NEGLIGENCE
Introduction: The legal issue is to examine whether the D is LIABLE FOR NEGLIGENCE
to the P. The rule applicable in this case is the 4 steps test for negligence : DOC, breach of
DOC, causation and remoteness
1)DOC: The legal issue is whether A owed B a duty of care regarding physical/psycho……
a)Physical Injury
Rules: In order to prove that a defendant (D) owed a DOC to a plaintiff (P), the P must
show that, at the time of D's careless act or omission, it was reasonably foreseeable (RF)
that harm to persons like P could result.
Apply: When A carelessly drove 150km/hour on his motorcycle, it was RF that pedestrians
such as B could be injured, because …
Also, drivers such as A owe a recognized DOC to pedestrians such as B.
Conclusion : A owed B a DOC
b) Fail to act
Generally there is no duty to act to prevent harm to another person. Such a duty exists
only if it is RF that D's failure to act could cause harm to persons like P (i.e., the
neighbor test) and either:
1) the parties are in a relationship of reliance and dependence, or
2) D has control over the person or property causing the harm.
While it is RF that C's failure to act could cause harm to nearby pedestrians such as, there is
no relationship of reliance and dependence here..
Therefore, C did not owe a DOC to B.
c) Pure psychological injury   They were not too remote, and B can claim them against A. B's lost iphone4 was not a
The legal issue is whether A owed D a DOC regarding pure psychological injury.
In order for a D to owe a DOC regarding pure psychological injury, the P must show:
1) at the time of D's careless act, it was RF that serious mental illness to persons like P
could result, and
2) good evidence of serious mental illness.
When D carelessly decided to drive 150 km/hour on his motorcycle at noon through Phu
My Hung, it was RF that serious mental illness to close relatives of pedestrians, such as
D, could result, because
D can present good evidence of her serious mental illness. Good evidence is not limited to a
doctor's statement. Inability to work, loss of weight, or attempting suicide all are good
evidence, and the first two are present here.
Therefore, A owed D a DOC regarding pure psychological injury.
d)Pure economic loss
In order to prove that a D owed a DOC regarding pure economic loss to a P, the
following four factors from Perre v Apand must be weighed:
1) at the time of D's careless act, was it RF that persons like P could suffer pure
economic loss as a result?
When A chose to drive 150 km/hour at noon through Phu My Hung, it was RF that
So this factor tends to show that A owed the DOC.
2) Were the D's actions legitimately protecting D's business interests?
Here, A was not protecting any business interest by driving so fast
3) How vulnerable was the P?
F was very vulnerable, there wasn't anything F could do to protect her business from the
effects of A's carelessness. This tends to show that A owed the DOC.
4) Did the D know / should have known of the risk to the P?
Here, A should have known that if he drove so fast, he could destroy a business
Therefore, A owed F a duty of care regarding pure economic loss.
e) Negligent Misstatement:
In order to prove that a D owes a DOC for negligent misstatement, a P must show the
four elements of MLC v Evatt:
1) the speaker (D) realized they were being trusted to give information which they were
believed to know . . .
H must have realized that he was being trusted to give information because it was part of his
job.
2) . . . whose subject is of a business or serious nature . . .
. Real estate development is a business, and it is serious because large amounts of money
3) . . . where the speaker (D) should realize the recipient (P) intended to act on the
information . . .
H should have realized that G intended to act on the information (that the large piece of land
4) . . . and it is reasonable in the circumstances for the recipient to accept and rely upon
the advice (i.e."reasonable reliance").
Here, it was reasonable for G to accept and rely upon the advice.
Therefore, H owed G a DOC for negligent misstatement.
2) BREACH OF DOC
To prove that a D failed to meet the required SOC, a P must show that D failed to act as
a reasonable ordinarily careful person (ROCP) would have in the same circumstances.
Four factors are considered:
1) Gravity of the (pure psychological) harm - This means what is the worst that could
happen? The gravity of the harm is high/low
2) Probability of the risk - how likely was it that D's carelessness would cause someone pure
psychological harm? High probability. It tends to show that A failed to act as a ROCP.
3) Difficulty and expense of eliminating the risk of pure psychological harm - would it
have been easy and cheap for D to have acted more safely?
4) Other conflicting responsibilities - Did D have a good reason to do the risky act?
Boredom is not a good reason for driving 150 km/hour.
Therefore, A failed to act as a ROCP would have in the same circumstances, and he
failed to meet the required SOC towards D.
3) CAUSATION: The legal issue is whether B can prove that A caused all of his damages
To prove that D's conduct caused P to suffer damage, injury or loss, P must prove two
elements:
1) Actual damage, injury or loss
The $50,000 medical bills, $10,000 psychologist bills and stolen iphone4 are all actual losses
incurred by B, that is, they represent real damage suffered.
2) "But for" test
If we could go back in time and take away A's careless speeding, B would not have suffered
the medical and psychologist bills because …..
Therefore, B can prove that A caused all of his damages.
4)REMOTENESS: The legal issue is whether the types of injuries B suffered were too
remote
To show that the type of injuries he suffered were not too remote. This is proved by
showing that at the time of D's careless act, it was RF that the specific type of damages
suffered by P could result.
When A carelessly chose to drive too fast in a populated area, it was RF that pedestrians
like B would be injured as a result. Injured people need to go to hospitals for treatment
However,wouldn't think that this action could cause someone to be robbed, a criminal act, and
be unable to fight back and result in a stolen iphone4
Therefore, B's $50,000 medical bills and $10,000 lost income were RF types of injuries.
RF type of injury, and B cannot claim it against A.
4) CONTRIBUTORY NEGLIGENCE : The legal issue is whether B was contributorily
negligent.
In order to prove that a P was contributorily negligent, the D must show two elements:
1) P also did something negligent (P showed a lack of care for his own safety).
B showed a lack of care for his own safety by chasing a football into the middle of the road,B
did something negligent.
2) P's negligence contributed to P's injury
The fact that B ran into the road is one of the reasons why B got injured. B's own negligence
did contribute to B's injury.
Therefore, B was contributorily negligent and liability for B's damages will be
apportioned (split) between B and A.
5)VICARIOUS LIABILITY: The legal issue is whether Pizza Hut is vicariously liable
for A's negligence
An employer will be vicariously liable for the negligence of an employee if the careless
act occurred while the employee was acting within the scope of his employment and not
on a frolic or detour of his own.
-was the employee “on the clock”?
- was the employee at his place of work or out on an official errand related to his work?
- did the employee appear to be in the process of working for the employer (wearing the
company uniform, driving a truck with the company logo
on it, etc.)
- was that activity a part of his job?
If the above factors exist, then the employer probably is vicariously liable for its
employee’s negligence.
CONTRACT
I. CONTRACT FORMATION:Intention, Consi, Capacity,Offer.
1)INTENTION TO BE BOUND : The legal issue is whether A and B intended to be
bound in a legal relationship
Agreements that are obviously social in nature (friends and family) are not normally
intended to be contractual and so the parties do not likely have the intention to be
bound. However, they can prove through circumstances, such as economic seriousness,
that there was legal intention.
Agreements that are obviously commercial in nature usually are contractual and the
parties usually do have the intention to be bound. However, they can still prove through
circumstances that there was no intention
2)CONSIDERATION (goods, services, money, legal right)
a) Bare Promise:
The legal issue is whether Hoang gave any consideration in exchange for his dad's
promise.
For an agreement to be binding and legally enforceable, both parties must agree to give
up something that has legal value or suffer some detriment. If only one party agrees to
give up something of value, then we have a mere "bare" promise that is unsupported by
consideration - not a binding, legally enforceable contract.
The father promised a new car, which was good consideration and had legal value. Hoang,
however, promised nothing and did nothing in exchange.
Hoang provided no consideration and therefore his dad's promise was merely a "bare" promise
unsupported by consideration. NO CONTRACT
Therefore, Hoang cannot successfully sue his dad.
b)Past Consideration
The legal issue is whether Hoang provided merely "past" consideration in exchange for
his dad's promise.
Consideration may not be past. To be valid consideration, the thing having legal value
must be given at the time or after the promise it is given in exchange for is made.
Hoang's agreement (the thing having legal value) was given before the dad's promise.
Therefore, Hoang gave merely "past" consideration. Consideration is required for a valid
contract, so no contract was formed and Hoang cannot sue for breach of contract.
c)Adequate Consideration
The legal issue is whether Hoang provided valid consideration in exchange for his dad's
promise.
Consideration need not be adequate (good enough, fair, reasonable, etc,). The thing
given must have some legal value, but it can be very low in value.
By offering the tissue paper, Hoang was doing something he wasn't obligated to do - incurring
a kind of detriment.
Therefore, Hoang provided valid consideration in exchange for his dad's promise.A
contract was formed, and Hoang can sue his dad for breach of contract.
d)Sufficient Consideration:
The first legal issue is whether David provided sufficient consideration in exchange for
A's promise to give $100.
Consideration must be sufficient. This means that it must not already be owed under an
existing legal duty.
David had a pre-existing legal duty to teach a good class. He didn't give up anything above
what he was already required to do (like the).
Therefore, David provided insufficient consideration in exchange for A's promise. A's promise
was a bare promise unsupported by consideration, and is unenforceable.
3) LEGAL CAPACITY
a)Minors
The legal issue is whether Binh, a minor, had legal capacity to enter the contract with
CLA.
Contracts with minors are valid, but most contracts cannot be enforced against a minor
if the minor wishes to void them. However, some contracts are fully enforceable against
minors, including employment training contracts (if for the minor's benefit).
The contract between Binh and CLA was an employment training contract for Binh's benefit
because….
Therefore Binh did have legal capacity to enter the contract with CLA, although he was a
minor. A valid contract was formed and CLA may sue Binh for breach of that contract.
b) Intoxication:
The legal issue is whether Yen lacked legal capacity to contract due to intoxication.
Legal capacity is one of the required elements to form a valid contract. Persons who are
intoxicated have legal capacity unless they can prove: (elements)
1) They were so intoxicated that they did not know what they were doing, AND
There is no evidence to show that Yen was so intoxicated that she didn't know
2) The other party was aware of this.
There is no evidence that Oanh was aware that Yen was so intoxicated that she didn't know
what she was doing.
Therefore, Yen did not lack legal capacity due to intoxication. A valid contract was
formed between Yen and Oanh, and Yen may not avoid it based on lack of capacity.
c) Mental Illness
The legal issue is whether D lacked capacity to contract due to mental illness
Legal capacity is one of the required elements to form a valid contract. Persons who are
mentally ill have legal capacity unless they can prove:
1. They are so mentally ill that they did not know what they were doing; AND
2. The other party was aware of their mentally ill condition
4)OPTION CONTRACT: the offeree must agree to give up
something of legal value as consideration for the offeror’s promise to keep the offer open
and exclusive to the offeree
5) OFFER- ACCEPTANCE
The legal issue is whether there is a valid offer and acceptance (agreement) between A and B
A.OFFER
Supply of information is not an offer
Advertising is invitation to treat, but it can be an offer if it is unilateral offer or it says
serious offer (need evidence)
a) Offers must be clear and complete including subject matter, price, quantity
E's offer is neither clear nor complete, as "a fair wage" (price) is vague and ambiguous.
Different people will give various meanings to this phrase.
Since E's statement was not a valid offer, there can be no acceptance by F, no agreement
and thus no contract was formed.
b) An offer can only be accepted by the person to whom it is addressed
c)Offers may be revoked (withdrawn) by the offeror any time before acceptance. Also, the
offeror’s revocation must be communicated to the offeree to be effective
(state option contract rules and apply for exception if they mention) Huan (offeree) gave up
nothing of legal value in exchange for Xuan's (offeror's) promise. Xuan's promise to keep the
offer open was merely a bare promise unsupported by consideration, and is unenforceable.
There is no option contract.
Xuan was free to revoke at any time before acceptance, and he did so by sending the email.
Revocation must be communicated. Xuan's revocation was communicated and effective when
Huan read the email. (and conclusion)
TERMINATE OFFER : revokation, rejection,lapse of time, death BEFORE acceptance
LAPSE OF TIME :An offer may be terminated by lapse of time, either the time specified in
the offer, or if no time is specified, a "reasonable time."
no evidence A's offer specified that it would be open for a certain amount of time.
Therefore, it should terminate after a reasonable amount of time. What is reasonable depends
on the facts.. Perhaps 10 days or 2 weeks might have been reasonable. Therefore, A's offer
terminated before B's response, which was actually a new offer.
There was no acceptance, no agreement and no contract between A and B.
B. REJECTION:
Rejection occurs when the offeree refuses to accept. It must be communicated (other
party is aware of it)
a)Express Rejection, b) Implied rejection by conduct
c) A counteroffer is also a rejection:A counter offer terminates the original offer because
it is a rejection with a new offer. It too must be communicated
B's statement "make it $200 . . ." was a counteroffer which terminated A's offer to sell for
$250. B could not later accept that offer, which was terminated. B's statement: "OK, I agree to
pay $250" was therefore a new offer, not an acceptance.
There is no acceptance, thus no agreement and no valid contract was formed.
C. ACCEPTANCE
a) The terms of the offer must be accepted without suggesting changes (complete and
unconditional), called Mirror image rule.
If changes to the original offer are proposed, such as adding a condition, the response is
a rejection and counter offer, not an acceptance.
F did not unconditionally accept the terms of D's offer; he added a condition: "if . . ." F's
response was a rejection and counter offer.
There was no acceptance, no agreement and thus no contract
b)The offeror can require a certain method of acceptance by the offeree
Here A specified that acceptance was to performed by the act of returning Eve to A (A made a
unilateral offer, an offer in exchange for an act). C did follow A's method of acceptance, at
least literally. C presumably knew about the offer and brought Eve to A, so C has made a
valid acceptance by performing the acts specified in A's offer.
There is agreement (offer and acceptance) between A and C, thus there is a valid
contract between them
c)Acceptance must be communicated. Silence does not equal acceptance
Even though H shouted and communicated his acceptance to the neighbors and the whole city,
he didn't communicate it to the offerer G. Therefore H did not make a valid acceptance
1) Unilateral offers may be accepted by their performance.
2) Acceptance by post takes effect when the letter of acceptance is posted - In other
words, it is considered communicated at the date that the letter is sent, NOT when it is
received/read
There is no evidence that G stated that H may not use the post to accept. So if H mailed the
letter of acceptance to G, the acceptance was valid the moment the letter was posted
(assuming it was properly addressed and stamped). A contract was formed at that moment,
and G's second email would have been too late to be a valid revocation
II. CONTENT OF THE CONTRACT:
1) TERM OF MERE REPRESENTATION (sue prove term and condition): The legal
issue is whether this statement “…” was a mere representation or a term of the contract
Terms are promissory statements of fact, which are intended to be legally binding.
Representations are merely statements made during negotiations, without this intent.
Fact means the information can be independently verified by a third party.
This statement can be verified independently - someone could determine whether there was a
policy that HD students do win the trip
The next step is to consider the reasonable bystander test:
Four factors are considered:
1) What was the time period between the statement and the signing of the contract?
Here, the time period was very short
2) Was the statement included in the contract written later?
Here, the oral statement was apparently left out of the written contract. Normally, that would
tend to show the statement was a representation. But short time they didn't have time to
include the statement in the written contract. In this case, this factor tends to show either
slightly favoring representation, or else neutral.
3) Did the party making the statement have special knowledge or skill regarding the
subject matter?
The university B representative who made the statement did have special knowledge.This
tends to show that the statement was a term.
4) How important was the truth of the statement?
The Hawaii trip is worth alot of money and may have motivated Trang to choose university B.
It has a fair level of importance. This tends to show the statement was a term.
Based on the above factors, this statement was a term of the contract.
2)CONDITION OR WARRANTY: The legal issue is whether this statement “..”was a
condition or a warranty.
A condition is an essential term that is extremely fundamental and goes to the "root" of
the contract. Breach of a condition entitles the innocent party to terminate the contract
and sue for damages.
A warranty is a term which is only of secondary importance - not as fundamental to the
subject matter of the contract. Breach of a warranty only entitles the innocent party to
sue for damages, not to terminate the contract.
Courts determine whether a term is a condition or warranty by applying the "essentiality"
test: "whether it appears from the nature of the contract, that the promise is of such
importance to the promisee that he would not have entered into the contract unless he
had been assured of a strict or substantial performance of the promise."
This statement, about the Hawaii trip, does not go to the root of the contract. The Hawaii trip
was not fundamental, given the nature of this contract. Primarily Trang chose university B for
education purposes, Money damages would be an adequate remedy for Trang here.
This statement was a warranty. Trang may sue university B for damages, but may not
terminate the contract
3) EXEMPTING, EXCLUDING AND LIMITING TERMS : The legal issue is whether
LPG gave Hiep reasonable notice of the monkey exclusion clause.
(Sign)A written statement outside the contract will be incorporated into the contract as
long as reasonable notice is given. In the case of an exclusion clause located in a sign, that
sign must be:
1) prominently displayed
2) where the plaintiff did or could have seen it before or at the time the contract was
entered into.
Here, the monkey exclusion clause was prominently displayed (and actually read), but it was
presented to Hiep after the contract was entered into (contract formed when Hiep registered
at the front desk).
Therefore, reasonable notice of the monkey exclusion clause was not given. The exclusion
clause was not part of the contract and was not binding on Hiep. Hiep may sue JPG regarding
the monkey bite.
(Document) “A written….”. In the case of an exclusion clause located in a document,
that document must be:
1) contractual in appearance(people expect to find terms in that document)
2) presented to plaintiff before or at the time the contract was entered into.
Here, the shark exclusion clause was read by Hiep before entering the contract, but it was
contained in a document (marketing brochure) with a non-contractual appearance. A
reasonable person would not expect to be bound by statements in a marketing brochure.
Therefore, reasonable notice of the shark exclusion clause was not given. The exclusion clause
was not part of the contract and was not binding on Hiep. Hiep may sue JPG regarding the
shark bite.
III. PERFORMANCE AND BREACH OF CONTRACT
The legal issue is whether B is entitled to compensation for his (partial,non, substantial..)
performance, and if so, how much
1)DISCHARGE BY BREACH
a)NON-PERFORMANCE:
A party might make no effort to do anything; or
The party might have done it completely wrong.
b) PARTIAL PERFORMANCE:
In order to claim that performance has occurred, the parties must perform their
contractual obligations exactly.
Where one side has partially performed and the other side has accepted the benefit of
the partial performance, that side is bound to pay for the value of the work done. Steele
v Tardiani.
Where the other side has not accepted the benefit of the partial performance, that side is
not bound to pay anything. Sumpter v Hedges.
By performing only 50%, B partially performed. We don't have enough facts to show whether
A accepted the benefit of B's partial performance.
If A did not accept B's partial performance (for example, by destroying or abandoning the
partly-built structure), then A is not required to pay B anything.
If A did accept B's partial performance (for example, by occupying the building or by hiring
another person to finish construction), then A is required to pay B $40,000
c) SUBSTANTIAL PERFORMANCE:
In order to claim that performance has occurred, the parties must perform their
contractual obligations exactly.
Where one side comes very close to performing its obligations under the contract (close
enough to complete performance that the non-defaulting party substantially receives the
benefit they expected), this is a special type of breach called "substantial performance."
The non-defaulting party is required to pay the contract amount minus the amount
needed to get the other side's performance up to 100%.
By completing 95%, B has substantially performed. A must pay the contract price of $100,000
minus the amount required to bring performance up to 100%. The facts don't clearly indicate
what this amount is.
If we assume that it would cost $5,000 to complete the building of the karaoke bar, then A
must pay B $95,000 ($100,000 - $5,000).
D) ANTICIPATORY BREACH: The legal issue is whether A can terminate the contract
due to anticipatory breach by B
If, before performance is due, one contracting party indicates either expressly or by
conduct, that they will not perform the contract, either at all or in the manner required,
the law recognizes what is called "anticipatory breach." This means that the non-
breaching party can sue or terminate immediately, and does not have to wait until the
time required for performance by the repudiating party.
However, in order for the non-breaching party to sue or terminate immediately, it must
be very clear that the other side is completely unwilling or unable to perform - merely
having some difficulties performing is not anticipatory breach.
These facts do not show that B was completely unwilling or unable to perform, merely that he
was having some difficulties performing ("I don't know whether I can finish . . .")
Therefore, B has not anticipatorily breached, and A had no right to terminate the contract
based on anticipatory breach by B.
A is the one who has repudiated (refused to perform) the contract, and B may claim damages
against A for breach of contract
4) TERMINATE BY FRUSTRATION: The legal issue is whether contract is terminated
by F
After the parties have entered into the contract, something happens afterwards that
makes the contract impossible to perform, then the contract is terminated by frustration
For frustration to exist: (elements)
1) There must be a radical/extreme change in the parties’ abilities to perform their
obligations under the contract;
2) Neither party caused the event that made it impossible for the parties to perform their
obligations under the contract; and
3) The event that made it impossible for the parties to perform their obligations under
the contract was not contemplated in the contract itself
Examples of frustration include:
The destruction of the goods after the time the contract is entered into
A change in the law makes performance impossible
An “Act of God” occurs
Hurricane;
Earthquake;
Volcano;
IV. REMEDIES
1) The common law remedy of damages
The legal issue is whether A's contract damages meet one of the two tests of Hadley v
Baxendale (and are thus reasonably foreseeable and not too remote).
Like negligence damages, contract damages must also be reasonably foreseeable and not
too remote. However, to prove that contract damages are reasonably foreseeable and not
too remote, the plaintiff must show that they meet one of the two tests of Hadley v
Baxendale:
1) the damages flow directly and naturally from the breach (this type of loss would arise
naturally in the ordinary course of things) ("direct" loss)
Or 2) unusual or unexpected type of damages ("indirect" or "consequential" loss) - this
type of damages can only be recovered if, at the time of entering the contract, the
defendant was made aware that these might occur if he breached the contract.
If the damages can't pass one of the above two tests, they can't be recovered as contract
damages, because they are too remote and not reasonably foreseeable
-Damage for unilateral, misrepresentation : The legal issue is how much money is required
to move Nancy from the actual position she was in after the contract, to the position she would
have been in if both Nancy and the dog breeder had fully performed their obligations under
the contract.A plaintiff suing for breach of contract is entitled to enough damages
(normally money) to put them in the position they would have been in if both sides had
fully performed their contractual obligations under the contract. This way, contract
damages look forward in time, as opposed to negligence damages, which look backward
(putting the plaintiff in the position they were in before the negligence ever happened).
2) Equitable remedies
1. Specific performance – is when the court orders the breaching party to do something,
only available when the subject matter of the contract is unique, not be ordered when: (1)
damages are enough; (2) the contract is one of personal service; or (3) the order would be very
unfair to the breaching party
2. Injunction – is when the court orders the breaching party NOT to do something. Ex: You
are building that house too high in violation of local building regulations, and this court orders
you to stop building that house any higher
3. Restitution (“Quantum Meruit”) – is when the court orders the one party to pay the
other party so that the other party is not “unjustly enriched” – does not unfairly benefit at the
other party’s expense. Ex: A built 70% of P’s house.It would be unfair to allow P to keep the
house and not pay anything for A
V.AVOID A LEGAL TRANSACTION
A.GENUINELY CONSENTED
The legal issue is whether A genuinely consented to enter the contract with B,
particularly with regard to undue influence
1) DURESS:Duress exists when one party uses illegitimate pressure to force the other
party to enter the contract against their will. In other words, they obtain consent by
compulsion. The pressure can be physical, economic, or psychological pressure, but it
must be illegitimate
By threatening to spread the AIDS rumors, B used illegitimate pressure to force A into signing
the contract. B had no legal right to spread the rumors, and doing so would be considered
inappropriate by society - B would possibly be committing a civil wrong (tort) such as libel,
slander or defamation. Therefore A's consent to the contract with B was obtained by duress
and was not genuine
2)UNDUE INFLUENCE: Undue influence occurs when a party enters into a one-sided
contract only:
Consider 3 elements
- How one-sided the contract is (does the trusted party – the lawyer get all of the benefit
under the contract?)
- The client’s ability to make free and independent choices (factors include the client’s age,
knowledge and understanding of the subject matter of the contract, education level, etc.)
- Whether the client received any independent advice (was he able to get the advice from
independent 3rd parties
If B was also A's lawyer, then A and B would be in a special relationship of trust, and the
court would presume undue influence existed. B would have the burden of proof to show no
undue influence, specifically
3) UNCONSCIONABILITY (gross unfairness): The parties to a contract are usually
presumed to be equals and to have equal bargaining power
1) Where one party has superior bargaining power;2) The other party has a special
disability; and 3) The parties enter into a very unfair, one-sided, take-it-or-leave-it
contract
Special Disabilities Poverty or extreme need;Old age; Immigrant – can’t speak the
language;Physical or mental sickness;Drunkenness;Illiteracy (can’t read);Lack of education;
or Lack of assistance/explanation
4)Mistake:
A)BILATERAL/COMMON MISTAKE: Bilateral/common mistake exists when both
parties make the same mistake at formation of the contract. The mistake must exist at the time
the contract was made, and it must be extremely fundamental to the subject matter of the
contract.The mistake may refer to the identity, existence or ownership of the subject matter of
the contract.Different in character, value, or quality than what the parties thought, then it
is not a bilateral mistake. The contract is void and unenforceable by either party
Only when : a)The subject matter of the contract has been destroyed or does not exist at
the time the contract is entered into.Sale of cargo which, unknown to the parties, sunk at sea
b) Nothing to sell:A party contracts to buy property he later determines he
already owned
B)MUTUAL MISTAKE: The parties have both made mistakes on key facts of the
contract – but each party has made a different mistake. “No meeting of the minds.”
The contract is void and unenforceable by either party.Ex: D agreed to buy cotton arriving
from Bombay to be delivered on the ship Peerless. There were two ships arriving from
Bombay – one in October and one in December. P’s offer was for the December ship. D’s
acceptance was for the October ship
C)UNILATERAL MISTAKE: Only one party is mistaken about a key fact of the
contract – and the other party is aware of that mistake or should be aware. Voidable by the
party who made the unilateral mistake
5)MISREPRESENTATION: An actionable misrepresentation exists where one party
makes a false statement of material fact which is addressed to the other party and
induces them to enter into the contract
-False statement = untrue (*Note: the party making the statement does not have to
know that the statement is false when they make it.)
-Material fact = a statement of fact, not mere opinion or puffery (salesmanship) that is
about something important to the contract;
-Addressed to the other party = the false statement was actually made directly to the
other party – the other party did not just overhear the statement, etc.; and
-Inducement = the other party likely would not have entered the contract if the false
statement had not been made
-Remedy for actionable misrepresentation is rescission – the contract can be set aside
and the parties restored to their positions before the contract.
NOTE: You should consider actionable misrepresentation whenever there is a unilateral
mistake (and vice-versa)
B.ILLEGALITY
The legal issue is whether the contract between A and B is legal
1)ILLEGAL AS FORMED : The type of contract itself is forbidden by statute. Even if
there is not a statute making certain contracts illegal, common law may say that
contracts which are harmful to society are illegal Ex:A contract to murder someone would
be illegal as formed
A contract which is illegal as formed is VOID and is unenforceable by either party
2)ILLEGAL AS PERFORMED : If a statute (written law) makes certain things illegal
and parties try to enter into a contract regarding that illegal thing – or for an illegal
purpose – then the contract is illegal as to purpose/illegal as performed
A contract which is illegal as performed is VOIDABLE and is enforceable by the
innocent party (the party that did not perform the contract illegally)
3) . INCIDENTAL ILLEGALITY:If the illegality is very minor and secondary or
“incidental” to the main purpose of the contract, the court may say that it is only
“incidental illegality”, in which case the contract remains enforceable.Ex: You and I have
a contract for you to ship freight to our local port by boat. When your boat arrives, I measure
it and it is 101 meters long. I cannot refuse to pay you based on this very minor breach of the
statute
STATUTORY LAW
SUE FOR BREACH OF CONTRACT:
1)Look inside the contract
2)Outside :Incorporate, Term, Condition, Excluding…
3)Implied term: both common and statutory
A.CONSUMER SERVICES CONTRACTS:
1)The elements required for a consumer services contract are:
1)The company providing the services is supplying a service
2)Supplied in trade or commerce
3)And the service is being provided for a consumer purpose
Either: (i) “ordinarily for personal, domestic, or household use”; or
(ii) the total price of the service is “$40,000 or less”
2)IMPLIED TERM:
a) The services shall be provided with due care and skill
and
(b) If the person supplying the service is made aware that the services have been
requested for any particular purpose, that the services shall be fit for their intended
purposes
3) The guarantees under the Australian Consumer Law can not be excluded, limited,
or modified in any way except: a company may limit its liability under a consumer goods
contract to the cost of repairing or replacing the goods if the goods are not ordinarily for
personal, domestic, or household use. Limitation must be fair and reasonable
AND Providers of recreational services, particularly those involving some form of risk
(for example, water skiing, football, bungie jumping, skiing, etc) can include an
exemption clause in their contracts to exclude or restrict liability for death or personal
injury
B.CONSUMER GOODS CONTRACTS: The legal issue is whether there is a consumer
goods contract between A and B
1)The elements required for a consumer goods contract are:
1)Supplying a good :physical products.
2)In the course of its business.
3)The good is a consumer good Either: a) Ordinarily acquired for personal, domestic, or
household use (or a commercial road vehicle); OR b) the total price is $40,000 or less.c )
The good cannot be for re-supply or to be transformed in trade or commerce
2) IMPLIED TERMS (ACL: The legal issue is whether B breached the implied terms of
CGC
1) Implied condition that the goods are fit for their general purpose (merchantable–
acceptable quality) (Is the product good?)
2)Implied condition that the goods are fit for their specific (consumer) purpose
3)Implied condition that the goods will match the description
4)Implied condition that the goods match the sample
3)EXCLUSION :As with consumer services contracts, implied guarantees in consumer
goods contracts can not be excluded, limited, or modified in any way except:a company
may limit its liability under a consumer goods contract to the cost of repairing or replacing the
goods if the goods are not ordinarily for personal, domestic, or household use. Limitation
must be fair and reasonable
4)REMEDY: a)Seller fails to comply with any of these guarantees, the consumer may require
the supplier to remedy the failure within a reasonable time. If the supplier does not do so, the
consumer may sue the supplier for breach of contract and recover any damages caused by the
failure. B) “Major failure” to comply with one of the guarantees, then the consumer may
also reject and return the goods, and recover the price paid. A “major failure” is one in
which the goods would not have been acquired by a reasonable consumer who was fully
acquainted with the nature and extent of the failure
C.DEFECTIVE GOODS:
The legal issue is whether A can sue company X for defective goods.
1)Manufacture: grower, extractor,producer,processor,assembler,own branders, Importers
2)Supplies goods: physical,tangible product
3)In trade and commerce : for profit
4)The goods are DEFECTIVE : Goods are “defective” under the Australian Consumer Law
if “their safety” is not such as persons generally are entitled to expect.
-Unsafe: cause personal injury or damage of property
Ex: A reasonable, average person in the community does not expect a marker to blow his
hand off, so the marker was defective by the objective community standard
To decide whether the safety of a good is what persons generally are entitled to expect,
we must consider all of the relevant circumstances
a)Marketing: Commu Expect: good must match the ad
b)Packaging: CExpect: packing safe and not dangerous
c)Instructions and warnings: CExpect to have instruction about product like medicine,
restricted usage
d)Reasonable expected use:Did people use product right
e)Time of supply : Meet Commu reasonably Expect of safety at the time it was supply?
Because expectation change all the time
5)Causation:
a) But for test:……
b) RF of type of injury: Loss from individual injuries, Loss to the injured person’s
dependants (children or spouse)because of the injuries, Loss from destruction or damage of
personal, domestic or household goods, Loss from destruction or damage of private land,
buildings for fixtures
6)Remoteness: (like the rules in Common law)
7) Defense:
If a plaintiff proves that the above elements of a defective goods claim exist, then unless
the manufacturer can prove to the court that one of the following four defenses applies,
the manufacturer is liable for the plaintiff’s injuries
1. The defect didn’t exist at time of supply by the manufacturer
2. The only reason for defect was compliance with mandatory government standards
3. The “state of the art” defense
4. The defect is attributable to the design, markings or instructions added by others
after the goods were manufactured
8)Contributory Negligence : under ACL like common law
9)Excluding:
A manufacturer cannot exclude, modify, or limit its liability for defective goods under
the Australian Consumer Law:
- It doesn’t matter if the contract signed by the plaintiff says that the Australian
Consumer Law does not apply – it always applies
- The manufacturer cannot limit it’s liability in any way – i.e. “The plaintiff agrees that
the manufacturer’s maximum liability for any damage, injury or loss to plaintiff will be
$10,000” – this does not work – the plaintiff can still sue for all damages allowed by the
Australian Consumer Law
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