Exam 11: Failure to Create an Enforceable Contract

Given the degree to which courts are willing to enforce contracts subject to mutual mistake, cases of this sort tend to place greater hardship upon defendants than plaintiffs.

When the seller unknowingly makes an erroneous statement regarding the type of processor contained in a computer during negotiations leading to the sale of the computer, the contract

Sunjai, who is functionally illiterate, asks her friend Hahna to read a document aloud to her. She is to sign it in order to purchase chinchillas from Patrice to start a breeding farm. Actually it is a deed transferring ownership of Sunjai's farm to Patrice and, unknown to Sunjai, Patrice and Hahna have made a secret agreement to sell the farm and share the proceeds. If Sunjai is successful in her defence of non est factum, the courts will grant rectification of the deed transferring the land, and Sunjai will be able to keep the farm.

Which of the following is not a true statement about innocent misrepresentation?

While George was visiting his physician, he mentioned to him that he wished to sell his expensive sailboat. The physician expressed an interest in buying the boat and offered to pay George $10,000 for it. George had intended to advertise the boat for $12,000 in the local newspaper but agreed to sell it to the physician for $10,000. Some weeks after the boat had been sold; George wished to avoid the contract. In this case, the physician would be obliged to prove that there was no undue influence on his part

Oni bought a variety store franchise because he thought that its position on a bus route near some high-rise apartments would make it very lucrative. He had misread the transit map, however, for the bus ran along the street parallel to the one the store was on, and the occupants of the high-rises stopped off at a store on that street. Since Oni has made a mistake of fact, the court will grant him rescission of the franchise contract.

Misrepresentation by nondisclosure renders a contract voidable at the option of the party misled.

Deirdre bought a secondhand car from Honest Harry's Autos after being assured by Harry, in response to her questions, that the car had been driven only in good weather by the little old lady from whom he had purchased it. He claimed that was why its mileage was so low, and that it had never, (according to the little old lady), had so much as a scratch. "That's excellent," said Deirdre. "If it had been otherwise, I wouldn't have bought it." Deirdre soon began having trouble with the car pulling to one side when she applied the brakes, so she took it into the garage for a wheel alignment. The mechanic said "Why on earth would you buy this old heap? Granny Moses, that wild old lady, drove this thing like a madwoman, and it's never been the same since her last crash." a. Assuming that Honest Harry had also been fooled by Grandma Moses, what rights would he and Deirdre each have? b. Suppose Honest Harry found out after he sold the car to Deirdre that he had been cheated by Grandma Moses, but decided not to tell Deirdre. How would that affect Deirdre's rights and why?

Anderson Ltd. was negotiating a contract with the Bolton Manufacturing Co. for a large number of components for the office equipment Anderson Ltd. sells. The normal way of pricing the components is "by the piece," but Bolton Manufacturing sent a written offer to Anderson to sell the components at $5 a kilogram. The components would normally cost about $5.50 each and there are about two of them to the kilogram. After receiving Anderson Ltd.'s acceptance of the offer, Bolton realized the mistake it had made and is now refusing to perform the contract. Anderson has sued for breach of contract.

While George was visiting his physician, he mentioned to him that he wished to sell his expensive sailboat. The physician expressed an interest in buying the boat and offered to pay George $10,000 for it. George had intended to advertise the boat for $12,000 in the local newspaper but agreed to sell it to the physician for $10,000. Some weeks after the boat had been sold; George wished to avoid the contract. In this case, there is a rebuttable presumption of undue influence, because the purchaser was George's physician.

Chris and Sally were successful professionals who decided that the time had come to escape city living and move to a country home. While their tastes led them to desire all the conveniences of modern living, they had further decided that they wanted a home with "character." In the course of their search, they met Johnston, a real estate agent. They told him they were looking for "an older home with character." Johnston showed them a number of country homes, all of which were older. Each was rejected in turn, for a variety of reasons. In a number of instances, the home did not appear suited to being remodeled with cathedral type ceilings or did not lend itself to the addition of a large glass solarium, which was a feature that the couple wanted. In each case, upon finding one of these two facts to be evident, they left the properties with Johnston and returned to his car with him to view the next home on the list. At one of Johnston's listings, Chris and Sally finally found what they were after. The home clearly lent itself to the modifications they desired, and it certainly had the character they were looking for. Chris and Sally were delighted when they and Johnston noticed a decorative brass plaque six inches square beside the front door which read "Old Taylor Farmstead, 1855," and underneath "Heritage Canada." Chris and Sally signed Johnston's standard offer-to-purchase form, which was later accepted, and took it to their lawyer to close the sale. While in their lawyer's office, Chris mentioned the addition of the solarium to the home, and their lawyer informed them that since the property had been designated as a heritage property by Heritage Canada, modification in any material way to the property would be impossible. Chris and Sally immediately instructed their lawyer to commence action against the owner of the property and the agent, Johnston. Discuss the legal issues raised in this case. E.R. 509.

Garth and Elizabeth are husband and wife. Garth is a real estate agent and Elizabeth an artist. Although her occupation does not expose Elizabeth to a great deal of business-related matters, the couple have entered into many real estate deals and business ventures as full partners. Garth has an opportunity to buy into a condominium complex. He asks Elizabeth to sign as his loan guarantor so that he may invest in the project. Before the project is complete, the contractor abandons the job and all partners are left to answer the debt. Garth cannot produce sufficient funds to cover his loan, and the bank turns to Elizabeth as guarantor for payment. Outraged at the course of events, Elizabeth refuses to pay, and seeks legal assistance to nullify the contract. As her lawyer, what do you tell Elizabeth?

Diana receives a phone call late one night from Robert, her former husband. He says that if she does not agree in writing to drop her action for support to put herself through university, he will distribute copies of compromising photographs he took of her when they were married. Diana signs the agreement under seal. This is a clear case of duress.

Generally, a party is under a duty to disclose material facts to the other contracting party, and failure to do so is a violation of his or her duty of utmost good faith.

Indrek, a university student, owned a small automobile, which he desired to sell for $800. He placed an advertisement in the university newspaper offering the vehicle for sale and included his telephone number for further information. A few days later, he received a telephone call from a man who identified himself as Mr. Green. Green asked Indrek a number of questions concerning the car, and then expressed a desire to examine the vehicle. A meeting was arranged for later that evening, and Indrek gave Green the opportunity to test drive the automobile. Green agreed to purchase the vehicle for $800 and offered Indrek a personalized cheque bearing the name "R. Green" as payment. Indrek was reluctant to accept the cheque without further identification and suggested the two men meet the next day at the bank to close the deal. Green explained that he would not be available for the next week or two as he was leaving town on some business. Instead, he offered the driver's licence and a number of credit cards bearing the name "R. Green" as evidence of his identity. He offered to leave his credit cards with Indrek as security. With some hesitation and concern, Indrek signed the blank motor vehicle registration, and handed Green the papers necessary to transfer the ownership. In return he received the cheque and the credit cards which he agreed to hold until Green's return. The next day, Indrek presented the cheque at Green's bank only to discover the cheque had been forged. A customer at the bank whose name was "R. Green" had apparently lost his wallet sometime before, and the wallet contained the cheque book as well as the credit cards and licence. In the meantime, the purchaser of the automobile, posing as Indrek, sold the vehicle to Smith for $500, and disappeared. A few weeks later, Smith wrote a letter to Indrek asking if he might have the owner's manual to the automobile, and at that point, Indrek demanded the return of his vehicle. Smith refused to return the vehicle. He maintained that it was now registered in his name as a result of the transaction that, from his point of view, was a bona fide purchase from the person who possessed the registration documents for the automobile. Indrek brought an action against Smith for the return of the automobile. Discuss the points of law which are raised in this case and indicate how the courts might decide the matter.

Sarah Burns is suing her lawyer, Tom Lachey, for the return of property worth $20,000 that she had given him. She had signed a properly sealed document making the gift to him. She says she knew what she was signing but felt overwhelmed by his manner. It will be up to Sarah Burns to prove on the balance of probabilities that she was unduly influenced by Tom Lachey.

Undue influence involves a state of affairs whereby a person is so influenced by another that

If the formation of a contract is affected by mistake, which required element of a contract is not present?

. Red Stripe replied saying the $4 price is in Canadian currency, not Jamaican currency. What is the effect of the flaw on the agreement?

Rob purchased an old glass vase, which Banya represented as an antique made by a famous Italian glassmaker in the 17^th century. As proof of its authenticity, Banya produced an old paper with a rough sketch of the vase on it, along with some writing, and what appeared to be the glassmaker's name. Rob later sold the vase to Castillo, after telling Castillo the story of the vase as told to him by Banya. After Castillo had purchased the vase, he discovered it to be a reproduction of the original, and of very little value. Castillo should act promptly to void the contract on discovery of the misrepresentation, as Castillo will lose the right to do so if much time is allowed to pass.