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Damages

As soon as someone breaches, the innocent party has right to damages

Put party in position they would have been if the contract had been completed (Robinson v Harman (1848))

Plaintiff is not entitled to be placed in a superior position to what they would have been in, if the contract had been performed (Albert v Armstrong Rubber)

Whether an action is brought in tort or contracts, the damage will be assessed in the most favourable test (Parsons v Utley Ingham)

Nominal Damages

Damage a party gets because the law recognizes someone has been wrong – it's pidly – if no loss is proved as in Luna Park v Tramways (1938).

Party can claim as soon as there's a breach – but because of small amount, one doesn't go to court for this

Substantial Damages

Need to prove that there's been a loss due to the breach

Issues are:

How do you draw a boundary around what the loss is?

Does the loss fall within the boundary?

How do you value what the loss is?

Causation

There has to be some sort of connection between the breach and the loss

The "but for" test is a useful guide, but is not used today. Today we use common sense. The cases have broadened the concept so that, in both tort and contract, it is generally sufficient that the breach was a cause of the loss.

The question asked is if the defendants breach was connected with the plaintiff's loss that "as a matter of ordinary common sense and experience it should be regarded as a cause of it" (March v E & M H Stramare Pty Ltd)

Causation is a question of fact

If there are concurrent causes, it is sufficient that only one of these is the cause of the breach (Simonius Vischer & Co v Holt (1979))

Remoteness

It's about drawing a line (can't lose a kingdom over a lost horse nail)

In remoteness of damage there is a difference between contract and tort.

In the case of breach of contract, the court has to consider whether the consequences were of such a kind that a reasonable man, at the time of making the contract would contemplate them as being a very substantial degree of probability. In tort the court has to consider whether consequences were of such a kind that a reasonable man, at the time the tort was committed would forsee them as being of a much lower degree of probability.

There are components to remoteness: 1) Knowledge and 2) probability

Knowledge – there are two types of knowledge – 1) common knowledge that everyone is presumed to have; 2) knowledge of special circumstances. (Koufas v Czarnikow (1969))

Probability: Lord Reid "loss needs to be not unlikely". Lord Morris "likely + liable", "Liable", ""real danger or serious possibillity" – in Australia we haven't stated a preference for them. (Koufas v Czarnikow (1969))

· Whichever test it can be less than 50$ - this standard is higher than in tort "not far-fetched or fanciful"

· It was not unlikely that they would onsell the sugar, so relevant degree of probability was there (Koufas v Czarnikow (1969))

Assessment of Damages:

This is working out the most appropriate way to address a loss that is not too remote.

Three types: Expectation, reliance and restitution

Plaintiff doesn't get to choose between expectation and reliance – it's up to the court to decide (Commonwealth v Amann (1991))

Onus of Proof is on the Plaintiff to prove the damage sustained

If the Plaintiff's expenditure would not have been fully recouped had the contract been performed, then full compensation will not be awarded (Commonwealth v Amann (1991))

In a sale of land or goods where the buyer terminates for actual breach, the measure of damages is the amount in which the market price exceeds the contract price on the date fixed for performance (Sale of Goods Acts 1923)

If a plaintiff process that a defendant has, by acting unreasonably increase its loss, the amount of loss attributable to the unreasonable conduct will not be recoverable. Common example is where a plaintiff refuses to accept a reasonable offer of a replacement contract from the defendant (Brace v Calder (1895))

A plaintiff must give credit for benefits obtained by reason of the defendant's breach. These may be deducted from the Plaintiff's award of damages. (British Westinghouse Electric v Electric Railways Co (1912))

Damages are not generally awarded on a reinstatement bases – the plaintiff is not generally entitled to recover repair costs and so on incurred to make whatever was supplied under the contract conform to the contract requirements – however, building contracts and similar contracts for services are an exception – and reinstatement costs may be done (Bellgrove v Eldridge) – it doesn't matter it the plaintiff doesn't intend to build another house – and in essence then has two.

When a person wants to use an express term to terminate, rather than rely on the common law – need to be careful. The person has to prove 1) the breach was serious enough to allow termination at common law, then 2) if can't prove serious breach – can only get benefit of past lost, not future loss (Shevill v Builders)

A plaintiff may recover damages for contracts where there is an implied or express term provide enjoyment or entertainment – damages may be awarded for non-pecuniary loss in the form of disappointment (Jarvis v Swann Tours (1973) – promised a ski-ing tour and received bumpkins)

HC principle – might get damages for injured feelings, etc – if 1) where the object of the contract is to provide pleasures, entertainment or enjoyment, 2) where the object of the contract is to provide freedom from molestation, 3) dissppointment if connected with physical inconvenience for personal injuries (Hobbs v London and South Western Railawy) (Baltic Shipping C v Dillon (The Mikhail Lermontoc) (1993))

In Hobbs v London and South Western Railway Co, the plaintiffs were able to recover for their physical inconvenience when a railway company, in breach of contract, failed to deliver them to the correct destination. It was held that the plaintiff could recover not only the price of the ticket but also for the inconvenience and physical discomfort of having to walk home

Awards have been made in cases where a wedding photographer failed to perform his duties (Diesen v Samson (1971) SLT (Sh Ct) 49), where holidays did not meet the represented standard (Jarvis v Swan Tours Ltd [1973] 1 All ER 71 (CA); Jackson v Horizon Holidays Ltd [1975] 3 All ER 92 (CA).),and where a solicitor negligently failed to obtain a non-molestation order (Heywood v Wellers [1976] 1 All ER 300 (CA)

In Knott v Bolton an architect failed to carry out instructions to include a grand staircase and entranceway in his house design.[29] Despite suffering significant disappointment and distress, the plaintiffs could not recover because the object of the contract was to design a house, not to provide pleasure.

Blameworthiness and causative potency are recognised in Australia as determinants of responsibility (Podrebersek v Australian Iron and Steel Pty Ltd [1985] HCA 34)

Expectation Damages:

Date of assessment is usually at the breach time, except for land, that is at the time of the contract was to be finished (Hoffman v Cali (1985))

Take the value of the market vs the contract value to figure out the damages – this is per Sale of Good Acts 1923.

Expectation damages is looking at the good side – money that could have been made

Reliance Damages:

Now looking at the bad side – money spent

Usually get more award with expectation damages – however, this might be easier to prove than expectation damages.

Restitution Damages

Now looking at not what has the plaintiff lost, but what has the defendant gained – where the defendant makes a gain from the loss

Lord Nicholls, Lord Goff of Chieveley, Lord Browne-Wilkinson and Lord Steyn held that in exceptional cases, when the normal remedy is inadequate to compensate for breach of contract, the court can order the defendant to account for all profits. This was an exceptional case. Blake had harmed the public interest. Publication was a further breach of his undertaking of confidentiality. Disclosure of non-confidential information was also a criminal offence under the Official Secrets Act 1911. An absolute rule against disclosure was necessary to ensure that the secret service was able to deal in complete confidence. It was in the Crown’s legitimate interest to ensure Blake did not benefit from revealing state information. The normal contractual remedies of damages, specific performance or injunction were not enough, and the publishers should pay any money owing to Blake to the Crown.

Lord Hobhouse dissented. He would have held that since the information was no longer confidential, there could be no misuse of confidential information

Loss of Chance

In certain circumstances, a person can recover for loss of chance (Howe v Teefy (1927)) and (Chaplin v Hicks (1911) – where contestant lost out on final round because of mismanagement of information, awarded 100 pounds.

Loss of Reputation

Damages for loss of reputation or publicity are recoverable where the contract expressly or impliedly promises publicity or enhancement to reputation (Marbe v George Edwardes (1928))

Reinstatement Costs

The general rule in other cases where the defendant's breach relates to the quality or quality or conditions of goods or services supplied is that the plaintiff is limited to the differences in value measure

Mitigation –

Three principles to mitigation 1) can't recover for loss as a plaintiff that could reasonably have been avoided; 2) if trying to avoid loss reasonably, you can still recover; 3) you must account for benefits that you've received as a result of the breach.

The onus of proof is on the defendant to prove any failure to mitigate. (Roper v Johnson (1873))

The award of damages as compensation is qualified by a principle, “ which impose on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps”. (Lord Haldane in British westinghouse vs Underground Railway Co. (1912) A.C. 673 at 689 (H.L.).

But “this does not impose on the plaintiff an obligation to take any step which is reasonable and prudent man would not ordinarily take in the course of his business”. (British Westinghouse vs Underground Railway Co. (1912) A.C. 673 at 689 H.L.).

Any gain resulting from the plaintiff’s reasonable steps in mitigation must be balanced against the loss caused by the breach. Any loss resulting from such reasonable steps is recoverable.

Where a contractor who has repudiated his contract offers to complete under a new contract it is a question of fact in each case whether an employer who does not accept such offer is acting reasonably in mitigation of his loss. (Strutt vs Whitnell (1975) 1 W.L.R.870 C.A.).

If it is unreasonable to refuse such an offer, damages are calculated as if the offer had been accepted. (Sotiros vs Sameiet Solholt (1983) 1 Lloyd’s Rep. 605 C.A.)

Each case will depend on its facts, but it is thought that conduct which amounts to repudiation by a contractor is likely to render reasonable an employer’s refusal to reengage him.

Debt

Sum payable as a debt due

When a plaintiff alleges that debt is due, but the defendant denies this and pleased a defence of payment, the onus is on the defendant. If a plaintiff seeks damages for breach, they bear the onus of proving the breach and the loss in respect of compensation sought.

Young v Queensland (1954) at pg 567 sets out the distinction between action to recover debt and action for damages for breach of contract. HC explained that the rules dealing with mitigation of loss are not relevant where the plaintiff is seeking to recover a debt dur under the contract, whereas they are frequently relevant in actions for damages.

At common law, termination of contract for breach/frustration does not affect the right to recover a debt which has accrued before termination/frustration

When an innocent party sues contract breaker for debt generally principle of mitigation do not apply (White and Carter ltd v McGregor (1962)).

Liquidated Damages:

Law developed principles to control liquidated damages to stop abuse – called the Law of Penalties

Three principles: 1) only apply the rules if you're doing something (paying) upon breach of the contract – simple contracts aren't covered, ie credit card bills; 2) this is an artificial process – you need to put yourself at the time of the formation of the contract & possible breaches and possible losses – Not done under the breach/condition (Clydebank Engineering v Don Jose Ramos (1905)); 3) Only if it's a genuine pre-estimate loss v punitive aspect (Dunlop)

If the clause (continuing from above) is extravagant or unconscionable compared to the greatest loss that could conceivably be proved – it's penal vs a liquidated damage (Lord Halsbury from Clydebank) reinforced by the HC in Ringrow c BP Australia 2005. "It explains why the propounded penalty must be judged to be extravagant and unconscionable in amount"

The law of penalties has no application to a stipulation which provides for a payment of an agreed sum on the happening of an event other than a breach of contract (Campbell Discount v Bridge (1962))

As the law currently stands, Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 (Dunlop) is still the principle Australian authority on the law of penalties. Establishing a mere disparity between the loss suffered due to breach and the amount of damages stipulated for the breach is not sufficient to amount to a penalty. The stipulated damages must be out of all proportion to the loss actually suffered, or, as otherwise worded, disparate to a degree of disproportion sufficient to point to oppressiveness. In Ringrow v BP, the High Court stated: The principles of law relating to penalties require only that the money stipulated to be paid on breach or the property stipulated to be transferred on breach will produce for the payee or transferee advantages significantly greater than the advantages which would flow from a genuine pre-estimate of damage. As noted by the Full Court in Tasmania v Leighton, the High Court in Ringrow v BP was presented with an opportunity to reconsider the approach to penalties established in Dunlop. Given that neither party had contested the Dunlop principle, the High Court was of the view that such a consideration was not appropriate in the circumstances and, instead, it was proper to proceed on the basis that Dunlop continued to represent the law applicable in Australia. The court recognised, however, that it was foreseeable that the principles governing the law of penalties may need to be reformulated in a future case in the light of Australian conditions, 'the nature of penalties or any element in the contemporary market-place'.

Shevill v Builder decides that if A exercises an express right to terminate for breach, A is not entitled to recover substantial damages unless A can also prove a serious breach. Yet AMEV-UD says that the same termination clause can include a liquidated damages provision requiring substantial damages to be paid irrespective of whether A can prove a serious breach. Dissenting judges thought this showed Shevill to be an unsatisfactory decision.

The feature that differentiates damages from penalties comes from Dunlop Pneumatic Tyre v New Garage & Motor (1915). The clause will be a penalty if the sum stipulating payment of a specific sum upon breach must be examined to see whether to see whether they are liquidated damages or a penalty.

Enforceable liquidated damages clause entitles plaintiff to recover the sum stipulated without need to prove any loss (Pigram v AG for NSW (1975))

AMEV-UDC Finance v Austin (1986) explains that the minor nature of the breach meant that there was no causal connection between the breach and the loss suffered and the fact that a substantial sum would be payable had to be ignored.

Misrepresentation

Conduct before formation of the contract might affect the viability of the contract – court considers the contract to have never been made - rescission

Not unusual to find misrep and mistake coming up at the same time

Misrep is defined as: 1) false statement of fact; 2) that is intended to induce or does induce the party to enter into the contract; 3) materiality

Because statement is made to induce, it's not a term of the contract. If it was a term of the contract, it would be a breach.

False statement of fact:

· Usually unproblematic

· Court does take a common sense approach – so puffery is distinguished

· "My opinion" is not a fact – it's subjective. Assumption is that it really is your opinion. (Edington v Fitzmaurice (1885))

· If an expert in the area, they wouldn't say it unless they had reasonable basis/grounds for holding that opinion

· Can infer from conduct if it's a statement of fact

· When someone says they intend to do something, the presumption is that they really do intend to do it

Silence can't be a misrepresentation (traditionally). You're expected to do your own work to verify things However there are some exceptions (duty of disclosure): 1) Special relationship between parties where the other person is expected to speak (insurance – if you've had lots of accidents); 2) half-truths or literal truths, where half of the story has been told – ex: yes it's fully tenantable, but fail to mention that tenant has given notice

Inducement: to what extent must that statement have influenced the person to enter into the contract:

· Was the statement a real inducement, material inducement, play a part to enter into the contract (words used by HC) – the false statement need not have been the only, or even decisive inducement (Edington v Fitzmaurice (1885))

· In theory, the plaintiff bears the burden of proof – but often presumption plays a part (Holmes v Jones)

· Carelessness or failure to investigate does not negate the inducement element (Redgrave v Hurd)

· Jessel J (Redgrave v Hurd) talks about the presumption – if the P was drawn into the contract can show (1) and (3) then the court can infer or presume that P was induced.

· Burden then shifts on defendant to disprove – presumption works in plaintiff's favour

Material: there used to be an old principle of law that dealt with the degree of disparity between what the truth was vs what was said – but this isn't around very much anymore

What are the consequences of misrepresentation

· If it becomes a term then you can sue for breach

· Occasionally can get damages for misrepresentation

· Can also rescind the contract

Fraudulence does appear to be taken into consideration

There are limitations on recision & delay of itself does not present recision but delay will engage all of the other factors involved

Bowen LJ in Edington v Fitzmaurice: A mere suggestion of possible purposes to which a potion of the money might be applied would not have formed a basis for an action of deceit. There must be a misstatement of an existing fact: but the state if a man's mind is as much a fact as the state of his digestion. It is true that t is very difficult to prove what the state of a man's mind at a particular time is, but if it can be ascertained it is as much a fact as anything else. A misrepresentation as to the sate of a man's mind is, therefore, a misstatement of fact.

Rescission due to Misrepresentattion

The court does not require perfect restitution, it's enough that you're doing near enough – doing practically enough is good. (Alati v Kruger)

HC does things financially, so they'll hand back money, but they'll deduct for goods, losses, rent, etc. (Alati v Kruger)

Delay itself does not prevent recision but delay will engage all of the other factors involved (Leaf v International Galleries). The longer the wait, the more it will appear that the contract was affirmed and therefore, the less likely the restitution.

If third party has acquired rights, then can't rescind – if money has been exchanged. But if B gives it as a gift, then court will usually rescind.

Before a person has elected to have affirmed there must be 1) note that the representation is false 2) if exercising common law to rescind then you need to know that law that allows you to rescind (Coastal Enterprise v Melevende). Be aware of estoppel with this, court found no estoppel arose because the vendor was not prejudiced in any way.

Decision is controversial as it is at odds with the laws regarding discharge of breaches as it found that the representee must be aware of the right to rescind as well as that a misrep had taken place – this has been rejected by HC in Sargent v ASL, where HC has left it open

Seddon's Case – can always get out for fraudulent misrepresentation if land is involved. In Seddon's case, the judge expanded the application, but judges currently don't like it and try to distinguish it so that Seddon's case only applies to land. Lord Denning has over-ruled it many times outside of land.

It is most inconvenient in practice to hold a contract is void as it is difficult to unravel what has already been done and usually leaves an unsatisfactory outcome (Textbook 20-17)

If the subject mater of the contract never existed or perished prior to the contract being agreed, the issue is whether the parties made a mistake. IF the subject matter perishes after the contract has been agreed the issue is one of frustration

Damages due to Misrepresentation

Whether a statement is fraudulent or innocent becomes critical with regard to damages

Innocent – Innocent – no damages best can hope is to rewind (rescind) the contract – in tort – no breach of duty of care so no claim for damages.

Innocent – Negligence – get damages in negligence tort

Fraudulent – where it's fraudulent misrepresentation you can get damages and also sue in the tort of deceit

In all cases you should be able to rescind – then it's a matter of damages

Fraud – if it doesn't fall in the following three, you're innocent of misrepresentation

1. You knew the statement was untrue

2. You make the statement not believing it's true

3. You make the statement recklessly – you don't know it it's true or false (Derry v Peek)

Example: land – CP is 100K – told it's zoned commercial worth 150K, turns out it's zoned residential it's worth 80K. Let's say the misrep is fraudulent. If it was innocent, Seddon's case would apply.

Option 1) Buyer can rescind the contract – gets 100K because all you care about is reversing the contract

Option 2) I'll affirm – sues in contract (zoning is a term in the contract) – Damage 70K

Option 3) keep land and sue in tort of deceit – get 20K as if the tort had not occurred.

Best this would be for a breach to occur, because then expectation would be used and that rewards a good deal

Deceit is made out where, as a result of the false representation made by the defendant, the plaintiff has acted to his or her detriment, and therefore suffered economic loss.

Statutory Prohibition of Misleading Conduct

Statute – Fair Trading Act (NSW) s42 this is wider because it applies to conduct, not just trade or commerce. Remedies are better, because they're more extensive than common law: 1) can get damages even for innocent misrepresentation 2) statute is more flexible – not bound by rescind or not

TPA (Cth) s52

To succeed under s52 you don't need to show that the conduct resulted in someone being misled or deceived – it is enough to show that they merely intended to mislead or deceive.

In the context of future maters, s51A provides that where a corporation makes a representation with respect too any future matter and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. Importantly the corporation is deemed not to have reasonable grounds for making the representation unless it produces evidence to the contrary.

Concrete Construction v Nelson – HC says they don't know the boundaries as to what misleading and deceptive conduct is. Pretty much all misrepresentations fall under misleading and deceptive conduct – however also includes things that are excluded from misrepresentation.

Contracts Review Act 1980 (NSW)

S7 of the Act gives the court the power to review contracts, make specific orders where a contract or where a term of a contract is found to be unjust. Courts can 1) declare the contract to be in whole or in part void, may also vary the contract in whole or part; 2) deny specific performance; 3) grant ancillary relief. Does not apply to corporations, the crown or public authority/council, a person who enter for the purpose of their business , trade or profession.

Mistake

I did not intend to agree to that = objective test of intentions, implied terms, incorporation

You induced my mistaken assumption = misrepresentation, occasionally mistake as to the facts

You took unfair advantage of my mistake = unconscionability, equitable unilateral mistake

We contracted on a different assumption = common mistake

We did not anticipate such a change of circumstances = frustration

I thought our agreement was allowed = illegality

Lots of overlap between mistake and fraudulence

Common Mistake

Common mistake occurs when both parties make the same mistake about the same thing

A common mistake rendes a contract void ab initio

HC likes the implied contract price approach over the rule of law approach – is there an implied term

The implied term school has long denied that any mistake doctrine even exists (Contract Law By Mindy Chen-Wishart, Oxford UniversityPress)

Common law for common mistake is very narrow. In Australia we go with Lord Denning, implied term and equitable mistake – this allows for leeway for the court and is more generous.

In Solle v Butcher – Lord Denning came up with a three part test for common mistake in equity 1) where the parties are under misapprehension; 2) the error is fundamental; 3) the party wanting to get out must be at fault. Later cases have added an element of unconscionability in Taylor v Johnson.

Solle v Butcher (Denning J) – "A contract is … liable in equity to be set aside if the parties were under a common misapprehension either as to facts or as to their relatice and respective rights, provided that the misapprehension was fundamental and that the party seeking to set it aside was not himself at fault"

Great Peace Shipping v Tsavliris 92003) – has said that Solle v Butcher is wrong, there is no scope for common mistake to apply in equity, the contract is either void or not void at common law and equity will not intervene whatsoever.

Mutual Mistake

The two parties are mistaken about the same matter. Come back for a cuppa – I mean tea, he thinks I mean sex. The parties are so mistaken as to a fundamental part of the contract that there is no meeting of the minds, there is no agreement between the parties and thus there can be no contract.

The contract is void ab initio, not because the subject matter didn't exist at the time of the contract, but because the parties have not reached a contract about the same subject matter. (Raffles v Wichelhaus)

We interpret things objectively. If the reasonable person can interpret the contract reasonably– then that's the interpretation

Raffles v Wichelhause – was a mutual mistake where both parties were thinking of two different ships. It was not possible to say that a reasonable person may have interpreted one side of the deal differently, therefore, definitely mutual mistake and contract was void ab initio

Goldsbrough Co Ltd v quinn – NOT mutual mistake. Court found that a reasonable person would interpret the words as meaning that the land was to be sold to the company at the price mentioned etc. Accordingly the court found that mutual mistake did not operate and the contract did exist.

Unilateral Mistake

Mistake as to identity or mistake as to term.

One person is right, and they know they're right and one person is wrong.

If it's fraudulent – then it's unilateral as one person knows the truth and they're lying about it.

As a general rule, one person being wrong is not enough – so have to look for something else – look for wrongdoing by one of the parties

Mistake as to identity: you thought they were x and they turn out to be y (they know the truth and you don't)– seller sells to the 2nd buyer and disappears from sight (the rogue) , once the 3rd party acquires the rights it's too late for the seller to recind

Lewis v Averay – case parties met face to face – remedy – voidable. Judgement was held for the defendant (3rdparty) with the court saying that the contract was only voidable and not void, and because of this unless and until the plaintiff took steps to rescind the contract, the rogue had title to the vehicle which he was able to pass on to an innocent 3rd party in good faith.

Cundy v Lindsay – parties distant – contract void. Court held that since the plaintiff intended to enter into a contract with Blenkiron and CIA, and not with the criminal Blenkarn, the contract was void, the innocent defendant (3rd party) was therefore liable to the plaintiff in tort.

Common Law – contract are void., especially if there's a third party for the property to go back to the original owner as if no contract had ever been entered.

Equity – you can only get the contract voidable and not void.

Mistake as to Term: One person knows the truth about the terms

Term 1 – Did the seller thing that the buyer thought that the oats were old

Term 2 – Did the seller think that the buyer thought that the seller was promising to sell old oats

Term 1 – the buyer is mistaken about what the oats were like

Term 2 – There was a mistake in terms – therefore, in this situation the contract was void

HC has a different approach now (Taylor & Johnson). There needs to be 1) written contract; 2) a party is under a serious mistake; 3) about a fundamental term;

From Wayne: In Taylor, the particular aspects were expressed as being (1) awareness that the party was mistaken; and (2) deliberately setting out to ensure that the mistaken party does not realise the mistake.

The HC in Taylor v Johnson indicated a distinct preference for the equitable approach (renders the contract voidable/rescinded) vs the mistake at law (renders the contract void)

Taylor v Johnson was not void for unilateral mistake, yet was held that the contract should be rescinded on equitable grounds, because this was a case of special circumstances – because the other party was aware that there was a serious mistake and added unconscionable.

Non est factum

Used historically by people who didn't know what they were signing. So used as a DEFENSE

Can't claim non est factum just because of a mistake in a term, it must be a fundamental mistake that ultimately causes the signatory to think it is a complete different contract.

It's very narrow – allows people to get out of something they didn't really understand

Applies when the following can be satisfied: 1) class of people is very limited – blind, illiterate , or though no fault of their own they fail to understand the nature of the document 2) The error must be big – there must be a radical difference between what the plaintiff thought they were signing and what they signed; 3) Carelesness – it is for the defence to show that they weren't careless

This doesn't apply to drunkenness, it's about inherent characteristics.

A successful plea of non est factum renders the document void ab initio; it does not create rights and it does not create obligations. As such, non est factum operates as an exception to the rule that a party is bound to a contract that they have signed.

Undue Influence

One party occupies a position of ascendancy & domination & the other party is in a position of dependency or trust. (established + ad-hoc)

If you can create a presumption of undue influence, the transaction is voidable and can be rescinded.

If you fall under one of the established relationships – that's enough to establish undue influence – parent/child, guardian/ward, dr/patient, solicitor/client

Wife/husband is NOT an established relationship

Undue influence applies to gifts

Have to rebut presumption of undue influence to prove that it was an exercise of free will. To do this, prove that plaintiff understood it was voluntary and a well understood transaction.

In practice, a provision of independent legal advise for the 'weaker' party. But, this is not decisive, the fact that you got advise does not always rebut undue influence. It is really about the exercise of free will.

The onus is on plaintiff to show that there was undue influence.

In some cases, you might get A influencing B to enter into a contract with C

Unconscionable Transactions

This is a distinct element in it's own right. History is that it comes from the 17th and 18th century when the landed gentry were trapped into legal but unfair deals. "Catching bargains" UK hasn’t moved beyond this.

Mortgage is an agreement that if you don't meet certain criteria, then they can take your property.

It’s about presumption & A can rebut by showing the transaction is fair just and reasonable (Dean J, Commercial Bank v Amadio)

Special disadvantage could be disability, poverty, or need of any kind, sickness, age, sex, infirmity of body or mind, illiteracy or lack of education and drunkenness

Notwithstanding an apparent case of unconscionable conduct, a transaction may be justifiend if it was fair, just and reasonable (Commercial Bank of Australia v Amadio)

Intermediate Principle from Yerkey and Jones:

1)Traditionally applied to a wife entering into an agreement for her husband, but HC has expanded this to apply to other relationships; 2) historically, where a wife gives a guarantee for her husband; 3) wife gets no benefit from the transaction; 4) more explanatory than condition (husband might to explain stuff to wife); 5) Bank has to take steps to ensure that the wife understands the transaction

Yerkey Principle is state by Gaudron, McHugh, Gummow and Hayne JJ in Garcia as follows: 1) in fact the surety did not understand the purport and effect of the transaction; 2) the transaction was voluntary (in the sense that the surety obtained no gain from the contract the performance of which was guaranteed); 3) the lender is to be taken to have understood that, as a wife, the surety may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife; and yet 4) the lender did not itself take steps to explain the transaction to the wife or find out that a stranger had explained to her.

Contracts Review Act 1980

Shopping list to figure out things you can think about – don't need to know in depth – but do need to know what they cover.

Bigger picture than just the common law.

Remedies are more flexible than those under common law (not just recision)

Courts can refuse to enforce part or all of the contract.

There are two limitations: 1) You can't rely on it if the contract you entered into was for business purposes (it's presumed if you're entering into a business contract you know what you're doing); 2) corporations can't take advantage of the act – same reason as above

Relief may be granted in respect of a contract or provision that is unjust by reason by being unconscionable, harsh or oppressive.

Whether a contract or a provision is unjust is a separate question from what relief should be granted in respect of the contact. This interpretation is base don the fact that s7 provides that the order must be made for the purpose of avoiding as far as practicable an unjust consequence or result. The effect is that there are two steps for granting relief. First, the court must decide by reference to the matter set out in the act and the circumstances of entry into the contract, that the contract or a provision is unjust. Second, the order made must relate back to the ground of injustice.

Court decided that the list put forth is not exhaustive when determining if a contract or provision is unjust (West v AGC)

Court can make all or part of the contract void/voidable. Can enforce all/or part of the contract. Can vary all/or part of the contract.

Trade Practices Act

Statue has broadened the common law, but still have to show it's serious or unconscionable to get out

51AA – people thin it’s the statue of common law which incorporates unconscionability, but this has not been decisively determined. There are some strong suggestions that ti does (ACCC v Berbatis)

51AB + 51AC – both have a shopping list to determine what is unconscionable

51AB – corporations acting towards consumers – it's about how big business beats up the kid next door

51AC – business to business

Tort and Contract

The rights and obligations created by the resultant contract supersede and replace the tort duty of care Esso Petroleum v Mardon suggest that it doesn't, but there are other expressions to the contrary

Cases:

Derry v Peek (1889) 14 App Cas 337

A special Act incorporating a tramway company provided that the carriages might be moved by animal power and, with the consent of the Board of Trade, by steam power. The directors issued a prospectus containing a statement that by this special Act the company had the right to use steam instead of horses. The plaintiff bought shares on the strength of this statement. The Board of Trade refused to consent to the use of steam and the company was wound up. The plaintiff brought an action for deceit.

It was held by the House of Lords that in an action for deceit, it is not enough to establish misrepresentation alone; something more must be proved to cast liability on the defendant. There is an essential difference between the case where the defendant honestly believes in the truth of a statement although he is careless, and where he is careless with no such honest belief. Fraud is established where it is proved that a false statement is made: (a) knowingly; or (b) without belief in its truth; or (c) recklessly, careless as to whether it be true or false. If fraud is proved, the motive of the person making the statement is irrelevant. It matters not that there was no intention to cheat or injure the person to whom the statement was made. The defendants were not fraudulent in this case. They made a careless statement but they honestly believed in its truth.

Facts

A tram company's prospectus stated that the company had permission to use steam trams, rather than horse powered ones. In fact, it did not because the right to use steam power was subject to the Board of Trade's consent. The company had applied, and honestly believed that they would get it because permission was a mere formality. In fact, after the prospectus was issued, they did not get permission. Shareholders who had purchased their stakes in the company on the faith of the statement's truth sued when the company's business went down and ended up in liquidation.

[edit] Judgment

Their action failed, because it was not proved that the director lacked honest belief in what they had said.[1] Lord Herschell however did point out that though unreasonableness of the grounds of belief is not deceitful, it is evidence from which deceit may be inferred. There are many cases,

"where the fact that an alleged belief was destitute of all reasonable foundation would suffice of itself to convince the court that it was not really entertained, and that the representation was a fraudulent one."

[edit] Context

The tort of deceit would have been established only if the misstatements had been fraudulently made. Derry v Peek thus validated the perspective of the majority judges in the Court of Appeal in Heaven v Pender. That is, for there to be deceit or fraud (which is the same) it must be shown that a defendant knows a statement is untrue, or has no belief in its truth, or is reckless as to whether it is true or false.

Derry v Peek also outlined that no duty would be required in relationship to negligent misrepresentation, without the presence of a contract, fiduciary relationship, fraud or deceit. This was later overruled in Hedley Byrne v Heller.

With v O'Flanagan [1936] Ch 575

During the course of negotiations for the sale of a medical practice, the vendor made representations to the purchaser that it was worth £2000 a year. By the time when the contract was signed, they were untrue. The value of the practice had declined in the meantime (to £250) because of the vendor's inability to attend to it through illness. Lord Wright MR quoted:

"So again, if a statement has been made which is true at the time, but which during the course of negotiations becomes untrue, then the person who knows that it has become untrue is under an obligation to disclose to the other the change of circumstances."

Therefore, the failure of the vendor to disclose the state of affairs to the purchaser amounted to a misrepresentation.

Facts

"Salisbury Cathedral" by John Constable was what Ernest Louis Leaf thought he was buying on March 8, 1944 from International Galleries. International Galleries said it was a Constable. Leaf paid £85. Five years later when he tried to auction it, Leaf was told that it was not a Constable. He claimed rescission of the contract against International Galleries, to get back his money.

[edit] Judgment

Denning LJ held that Mr Leaf was barred because too much time had lapsed. He held there was a mistake about the quality of the subject-matter, because both parties believed the picture to be a Constable; and that mistake was in one sense essential or fundamental. But that was not enough to avoid the contract, because there was no mistake about essential subject matter (a painting). The painter’s identity was a term of the contract, which could either be classified as a condition (breach of which allows rejection of the picture) or a warranty (which allows damages only). Here the painter’s identity was a condition, but after hanging it in one’s house for five years it is far too late to reject the picture for breach of condition.

Svanosio v McNamara (HPH 1008)

The purchasers of a hotel found, after the purchase was completed, that the hotel was sitting partly on Crown land. The High Court held that that was too bad for the purchaser because in sale of land transactions the purchaser has every opportunity to check these kinds of things out.

There is really no need to go into this case in any detail because it is in some ways out of date because of the later High Court case of Taylor v Johnson. All that we need to note is that it would be very difficult to argue that the contract and conveyance are void at law and it would be almost as hard to argue that it was voidable in equity. Nevertheless, the latter must be possible after the later decision of Taylor v Johnson. At the time of Svanosio v McNamara the idea of mistake in equity was regarded as an idea coming from the controversial Lord Denning and you can see that the judges in this case are not very enthusiastic about Solle v Butcher.

One case mentioned by the judges in the course of their discussion is worth noting. It is just over half waydown p 1010, the case of Scott v Coulson. In that case someone bought a life insurance policy on the life of a Mr Alfred Timothy Death. It turned out that, unknown to both parties, Mr Death was in fact dead. This is one of the old cases where it was held that the contract was possibly void at law or some say it was a case where the contract was set aside in equity.

We have seen that in sale of land cases, the buyer after conveyance is going to have a very hard time trying to argue operative mistake, as exemplified by the decision in Svanosio v McNamara. After the case of Taylor v Johnson, we might speculate that this hard line might be modified if it could be shown that there had been unconscionable conduct of some sort by the unmistaken party. A case which arose before Taylor v Johnson and which sorely tested the hard line in relation to mistake of title in sale of land cases was

WITH v O’FLANAGAN [1936] Ch 575

March 16 1936

FACTS In January 1934, negotiations were entered into for the sale of a medical practice, and the vendor then represented to the purchasers that the takings of the practice were at the rate of £2000 per annum. The contract was signed on May 1 1934, but by that date the circumstances had changed, as the practice had fallen off owing to the illness of the vendor. The change of circumstances was not disclosed to the purchasers, and when they took possession on that date they found that the practice was almost non-existent. They thereupon commenced an action for rescission of the contract.

By Michelle Warner available by All Things Law – http://law.timdavis.com.au - A Law Forum to discuss everything about Studying Law - from Law Subjects, Notes and Questions to Law Clerkships and Jobs.