Deck 11: Failure to Create an Enforceable Contract

Question 1

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

A) contains a common mistake.
B) contains a mutual mistake.
C) contains a unilateral mistake.
D) contains an innocent misrepresentation.
E) contains a fraudulent misrepresentation.

Answer 1

D

Question 2

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

A) Offer
B) Acceptance
C) Consideration
D) Intent
E) Legality

Answer 2

D

Question 3

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 Castillo may take action against Rob to have the contract rescinded on the basis of fraudulent misrepresentation by Rob.

Answer 3

False

Question 4

Fronia, a neighbour of David, wished to borrow a sum of money from a local bank. David was quite wealthy but elderly, with very poor eyesight. He frequently requested Fronia to read his newspaper to him when Fronia would drop by for a visit because reading was exceedingly difficult for him. One evening, Fronia placed a paper before David and explained to him that she wished to borrow a sum of money but required a letter of reference before the bank would make the loan. She requested David to sign the paper to satisfy this requirement. David trusted his friend Fronia and signed the paper at her request without reading it.
Unknown to David, the paper was a guarantee of Fronia's indebtedness, and not a letter of reference, and Fronia later defaulted on her debt.

A) David may successfully plead non est factum as a defence to any claim by Fronia's creditor.
B) If Fronia had told David that the paper was a guarantee for $1500 when it was in fact for $2000, David could still successfully plead non est factum as a defence.
C) Fronia required David's signature on the paper because the Statute of Frauds requires a guarantee to be in writing and signed to be enforceable.
D) Fronia required David's signature on the paper because the Statute of Frauds requires a guarantee to be in writing and signed to be enforceable and David may successfully plead non est factum as a defence to any claim by Fronia's creditor.
E) All of the responses are correct.

Question 5

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.

A) Bolton will succeed since a mistake as to value makes the contract void.
B) Since the mistaken phrase is ambiguous, the courts will not interpret it and Bolton will succeed.
C) A reasonable person would have realized that there was a mistake about the price so Anderson will not be allowed to snap up the offer.
D) There is offer, acceptance and consideration from each party and, since the court will not consider the adequacy of consideration in a contract, Bolton has no grounds to refuse to perform the contract.
E) While a reasonable person might not have realized that there was a mistake in the offer, the court will not allow Anderson to enforce the contract if doing so will cause hardship for Bolton.

Question 6

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. B may avoid the contract on the basis that the parties had made a mistake as to the existence of the subject matter.

Question 7

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 test driving it. 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 payment. 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.

A) Trent will succeed because of innocent misrepresentation.
B) Trent will succeed because of fraudulent misrepresentation.
C) Trent will obtain rescission but is not entitled to receive any damages.
D) Trent will succeed because of innocent misrepresentation and will obtain rescission but is not entitled to receive any damages.
E) None of the responses are correct.

Question 8

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

A) Void
B) Voidable
C) Rectification
D) Invalid
E) Unenforceable

Question 9

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

A) False statement of fact
B) Intention to induce contract formation
C) Induced contract formation
D) The parties discover the fallacy after the contract is formed.
E) The contract is voidable

Question 10

Mathieson wanted to lease a suite in the new office building owned by Logan, which is the most prestigious one in town. He knew that Logan would not rent to him because of a business deal several years ago that had gone bad, costing Logan a great deal of money. Logan swore he would never do business with Mathieson again. Mathieson paid Muir to act as an agent for his company, and Logan rented to him. Several months later, Logan found out who had really rented the suite.

A) This is a unilateral mistake, which would entitle Logan to declare the lease contract to be at an end.
B) This is a mutual mistake, which would entitle either party to declare the contract to be at an end.
C) This is a unilateral mistake, but Logan cannot end the contract because the identity of the other party is not a material term of the contract.
D) Since the contract has been in existence without problems for several months, Logan cannot now withdraw his agreement to the contract as Mathieson has relied on it.
E) A contract based on a lie is void.

Question 11

A tort that arises when a party suffers damage by acting upon a false representation made by a party, with the intention of deceiving the other is called

A) fraudulent misrepresentation.
B) mistake.
C) deceit.
D) rescission.
E) non est factum.

Question 12

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.

Question 13

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.

A) Alda must go through with the contract since she signed it and she is of age and mentally competent.
B) This is a case of duress and it is possible for Alda to repudiate it.
C) This is a case of undue influence, and, if Alda can prove it, she can avoid the contract.
D) This is a case of undue influence and, since the doctor cannot show that the agreement was fair to Alda, she can avoid the contract.
E) Although this is a case of undue influence, since Alda will be able to kick her habit at the doctor's clinic which is an invaluable benefit, she cannot show the price is unfair to her.

Question 14

Jahara Ltd. enters into a contract to supply glass bottles to Brine Co. for its line of baby dill pickles. Since it is a new relationship, both parties want the option to end the contract without problems, so they include a clause which allows either one of them to terminate the contract on 30 days written notice. Jahara finds that Brine Co. is too slow in paying its bills and too quick to question quality. On March 1^st, Jahara Ltd. gives Brine Co. notice in writing that the contract will end on March 31^st. Brine Co. insists that the 30 days notice clause means 30 working days, not 30 calendar days, and thus Jahara must supply them until April 1. Jahara refuses. Brine Co. loses two weeks of production when its supply of bottles runs out and sues Jahara for breach of contract. In this situation,

A) the court would allow evidence about the negotiations leading up to the contract to help them decide who is right here.
B) the court will rectify this contract to reflect what it considers to be a reasonable solution, if it cannot decide which of them is right.
C) if the court cannot decide, for lack of clear evidence, which of them is right, Brine Co. will lose.
D) the court would allow evidence about the contractual negotiations and may order rectification.
E) the court would allow evidence about the contractual negotiations leading up to the contract and consider existing case law.

Question 15

Bev and Renee moved to a large farm they recently purchased. The couple wish to subdivide some of the land and sell a lot. They contracted a local surveyor who completed the survey of the prospective lot to be severed. After the deal had been completed and the lot sold, the couple was confronted by the new lot owner, and a neighbour of the couple. They produced an older deed showing the newly severed lot belonged to the neighbour's farm and did not belong to Bev and Renee. With the threat of legal action looming, the couple confronted the surveyor who told them they cannot sue him because he is an unlicensed professional and is free from any responsibility for the services he renders.

A) The contractor is right. Bev and Renee used an unlicensed professional and this action makes them responsible under contractual law for all mistakes that the person has made.
B) Bev and Renee can sue him because although he is unlicensed, he is still responsible for the damage they incurred under a breach of contract.
C) Bev and Renee are responsible for their own damages, because according to law you are required, when using an unlicensed professional to have their work checked by a professional.
D) All of the responses are correct.
E) None of the responses are correct.

Question 16

. Red Stripe replied saying the $4 price is in Canadian currency, not Jamaican currency. When a contract does not specify the currency but only contains the $ symbol, the contract

A) contains a common mistake.
B) contains a mutual mistake.
C) contains a unilateral mistake.
D) contains an innocent misrepresentation.
E) contains a fraudulent misrepresentation.

Question 17

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. The contract is voidable by Castillo on the basis of innocent misrepresentation.

Question 18

Jahara Ltd. enters into a contract to supply glass bottles to Brine Co. for its line of baby dill pickles. Since it is a new relationship, both parties want the option to end the contract without problems, so they include a clause that allows either one of them to terminate the contract on 30 days written notice. Jahara finds that Brine Co. is too slow in paying its bills and too quick to question quality. On March 1^st, Jahara Ltd. gives Brine Co. notice in writing that the contract will end on March 31^st. Brine Co. insists that the 30 days notice clause means 30 working days, not 30 calendar days, and thus Jahara must supply them until April 1. Jahara refuses. Brine Co. loses two weeks of production when its supply of bottles runs out and sues Jahara for breach of contract. In this situation,

A) This is a mistake of law, specifically the law of contract.
B) This is a mistake of fact.
C) This is an example of a mistake of utmost good faith.
D) This is a case of innocent misrepresentation.
E) This is a mistake about the existence of the subject-matter of the contract.

Question 19

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

A) the person is considered to be in a special relationship.
B) the person is liable to seek out other advice.
C) the person's judgment allows them to act illegally.
D) the person's judgment is not his or her own.
E) the person does not act in good faith.

Question 20

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. B is bound in contract and must purchase the motorcycle even though it is badly damaged.

Question 21

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.

Question 22

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.

Question 23

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. The physician could rebut the presumption of undue influence by proving that he paid a reasonable price for the sailboat, and that George had freely offered to sell him the boat.

Question 24

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. Banya is liable to Rob in tort for fraudulent misrepresentation of the vase if he knew the vase was only a reproduction, and the paper a forgery.

Question 25

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.

Question 26

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. Since Sunjai did what was reasonable to deal with her own inability to read, she could raise the defence of non est factum to an action by Patrice to get possession of the farm.

Question 27

Jax, a university student commuted to and from classes by public transit. He decided that he must buy a car because the bus service was terrible. A friend was discussing this problem with Jax and said that he wanted to sell his car in order to purchase a motorcycle. Knowing the car's good condition, Jax said he would buy it. Jax's friend told him to come by to pick up the car in two days. Neither of them knew that the friend's roommate had borrowed the car that day and had destroyed it in an accident. This is not a cause of mistake of fact because the two were both clear as to what was the subject matter of the contract.

Question 28

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.

Question 29

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 by the guarantor to be enforceable.

Question 30

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.

Question 31

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, through embarrassment, fails to do anything about the return of the property for several months, it is unlikely that she would then win an undue influence suit even if she might have done so if she had acted promptly.

Question 32

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 is married to Tom Lachey, she cannot sue him for undue influence.

Question 33

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

Question 34

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.

Question 35

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.

Question 36

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.

Question 37

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.

Question 38

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. If Wes had told Stan that the paper was a guarantee for $1,500 when it was in fact for $2,000, Stan could still successfully plead non est factum as a defence.

Question 39

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.

Question 40

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.

Question 41

Innocent misrepresentation renders a contract voidable at the option of either party.

Question 42

Your car dealer hands you documents for your signature, "the paperwork on the deal" you have just shaken hands on. Among the papers is an undiscussed extended warranty plan. You sign all the documents where the dealer so indicated. You first become aware of the warranty when its cost is automatically debited from your chequing account. Your successful defence to further payments will be non est factum.

Question 43

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

Question 44

ABC Construction Co. was building a large condominium complex in two phases. Phase 1 was to commence immediately, and construction of Phase 2 would get under way once a minimum of 50% of the Phase 1 units had been presold. ABC had asked for bids for certain aspects of the construction project. Company X had bid on the stucco work and Company Y on the drywall. Both bids were accepted by ABC and the respective contracts awarded. Moreover, ABC used the bids to prepare its budgeting for the project and to acquire its financing.
Shortly after commencement of Phase 1, Company X ran into financial difficulties and was forced to withdraw from the project. ABC then approached Company Y with a request for a bid on the work which Company X could no longer complete. ABC emphasized the urgency to move on with Phase 1, which was falling behind schedule, and requested Company Y's bid as quickly as possible. Company Y believed from the conversations it had with various representatives of ABC that it was to quote only on Phase 1. ABC accepted Company Y's bid as it was very close to the prior bid of Company X.
Sometime later it became apparent that ABC expected Company Y to do all of the stucco work on both phases of the project for the bid price. The president of Company Y contacted the president of Company X to inquire what X had understood the bid terms to be. X's president replied that he had been unclear at the time just what he was bidding on but that he had submitted a bid for one phase only. In fact, he mentioned to Y's president that if ABC had taken even a brief look at his bid, it would have realized that the bid would have been substantially below cost if it were for both phases. After this conversation, Company Y undertook the further work on Phase 2 but insisted on additional payment.
ABC contended that the bid was to be for both phases and brought legal action for breach of contract against Company Y. Company Y countered with a claim for the money owing for Phase 2. Discuss the legal issues which arise as a result of these facts and the principles of law each party will rely on.

Question 45

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.

Question 46

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.

Question 47

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.

Question 48

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.

Question 49

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.

Question 50

Where there has been rescission, there must have been reliance.

Question 51

Duane applied to the municipality of Smallville for a permit to build an addition onto his home. He contacted the municipal offices by telephone to enquire about the fee for the permit. The building official was unavailable, but the municipal clerk told Duane she thought the current fee was $100 per 1,000 square feet. Duane's new addition was planned to be 3,500 square feet, so he attached a cheque in the amount of $350 to his application and delivered it to the building office. When the permit was approved and returned a note was attached to it which read that all building permits now cost a flat fee of $250. No money accompanied the note. Duane contacted the municipal offices requesting a refund of his $100. He was told by the clerk that there was no municipal bylaw authorizing the repayment of excess fees paid to the municipality, so she had no authority to process his refund. She suggested he could apply the extra amount to his municipal property taxes. Duane would probably be unable to obtain the money he paid in error.

Question 52

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?

Question 53

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?

Question 54

For there to be punitive damages, there must have been the tort of deceit, and therefore there must have been fraudulent misrepresentation.

Question 55

Undue influence is not the same legal concept as duress. Despite this, both constitute grounds for rescission by the affected party.

Question 56

Fraudulent misrepresentation renders a contract void ab initio.