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Unformatted text preview: Misrepresentation
Untrue statement of important facts Told sometime before the contract is made Not, honest but incorrect statement of intention or opinion Not, failure to tell all the facts (normal cases) Misrepresentation vs collateral warranty
Misrepresentation An untrue statement of important facts To cancel the contract Collateral warranty A oral promise collateral to the written contract To carry out the oral promise as part of the contract Cannot apply if the written contract says its terms are final Can apply even if the written contract says its terms are final Has the university made a misrepresentation in this example? The university promoted its programme during its open day. The university highlighted what the students can learn from the programme. The students were not told that it was very difficult to pass the programme. Are the following statements in the leaflet of a tourist agency misrepresentations?
Example1: Welcome to Hong Kong! Are the following statements in the brochure of a land developer misrepresentations? Example 1: The layout of the flat can be seen in this diagram. It is for your reference (there are inaccurate descriptions of the flat in the diagram). Example 2: You can see a fantastic view outside this flat (there will be a big building completed in the near future which would block the fantastic view outside the flat completely). Are the following statements in the leaflet of a tourist agency misrepresentations? Example 2: Buffet dinner! (very little food) Example 3: There are many cultural heritages in Hong Kong worthy to visit (there are not too many cultural heritages in HK)! Example 4: Stay in 5-star hotel every night, early departure and late return (knowing that these are unlikely to be arranged)! Breach of contract vs misrepresentation
When would a breach of contract happen? When there has been a breach of any term of the contract When would misrepresentation happen? When there has been an untrue statement of important facts Types of misrepresentation Fraudulent misrepresentation (e.g. a deliberate lie) Negligent misrepresentation (where the defendant is unable to prove that he reasonably believed in the truth of his statement) Innocent misrepresentation (the statement is wrong because of an honest and reasonable mistake) Damages for misrepresentation Damages for fraud under the common law: all the losses + aggravated damages for injury to feelings Damages under the Misrepresentation Ordinance: all the losses Rescission (refund) Can the innocent party have rescission in the following cases? Example 1: after eating a cheese hamburger which does not have cheese Example 2: after eating a cheese hamburger which makes you sick Example 3: after renovating a purchased flat which has an illegal structure Example 4: after receiving money advance from a bank under a mortgage arrangement which was made because of a misrepresentation Contracts in restraint of trade Reasonable as to the time period? Reasonable in respect of the geographical location? Necessary for the legitimate interests of the employer? Void contracts vs voidable contracts
Void contracts (illegal contracts) Voidable contracts (contracts made due to misrepresentation and undue influence) Rescission (but no rescission in some situations) Rescission Undue Influence
Presumed undue influence (class A cases): The existence of fiduciary relationship as defined by law, + The transaction is manifestly unfair to the `weaker' party Undue Influence
Presumed undue influence (class B cases): Trust and confidence in the `stronger parties' to be proved as a matter of fact, + The transaction is manifestly unfair to the `weaker' party Undue influence
How can the `stronger party' defend the validity of a contract entered into because of presumed undue influence? By reminding the `weaker party' to have independent advice before the contract is to be formed Undue Influence
Actual undue influence: Actual improper influence by the `superior' party? No need to prove the transaction is manifestly unfair Undue influence in a typical case involving a third party (the stronger party) Stronger party weaker party (undue influence) (contract) bank Undue influence in a typical case involving a third party (the stronger party) Did the bank know / ought to have known the weaker party has made the contract due to undue influence of the stronger party? If yes to either question, the contract can be rescinded. If no to both questions, the contract cannot be rescinded. Misrepresentation vs undue influence
Remedies for misrepresentation Remedy for undue influence Damages + / Rescission (depends on the type of misrepresentation) Rescission Unconscionable contracts Contracts relating to sale of goods / supply of services: the same reasonableness factors as used in the Control of Exemption Clauses Ordinance Other contracts: more difficult to prove they are unconscionable ...
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- Spring '11