Exam 11: The Extent of Contractual Rights

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.

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.

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

A met B while shopping, and in the course of conversation, mentioned that he had a motorcycle for sale. B was familiar with A's motorcycle, and offered to purchase it for $500. A accepted the offer, and A and B walked to A's home to get the motorcycle. When they reached A's house, they were told by A's father that the motorcycle had been stolen earlier in the day, and was subsequently found by the police in a badly damaged and burned condition in a local stone quarry. A and B made a valid contract, and A must deliver to B the motorcycle in the condition that it was in before it was stolen.

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. Sunjai could not raise the defence of non est factum if the document she signed was one to purchase chinchillas, but for a much higher price than Hahna read to her.

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.

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 is up to Tom Lachey, under these circumstances to prove that he did not unduly influence Sarah Burns, if she simply alleges that he did.

Brianne discovered that her younger sister, Alda, desperate to break her addiction to cocaine and unable to get into a Canadian addiction program for many months, has made a contract with a doctor from the U.S.A. The doctor will treat at his centre immediately, in return for which Alda has signed over to him the inheritance from her grandmother to which she will have access when she turns 22 next year. Since the cost of the treatment is only a fraction of the value of Alda's inheritance, Brianne promises to pay for the treatment if Alda can reimburse her next year. However, the doctor refuses to release Alda from their contract, and she does not know what to do.

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 may take action against Rob to have the contract rescinded on the basis of fraudulent misrepresentation by Rob.

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.

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?

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

Trent purchased a car from Veritas Motors. The sales agent stated that the car was new, although, in fact, it had been used as a demonstrator for three weeks. Two days after the purchase was completed, Trent learned that the car had previously been in an accident while a customer was trying it out. The sales agent had known all of this, but had not informed Trent of it. Two weeks later, a problem arose with the brakes, which necessitated repairs on three occasions. After the first repair, Trent wrote to Veritas claiming rescission of the contract and asked for a refund of his payments. Veritas refused. Two months later, Trent sued Veritas for rescission of the contract and damages equal to the amount he had spent on the car.

Innis Ltd. reach a verbal agreement with McKenzie Co. to sell them 16 tonnes of first-grade steel for $2,100 per tonne. At the request of McKenzie, Innis drew up a written version of the contract and both parties signed it. Shortly after delivery, Innis received a cheque from McKenzie for $19,200 in full settlement of the account, and was horrified to discover that the figures 1 and 2 had been reversed in the written contract and the price read "$1,200 per tonne" instead of "$2,100 per tonne," and neither party had noticed it at the time. Discuss what Innis Ltd. may do in this case.

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. If Sarah Burns had not yet given him the property, she would not be obligated to do so since it was simply a gratuitous promise on her part. Since she has given it to him, she must prove duress on his part to get it back.

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. George may raise the claim of undue influence in an attempt to recover the sailboat.

Wes, a neighbour of Stan, wished to borrow a sum of money from a local bank. Stan was quite wealthy, but elderly, with very poor eyesight. He frequently requested Wes to read his newspaper to him when Wes would drop by for a visit, because reading bothered his eyes. One evening, Wes placed a paper before Stan, and explained to him that he wished to borrow a sum of money, but required a letter of reference before the bank would make the loan. He requested Stan to sign the paper to satisfy this requirement. Stan trusted his friend Wes, and signed the paper at his request without reading it. Unknown to Stan, the paper was a guarantee of Wes's indebtedness, and not a letter of reference. Wes later defaulted on his debt. Wes required Stan's signature on the paper because the Statute of Frauds requires a guarantee to be in writing, and signed to be enforceable

Wes, a neighbour of Stan, wished to borrow a sum of money from a local bank. Stan was quite wealthy, but elderly, with very poor eyesight. He frequently requested Wes to read his newspaper to him when Wes would drop by for a visit, because reading bothered his eyes. One evening, Wes placed a paper before Stan, and explained to him that he wished to borrow a sum of money, but required a letter of reference before the bank would make the loan. He requested Stan to sign the paper to satisfy this requirement. Stan trusted his friend Wes, and signed the paper at his request without reading it. Unknown to Stan, the paper was a guarantee of Wes's indebtedness, and not a letter of reference. Wes later defaulted on his debt. Stan may plead non est factum as a defence to a claim by Wes's creditor on the guarantee.