or near relatives
(Seear v Cohen (1881) (p369)
criminal proceedings against son).
Contract voidable at option
of coerced (forced) party
To goods Threats to seize, damage or
destroy the goods of one
contracting party
Contract voidable at option
of coerced (forced) party
Economic duress Economic pressure beyond normal
acceptable commercial practice
(Universe Tankships Inc. of
Monrovia v. International Transport
Workers Federation [1983] (p370))
Contract voidable at option
of coerced (forced) party
25 25 25 25
Undue Influence Undue Influence Undue Influence Undue Influence
Involves the improper use of a position of influence or power possessed by one
person over another in order to INDUCE that other person to act for their
benefit.
Lack of GENUINE CONSENT to the agreement.
Usual remedy is Rescission.
Action must commence within a reasonable time or right to rescission may be lost
(Allcard v. Skinner (1887) (p 372)).
26 26 26 26
Types of Undue Influence Types of Undue Influence Types of Undue Influence Types of Undue Influence
Where a special relationship is presumed to exist:
The defendant stands in an unequal relationship to the plaintiff in a relationship of
influence or confidence, eg doctor and patient.
Onus of rebutting the presumption lies with the defendant
Where no special relationship exists:
Onus on the plaintiff to prove that the defendant exerted influence over them.
If undue influence is established, the contract is voidable.
27 27 27 27
Summary of Undue Influence Summary of Undue Influence Summary of Undue Influence Summary of Undue Influence
Type Description Remedy
No special relationship
exists
Improper use of a position of
influence or power, onus on Plaintiff
to prove Defendant exercised
influence
Contract voidable at
option of weaker party
Special relationship
presumed to exist
Defendant stands in unequal
relationship to Plaintiff because of
parental or confidential relationship,
onus on Defendant to prove that the
transaction was voluntary and
Plaintiff understood the contract
Contract voidable at
option of weaker party
28 28 28 28
Unconscionable (Unfair) Contracts Unconscionable (Unfair) Contracts Unconscionable (Unfair) Contracts Unconscionable (Unfair) Contracts
In their equitable jurisdiction, the courts may set aside a contract for being unconscionable
(unfair) where the defendant has abused their superior bargaining position in their dealings with
the plaintiff (Commercial Bank of Australia v. Amadio (1983) (p373)).
The plaintiff has to establish:
They were in a position of special disadvantage (Louth v. Diprose (1992) (p 374) Male
(Diprose) in love, Female manipulated him to get $60 000);
Which substantially affected their ability to protect themselves;
The defendant knew, or ought to have known, of the plaintiffs disability and not taken
advantage of it;
29 29 29 29
Unconscionable (Unfair) Contracts Unconscionable (Unfair) Contracts Unconscionable (Unfair) Contracts Unconscionable (Unfair) Contracts
Statute Law also prohibits Unconscionable Conduct:
Sections 20, 21 and 22 of the ACL prohibit a person who is acting in trade or
commerce, from engaging in conduct which is, in all the circumstances,
unconscionable:
Section 20 of the ACL provides that the meaning of unconscionable is to be
found in the common law and Amadios case.
30 30 30 30