You are on page 1of 29

Exam Preparation Business Law exam is an open-book exam. How do you prepare for an open-book exam?

Prepare a set of detailed revision notes which include materials from lectures, tutorials and textbooks These notes should include: each topic of the law studied in the subject definitions of key concepts brief outline of the key principles/rules of law relevant cases (include key facts, decision and reasoning) past exam questions on each topic possible answers to these questions prepared by you under exam conditions flowcharts

make sure your notes and text are easily accessible: * colour-code * tab each topic * use headings, sub-headings * index clearly

During the exam: read the questions carefully; make sure you understand what the questions are requiring you to do; check all marks allotted to each question and allocate your time accordingly; attempt to identify the issues in the questions; if you run out of time on a question, map out a plan of the answer.

Example of Flow Chart Agreement Does an agreement exist between the parties? Is this an invitation To treat? (announces availability for sale to public at large) Is this an offer? How was the offer made? By instantaneous communication Was an offer made in response? Was offer communicated? Was the offer accepted? Yes Agreement No No agreement Same form as offer or as stipulated or in equally advantageous manner In writing invoking Postal Rule* How was acceptance to occur? Was a counter offer made? Was it a mere request for information? In writing

When does acceptance occur? General Rule On receipt of acceptance by offerer unless Notice of Revocation received before acceptance Postal Rule At day, date and time of posting of acceptance unless Notice of Revocation received before posting

* Note that the Postal Rule only applies to acceptance. Offer, revocation of offer or rejection of offer all must be communicated. You should now add any relevant cases in support of agreement.

An example of how your notes could look after summarising a topic ready for exams. page 5 ELEMENTS OF CONTRACT -- INTENTION (from Parker & Box) (After noting definitions of PRESUMPTION; REBUTTAL; DOMESTIC; COMMERCIAL) [Aim: To take the cases as set out (in any textbook) and reclassify them so that your notes make a series of statements or law that you can apply / copy in an exam situation with the case names noted after each proposition of law. (In the exam it is rare that you will need to state the facts of the case.) However, you may wish to put a short reminder note in brackets to jog your own memory and understanding of the rule - as is done in square brackets below.] A. DOMESTIC / SOCIAL AGREEMENTS:

PRESUMPTION: THAT THE PARTIES DID NOT INTEND TO CREATE A LEGALLY ENFORCEABLE AGREEMENT - Domestic assumption applies in these circumstances: 1. HUSBAND and WIFE -a) If living together in harmony at the time agreement made = Social presumption applied (Balfour v Balfour) [holiday - money agreement - later separated] (Cohen v Cohen) [dress allowance] BUT 2. 3. b) If separated at time agreement made = Social presumption rebutted [particularly maintenance agreements] (Merritt v Merritt) FAMILY ARRANGEMENTS -- [even in the use of family assets left under administration under a will] (Murphy v Simpson) = Social presumption applied CLUBS; SOCIETIES; [prises awarded] = Social resumption applied C/f. (means contrary result) (Clarke v Dunraven) [Club Rules may be contractual]. (Coward v

4. FRIENDS (agreements between) = Social presumption applies Motor Insurers Bureau) [lift to work and sharing expenses].

page 6 PRESUMPTION IS REBUTTED (In this context rebutted means that the usual presumption no longer applies and the alternative presumption applies) - A Domestic/Social presumption will usually be rebutted if the consequences of breaking the agreement create a hardship for one of the parties. A DOMESTIC/SOCIAL (i) FAMILY

1. HUSBAND/WIFE agreements where separated at time of agreement (particularly maintenance agreements) (Mc Gregor v Mc Gregor) [wife compromised her rights] (Merritt v Merritt) [transfer of property]; - Property arrangements (Popiw v Popiw) 2. FAMILY SITUATIONS where one member has agreed, on request of another, to give up their established situation (i.e. jobs, house) and move (country to country) to look after a relative in return for property or inheritance. Then the arrangement breaks down after the move and promises not kept. (Wakeling v Ripley; Riches v Hogben; Todd v Nicol) also (Parker v Clarke) [geriatric care arrangement]. (ii) FRIENDS 3. Joint agreements to enter competitions, eg. TATS, footy pools - where one party purchases / applies for / enters - and all contribute financially - in some way (Simpkins v Pays) B COMMERCIAL ARRANGEMENTS

PRESUMPTION IS THAT THE AGREEMENT IS TO BE LEGALLY BINDING ON BOTH PARTIES i.e. THAT A CONTRACT IS INTENDED A) Commercial Presumption applied: 1. Advertisements offering a reward for failure of a product may not be just mere advertising puff but could be a legally binding contract - i.e. intention implied (Carlill v Carbolic Smoke Ball Co). 2. Offers made in jest or joke may be found to have no intention to be bound - if offer is commercially ridiculous (Keller v Holderman) [sell watch for little money]; c/f (however) a court could hold otherwise (Nyulasy v Rowan) [share offer at ridiculous price] - Held -Commercial nature, hence presumption (of intention) applies.

B)

Commercial Presumption - REBUTTED 1. Agreements where no intention to be legally bound is stated in rules (Jones v Vernon Pools) [soccer pools case]. 2. Honour Clauses = clause in agreement contains a clause no intention to have legal consequences (Rose and Frank v Crompton)

Note: It is against Public Policy (i.e. the law) to oust the jurisdiction of the court (an agreement cannot claim to be a contract and refuse the court the right of adjudication upon its terms - a court always has that right). 3. Government or Administrative offers / schemes for assistance / subsidies are not necessarily contracts unless an Act of Parliament eg (The Administration of the Territory of Papua and New Guiney v Leahy) [tick

eradication scheme] (Australian Woollen Mills v Commonwealth) = wool subsidy. 4. Ex Gratia Payments [voluntary payment, not in return for work done]. May be enforceable if the promisee (person to whom monetary promise made) gave up a right or something of value in return (Edwards v Skyways) [premature retirements]. The following are the notes on INTENTION (above) written out with an index. This is how your indexed notes could look ready to take into the exam room. (Imagine that the following is the index to your set of notes - But note also that the following is just the headings from the notes. The explanations and case references should be written out in full at the pages indicated in the margin.) _______________________________________________________________ PAGE INTENTION 5 A DOMESTIC / SOCIAL AGREEMENTS : PRESUMPTION : THAT THE PARTIES DID NOT INTEND TO CREATE A LEGALLY ENFORCEABLE AGREEMENT 1. HUSBAND and WIFE -a) If living together in harmony BUT b) If separated at time agreement = rebutted = intended to contract 2. 3. 4. 6 FAMILY ARRANGEMENTS CLUBS; SOCIETIES FRIENDS

PRESUMPTION IS REBUTTED A DOMESTIC/SOCIAL (i) FAMILY 1. HUSBAND/WIFE - Property arrangements (Popiw v Popiw) 2. FAMILY SITUATIONS (ii) FRIENDS 3. Joint agreements to enter competitions B COMMERCIAL ARRANGEMENTS

PRESUMPTION IS THAT CONTRACT IS INTENDED in the following situations:1. 2. Advertisements Offers made in jest or joke c/f (however) a court could hold otherwise (Nyulasy v Rowan) 3. Agreements where no intention to be legally bound is stated 4. Honour Clauses

The Paper The paper comprises 6 questions. All are compulsory. Questions Questions 1 - 5 are typical problem questions, similar in complexity and length to questions to be found in past examination papers. You should look at old exam papers to see what kind of questions have been asked in the past. Question 6 is the traditional short answer question Questions may be taken from all areas of the syllabus other than the above topics. FAQs Problem Based These include Formation of Contract, including offer, acceptance, revocation, counter-offer, postal rule of acceptance, and so on); Conditional Acceptance (preliminary agreements, requiring analysis of the case of Masters v Cameron); Intention (to create legal relations); Consideration (often, but not always, in the context of discharge of a contractual obligation); Exclusion clauses; Capacity to contract; Terms v Misrepresentations (as in Oscar Chess Ltd v Williams and related cases) Mistake; Misrepresentation; Discharge of contract, especially discharge by frustration; Remedies for Breach of Contract, especially damages. Examiners Exclusion Clause The above list of FAQs is a guide only.

It is not necessarily an exhaustive list of the possibilities.

It is important to apply the following format when answering a problem question:


(a)

decide what the issues are (that is, the matters over which there is or may be some dispute); decide what rules of law are applicable to those issues; cite the authority for the rule (that is, a case or statute); apply the rule to the facts; come to a conclusion; state the remedy.

(b)

(c)

(d)

(e)

(f)

A sample exam question:

On 15 September, Arthur offers to sell his antique desk to Harry for $5,000. Harry subsequently inspects the desk and says to Arthur 'The desk is in excellent condition and I'd like to have it. There's no doubt that I could afford to buy this desk if I could pay for it in three installments. Nothing further is said concerning the desk. On 18 September, Harry sends a letter to Arthur in which he accepts Arthur's original offer. On 19 September, Harry learns that Arthur has sold the desk to Richard for $6,000 On 20 September Arthur receives Harry's letter of acceptance. Advise Harry whether he has an action against Arthur for breach of contract. Give detailed reasons for your answer.

10

To get a clear picture of related events, it is useful to draw a diagram: A 1. A offer 2. H A H will buy if can pay in instalments 18 September H accepts offer H

3.

4.

19 September H learns A sold desk to R

5. 20 September A receives

11

Hs acceptance

Next step: isolate areas of dispute which may occur these are the issues an issue is a fact of a situation that could have more than one legal interpretation. That is, more than one law could apply to it. The statement: Id like to have it (one fact) could be interpreted in more than one way legally. It could be: * an acceptance of the offer * a request for more information * a counter offer

12

A questioning attitude is important

The issues are indicated by elliptical circles in the following diagram: Areas of possible dispute A 1. A offer H A H will buy if can pay in instalments 18 September - H accepts offer 19 September H learns A sold desk to R H

2. Counter offer? Request for more Information? 3.

4. Revocation of Offer

13

5. 20 September A receives Hs acceptance

which occurred first acceptance or revocation?


Plan of Answer

A offered H desk ($5000) Hs reply Counter offer? (Hyde v Wrench) Request for more information? (Stevenson, Jaques v McLean)

H rejected As offer open (H intended to add new terms) therefore no contract/no breach

As offer still, could be accepted

Acceptance occurred when? Postal rule apply? Yes acceptance before revocation No acceptance after revocation

14

contract exists/ breach

no contract/ therefore no breach

Answer An offer has clearly been made by Arthur to sell his antique desk to Harry for $5000. The first question is whether Harrys reply was a counter offer or a request for further information. If it was a counter offer then, as was held in Hyde v Wrench, it amounted to a rejection of Arthurs offer. Arthurs offer would therefore have terminated, and hence could not be accepted, and there would have been no contract. If it was a request for further information, as in Stevenson, Jacques v McLean, the offer was still open and could have been accepted. To be an offer (whether an original offer or a counter offer), a statement must contain a promise or promises and not just a fact or information, as was indicated in Harvey v Facey. So the question becomes did Harry intend his statement to be a promise to buy the desk on condition that he could pay for it in three instalments? If he did, then it was a counter offer and he could not sue for breach of contract. Alternatively, Harry could just have been commenting on his own ability to pay thereby seeking further information from Arthur about what method of payment would be acceptable to him. In my opinion, Harrys statement contained no promises. He did not promise to buy it on condition he could pay by instalments. He merely stated a fact about his financial circumstances and the method of payment he could manage. He was talking around the offer, perhaps seeking a response from Arthur, before deciding how to respond to Arthurs offer. Therefore Harry made no counter offer and Arthurs offer remained open. It is now necessary to determine if and when Harry accepted the offer. If the Postal Rule applied then acceptance occurred on the 18th (that is at the time of posting Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd). There is probably not sufficient evidence to decide the issue absolutely. It is not disclosed how Arthurs offer was made. Whether the Postal Rule applies depends on whether the offeror has contemplated and expressly or impliedly approved the post as a mode of acceptance. If the offer was made verbally, then probably the Postal Rule did not apply. Therefore acceptance did not occur until the 20th, when Arthur received the letter. If the offer was made by post then acceptance would probably have occurred on the 18th (that is when Harry posted the letter). If the latter applies then Harry has an action for breach of contract. If the former applies then the result depends on whether Arthur revoked his offer prior to the 20th. By selling the desk to Richard, Arthur clearly intended to revoke his offer. However, as decided in Byrne v Van Tienhoven, the revocation must be communicated to the offeree. However the revocation does not have to be communicated by the offeror in person. It may be made by any other person provided it is reasonable in the circumstances for the offeree to rely upon that other person. In Dickinson v Dodds

15

the court decided that revocation is effective if it is communicated to the offeree by a reasonably reliable source. It seems clear that this has happened in this case, and hence, Harry cannot accept Arthurs offer because it no longer exists. In my opinion Harry has little chance of success because either: a) there was a counter offer, or b) the Postal Rule does not apply and revocation occurred prior to acceptance.
Introductory Sentences

Issue This question raises two issues, firstly .............. and secondly, .................. The issues' raised in this question are .......,..,.....,......... There are two issues raised in this question. They are ......... Two issues are evident in this question. They are .,............ Two issues need to be addressed in this question. They are .............. Two issues require discussion in this question. They are ................. Law The law in this area states that ..,..............., In this area the law states that ....,.....,.,..... The law states that .................. The law requires that ................, The law stipulates that ................... The law says that ..................... We can say that the relevant law is ................... Cases It was held in the case of ............ v ............. that .................... The case of ...........,, v .................. demonstrates this area of law, The law is demonstrated in the case of .......... v .,.,.,.,.., In the case of ............. v ............... the law is upheld. The law is refuted in the case of ,.......,.,.. v The case of ..........,.,v ................demonstrates, illustrates, clarified, highlights, shows, explains, manifests, exhibits, exemplifies .............. This (the law) has occurred in cases such as ...,.. v .. and ....... where .,.............,...,.. Apply If we apply the law to the present problem we see that ......... In applying the law to the present problem we see that ......... When applying the law to this problem it can be seen that ...... Applying these principles of law to the subject question we can see that ................ It is necessary now to apply the law to the present problem fact situation. In this instance ................... I t c o u l d b e a g u e d t h a t . . H o w e v e r , i t is not an acceptable argument because Conclusion v......

16

My advice to .............. is that he could succeed in his action against ............. In conclusion, ............. can take action against .......... Our conclusion in the present case, therefore, is that ......... To conclude, ........... can sue ........... for .......,....... Consequences Consequently, ........... can claim that he is entitled to .......... hence he will .......,...,....,. The consequences would be that ............. would get .... ............ , hence .....,............

BLO1105 Question 6.

Business Law

6.1 Explain briefly the distinction between a warranty in a contract and a condition in a contract. Why is this distinction important? (2 Marks) 6.2 Summarise briefly the presumptions applied by courts in deciding whether or not parties to an agreement intend legal obligations to flow from their arrangement. (2 marks)

6.3

Define briefly a "condition precedent" and a "condition subsequent". Explain when they operate by giving an example of each. (2 Marks)

6.4

Although damages are the typical remedy for breach of contract under the common law, equity has developed two significant remedies which can apply in breach of contract cases. Explain the two equitable remedies. (2 Marks)

17

6.5 A person under the legal age of majority is said to be a minor. In what circumstances (if any) may a minor enter into a valid and legally enforceable contract? (2 Marks) (5x2 Marks = 10 Marks)

Short Answer Questions There will be five short answer questions worth two marks each. These questions are straightforward and are an easy way to pick up marks. They usually require you to give definitions or explanations of legal principles or concepts. Example of a 2 mark Question -

What is the difference between `void' contracts and `voidable' contracts? Give an example of each.
Void contracts are a nullity. They have never existed and never had any legal effect. For example, if a mistake is proven to have occurred, then the court will declare that the contract was void for mistake, that is, the contract never existed at all. Voidable contracts are formed through the wrongdoing of one of the parties. Voidable contracts are perfectly valid contracts and are effective until the wronged party takes action to avoid the contract

18

by exercising their right to rescind the contract. If one party to a contract misrepresents an important detail, then the innocent party can avoid or rescind the contract. The contract then cannot be enforced by the guilty party, making it voidable.

Examples of a bare pass and a substantive answer for a 5 mark question.


Facts:

Florence is a trained nurse, working and living in New York. She is employed there on most favourable terms because of her specialised knowledge and she also owns her own apartment in Manhattan. She receives a letter from her parents, pleading with her to return to Melbourne as they are both ill, asking her to return and care for them in their old age. They assure her that they will leave to her in their respective wills, their beach house at Portsea in appreciation of her services. She sells her Manhattan property, relinquishes her job and returns to Melbourne to look after them. After their deaths five years later, she discovers that the Portsea house has been left in her parents will to the Lost Dogs Home, their favourite charity. Can

19

she claim the Portsea house from their Estates?

This question is worth 5 marks. This would justify a 15 minute answer.

The question could be answered to a bare pass standard in the following way:Florence can sue the estates in contract if she can prove all of the elements of a contract. They are offer, acceptance, intention and consideration. They all appear to exist, the only suspect one being intention. The facts are remarkably similar to the case of Todd v Nichol, where the Court decided that although there was a domestic relationship between the parties, there was intention to create a legal obligation, and therefore, there was a binding contract between the parties. By using that case as a precedent, Florence would succeed if she sued the estates.

20

A plan for the answer, using a 4 step procedure, would be as follows:Issue/ - Intention Law and cases - Intention is component of every legal contract - Proof of intention? - Presumptions - commercial Edwards v Skyways - rebuttal - Roe & Frank v Crompton - domestic - Balfour v Balfour - rebuttal - Merritt v Merritt Application - Elements of both social and commercial (Todd v Nichol) Conclusion and Consequences - She probably wins and can successfully sue the estates for the house. A plan of this nature can be prepared in 5 minutes, leaving 10 minutes to write the answer. A planned answer is much quicker to write than an unplanned one, follows a more logical sequence, and covers all the relevant points. Realistically, the answer would have to be limited to about a page, given the time restrictions. An answer which would attract 5 marks would be as follows:The issue raised by this question is whether or not the parties intended to be legally bound by their agreement. The law of contract requires that, in order for a binding contract to exist, there must be such intention, together with offer, acceptance and consideration. The existence of intention is tested by using two established presumptions. First, if the agreement is commercial in nature, there is a presumption that they intended to be legally bound. (Edwards v Skyways Ltd.) This presumption can be rebutted by clear evidence of an opposite intention. (Rose & Frank v Crompton) Conversely, with social or domestic agreements, the presumption is that no intention to be legally bound attaches to the arrangement (Balfour v Balfour). Again, this presumption can be rebutted by clear contrary evidence (Merritt v Merritt). By applying the law to the facts, we see that the agreement has both commercial and domestic elements, so that the presumptions do not really provide us with an answer. However, this dilemma arose in the case of Todd v Nichol, when the court decided in similar facts, that, despite the fact that the parties were related, thus suggesting a domestic or social agreement, the fact that they relinquished property interests and jobs in Scotland was evidence that they intended to be legally bound. The conclusion, therefore, is that, by relying on

21

Todd v Nichol, Florence can prove all the elements of a contract and can sue the estates of her parents to enforce those rights as against the Lost Dogs Home. Such an action would have excellent prospects of success. If the same problem arose as the sole issue in a question worth 10 marks instead of 5, a more detailed answer would be justified. This could be achieved in the planning stage by going into detail about the cases referred to in the answer.
BAO/BL01105 BUSINESS LAW SEMESTER 1, 1994

---------------------------------------------------------------------------------------------------------QUESTION 3 Tina is a champion badminton player, and is to compete in the forthcoming world badminton championships representing Australia. She decides to update all of her badminton equipment, including her racquets. She purchases four new badminton racquets without strings, and takes them to an expert in badminton racquets in Melbourne to have the racquets strung at the correct ' tension. When she enters the expert's shop, she does not notice a sign which is placed on the wall behind the counter which says, in medium-sized print: . Whilst all possible care is taken with stringing and restringing work entrusted to us we cannot accept responsibility for any defective work or defective products used by us, and we will not be liable for any loss or losses to customers, even if demonstrably caused by negligent workmanship on our part. Tina could not have read the notice, even if she had seen it, since she wears contact lenses which she did not have with her at the time. She left her racquet for restringing and was given a docket she placed in her purse, assuming that it identified her racquets so that she could collect the right racquets on her return. The same words which appeared on the notice behind the counter were also printed on the docked in very fine, but legible, print on the bottom of the docket. A few days later, Tina collected her racquets which appeared to be correctly strung, paid the costs of restringing, packed the racquets with her other gear and left for the world championships overseas. Whilst competing in the first round of competition, the strings in Tinas racquet broke. She selected two replacement racquets in turn and the strings also broke. She was eliminated form the first round of the championships. Valuable endorsements totalling $20,000 which Tina would have received if she had played in the finals were thus lost and all observers agreed that Tinas poor performance was directly attributable to her faulty racquets, which had been strung with defective material. Subsequent testing of the strings showed that

22

they were suitable for squash racquets, but not for badminton racquets, and they should never have been used by the person stringing the racquets for Tina. Tina seeks your advice. Can she successfully sue the racquet stringer for the $20,000 which she has clearly lost as a result of his faulty work? Advise Tina. (10 marks) (30 minutes)

Exclusion Clauses Issue Can Tina successfully sue the racquet restringer for damages, or can he rely upon the exclusion clause displayed on the premises and printed on the docket to defeat Tina's claim? Law & Cases Courts adopt a hostile attitude to exclusion clauses and, where possible, interpret them 'contra proferentum', but they nevertheless acknowledge that parties are free to enter into contracts upon whatever terms they choose. It follows that, if a person enters knowingly into a contract which contains an exclusion clause which potentially defeats that person's contractual rights on breach of the contract, then he must suffer the consequences of his action. The key word in this summary is 'knowingly', since the question of knowledge will be tested objectively by reference to a 'reasonable person'. The question thus becomes 'should he have known of the clause?', not 'did he actually know of the" clause?' This highlights the distinction between actual and constructive knowledge. The law relating to exclusion clauses is well defined, but is governed by the question of whether we are considering a case of a signed contract or a case where nothing has been signed by the victim. In the latter case, the offending clause is usually printed on a ticket or docket handed to the victim, and/or displayed upon the business premises. Dealing first with tickets or dockets, the court will apply two tests. These are the 'nature of the document' test, and the 'reasonable notice' test. The nature of the document test means that the court will look at the piece of paper upon which the exclusion clause is printed and ask whether, objectively tested, it is a contractual document? Is it a piece of paper upon which a reasonable person would expect to find contractual terms, or does it have some other .-function, such as a receipt (Chapleton v Barry Urban District Council.) or proof of ownership (Causer v Brown). If it does have some other function, it is not a contractual document, and cannot be relied upon. If it is a contractual document, then ( and only then) the court will ask whether reasonable steps have been taken to bring the existence of the clause to the notice of the customer. ( Parker v South Eastern Railway Co; Thornton v Shoe Lane Parking; Thompson v London, Midland & Scottish Railway Co.). If the clause is displayed on the premises, it will be effective if prominently displayed (Balmain New Ferry Co v Robertson), even if the actual customer has not seen it, or could not read it if he had seen it (Thompson v LM&S Railway Co.). In either case (ticket or notice), the clause must be accessible to the customer at or prior to the time of entering into the contract, not introduced afterwards, since one party to a contract cannot unilaterally introduce new terms (especially exclusion clauses) after the contract is made. (Olley v Marlborough Court Ltd). Application.

23

Tina could successfully argue that the docket she was given would be regarded by a reasonable person only as proof of ownership of the racquets, as occurred in Causer v Brown. She would not therefore be bound by the clause printed on the docket. However, she will be bound by the clause displayed on the shop premises, provided it is prominently displayed (Balmain New Ferry Co v Robertson), despite the fact that she has not noticed it and could not have read it even if she had. Conclusion The business proprietor will be able to rely upon the exclusion clause, as displayed on his premises, to defeat Tina's claim. Tina's victory on the ticket aspect of the case is therefore academic. Consequences It would be pointless for Tina to sue.
Another question and the methodology to answer.

Ben decides to sell his car. He has owned it for 3 years, having bought it second-hand from a care dealer. When he bought the car, Ben was told that it had only one previous owner, who had carefully maintained the vehicle and always had it regularly services by the same dealer from whom Ben had bought it. It had never been in an accident. And the mileage shown on the odometer was genuine, Ben was assured. Ben knew that. some of the statements made to him by the dealer from whom he bought the car were wrong, since his own mechanic had told him the car had been in a serious accident and had travelled many more kilometres than the odometer indicated.. Nevertheless, Ben thought that - since he had been deceived by the dealer from whom he bought it - it was reasonable for him to also deceive anyone who bought the car from Ben, and he advertised it as in excellent condition, accident free and so on. When Jane came to inspect -the car in response to Ben's advertisement, Ben repeated that the car had no accident history, and the odometer reading was genuine. Jane buys the car from Ben at the price requested by Ben. After owning the car for only a short time, Jane discovers that some of the statements made to her by Ben were

24

untrue, and she consults you for advice as to her legal rights. Assume that it can be proven that the car as described - by Ben and bought by Jane for $24,000 is worth that price, but that its true value (given the accident history and increased mileage) is $17,000. Advise Jane -. What action (if any) can she now take against Ben?

Isolate areas of dispute which may occur these are the issues an issue is a fact of a situation that could have more than one legal interpretation. That is, more than one law could apply to it the statements made by Ben to Jane. could be interpreted in more than one way legally. They could: be a term of a contract or a mere representation be a misrepresentation

25

A questioning attitude is important

Step 2 Are the statements a term of the contract? If they are a term of the contract are they a condition or a warranty? - a condition is a major term of the contract that is the substance of the contract. - A breach of a condition entitles the injured party to rescind the contract and sue for damages. - A breach of a warranty, a minor term of the contract, entitles the injured party to an award of damages only. Rescission is not available. - Rescission is restoring the parties to their original precontractual position. -However, there are a number of factors that can make claiming rescission impossible.

26

Apply discussion of law to facts Come to a conclusion

Step 3 Are statements a misrepresentation? Are they an innocent or fraudulent misrepresentation? - an innocent misrepresentation is a false representation, made by a person who, at the time of making it, believed it to be true remedy is rescission of contract -a fraudulent misrepresentation is a representation made by a person who, when they were making it, had no honest belief in its truth. - elements required to establish fraudulent misrepresentation statement must be fact statement must be false

27

person who makes statement must have no belief in the truth of the statement the statement must be intended to persuade the other party to enter the contract and have that effect remedy is rescission and damages Apply discussion of law to facts Come to a conclusion

Step 4 Of major consideration is what the parties want? If Jane wants to hand car back and get damages, then she may argue fraudulent misrepresentation or a breach of a condition of a term of the contract and claim rescission and damages. If she wants to keep the car, she may claim damages for losses suffered as a result of
28

the overpayment. Thus, she may argue that the false statements were a breach of a warranty of a term of the contract.

29

You might also like