Genuine consent

1
Genuine consent

• There must be genuine agreement between the
  parties to a contract as to its nature and scope
  (consensus ad idem).
• If one of the parties has not given genuine
  consent, then the contract could be either void
  or voidable depending on what the parties have
  agreed to.

2
Genuine consent
Consent
Mistake
Misrepresentation
Duress
Undue influence
Unconscionability
Fraudulent
Innocent
Negligent
Special relationship
No special relationship
Against the person
Against goods
Economic
Non est factum
Common
Unilateral
Mutual
3
Absence of consent

• Mistake (not discussed in this subject)
• Misrepresentation
• Duress
• Undue influence
• Unconscionable conduct

4
Misrepresentation

• Statements made before formation of the contract
  may be terms or pre-contractual representations.
• A misrepresentation is a false representation.

5
Misrepresentation

• 3 types of misrepresentation
• fraudulent misrepresentation - intention to
  induce a person to enter into a contract
• innocent misrepresentation there is a lack of
  intentional deceit and
• negligent misrepresentation statement made
  innocently but carelessly .

6
Misrepresentation

• If the representation was made fraudulently, the
  innocent party may be entitled to recover damages
  under the tort of deceit.
• If the representation was made negligently, the
  innocent party may be able to recover damages
  under the tort of negligence.

7
Misrepresentation

• Misrepresentation only makes the contract
  voidable.
• In the event of misrepresentation, the innocent
  party has a right to rescind the contract.
• This right will be lost where
• with full knowledge they elect to continue with
  the contract
• the parties cannot be restored to their original
  positions
• a third party has acquired in good faith and for
  value an interest in the subject matter of the
  contract
• there has been a long delay.

8
Misrepresentation

• Where there are only two parties the outcome is
  no different to that of mistake.
• However, where there are three parties involved,
  the question of the timing of the rescission of
  the contract becomes important in terms of
  whether the third party can get title.

9
Inducement

• A representation must produce a misunderstanding
  in the mind of the representee and must be one of
  the reasons which induced the representee to make
  the contract.

10
Inducement

• To operate as an inducement, the representation
  must
• be made with the intention that it should be
  acted upon by the representee
• induce the contract so that the representee has
  not relied on their own skill and judgement
• be material in the sense that it affected the
  representees judgement and
• be known to the representee, though communication
  does not have to be made directly with the
  representee.

11
Fraudulent misrepresentation

• There must be an intentional deceit, and the
  court is only concerned with the belief held by
  the representor at the time.
• There must be a false statement of fact that the
  representor knew was false or did not believe was
  true, which it was known would be acted on, and
  which was acted on.
• A contract induced by fraud is voidable

12
Innocent misrepresentation

• A misstatement of a material fact, not known to
  be false, made by one party to another, which
  induces the other to enter into a contract.
• It is distinguished from fraudulent
  misrepresentation by the lack of intentional
  deceit and the right to recover damages.

13
Innocent misrepresentation

• Common law prevails to the exclusion of equity.
• The appropriate remedy depends on whether the
  representation is a condition or a warranty.
• If a condition sue for damages or for a total
  failure to perform the contract.
• If a warranty sue for damages only no order
  for rescission in equity.

14
Negligent misrepresentation

• An innocent but negligent misrepresentation can
  give rise to an action where a special
  relationship can be shown to exist between the
  parties.
• CASE Hedley Byrne Co Ltd v Heller Partners
  Ltd 1964
• CASE Esso Petroleum Co. Ltd v Mardon 1976

15
Negligent misrepresentation

• Guidelines in establishing negligent
  misrepresentation
• a special relationship exists between parties
  such that the person providing the information or
  advice must exercise a duty of care
• subject matter is of a serious or business
  nature
• person providing the advice realises that the
  recipient intends to act upon that advice or
  information
• it was reasonable for recipient to rely on the
  advice or information and
• damage was suffered by the recipient usually,
  monetary loss.

16
Statutory modifications

• Both Commonwealth (Trade Practices Act 1974
  TPA) and state and territory consumer
  protection legislation have impacted on the area
  of misrepresentations by targeting conduct rather
  than contractual situations.
• For example, relevant sections of the TPA
  include
• s 52(1) misleading or deceptive conduct
• s 51A representations as to the future
• s 53 false representations
• s 53A false representations in relation to land
• s 53B false representations in relation to
  employment
• s 55A misleading conduct regarding services
• s 59 misleading statements about home-operated
  businesses.

17
Misrepresentation

• Most actions for misrepresentation are today
  brought under the Trade Practices Act, because
  breach is easier to establish and there is a
  broader range of remedies.

18
Duress

• Duress involves use of threats or violence
  against a person, their goods or economic
  interest to force them to enter into a contract
  against their will.
• Lack of voluntary agreement.
• It only has to be one of the reasons for a person
  to enter into a contract and the effect on the
  contract is that it will be voidable at the
  option of the injured party.
• CASE Barton v Armstrong (1973)

19
Duress

• Physical duress
• A contract is voidable where a threat to the
  personal safety or property of a party or their
  immediate family is a reason that the contract
  was entered into.
• CASE Barton v Armstrong (1974)

20
Duress

• Economic duress
• Threats to an individuals property or other more
  abstract financial interests may render the
  contract voidable.
• CASE North Ocean Shipping Co Ltd v Hyundai
  Construction Co Ltd (1979)

21
Undue influence

• Involves the improper use of a position of
  influence or power possessed by one person over
  another in order to induce that other person to
  act for their benefit.
• The doctrine is primarily concerned with gifts
  but may also apply to contracts.
• The gift or contract may be set aside where the
  parties were in a relationship where one had the
  power to influence the other in an unacceptable
  way.

22
Undue influence

• Undue influence will be presumed in certain
  relationships (e.g. doctor and patient, solicitor
  and client, guardian and child, religious leader
  and devotee).
• CASE Allcard v Skinner (1887)
• CASE Johnson v Buttress (1936)
• Where there is no pre-existing relationship, the
  gift/contract may still be set aside if actual
  undue influence is established.

23
Undue influence

• Action based in equity and usual remedy is
  rescission.
• Action must commence within a reasonable time or
  right to rescission may be lost.
• CASE Allcard v Skinner (1887)

24
Types of undue influence

• Where a special relationship is presumed to
  exist
• The defendant stands in an unequal relationship
  to the plaintiff in a relationship of influence
  or confidence, e.g. doctor and patient.
• Onus of rebutting the presumption lies with the
  defendant.
• Where no special relationship exists
• The plaintiff must prove that the defendant
  exerted influence over them.
• If undue influence is established, the contract
  is voidable.

25
Unconscionable contracts

• In its equitable jurisdiction, the court will set
  aside a contract as unconscionable (unfair) where
  the defendant has abused their superior
  bargaining position in their dealings with the
  plaintiff.
• CASE Commercial Bank of Australia v Amadio
  (1983)
• The plaintiff has to establish
• They were in a position of special
  disadvantage.
• CASE Louth v Diprose (1992)
• Which substantially affected their ability to
  protect themselves
• The defendant knew, or ought to have known, of
  the plaintiffs disability and had taken
  advantage of it
• The actions of the defendant were unconscionable.

26
Unconscionable contracts

• Part IVA, ss 51AA 51AC of the Trade Practices
  Act 1974 (Clth), prohibits a corporation, acting
  in trade or commerce, from engaging in conduct
  which is, in all the circumstances,
  unconscionable
• Section 51A prohibits conduct that is
  unconscionable within the meaning of the common
  law and Amadios case.

27
Unconscionable contracts

• Section 51AB catches consumer transactions and s
  51AB(2) lists a number of guidelines for the
  court to take into account
• Section 51AC catches unconscionable conduct in
  business dealings of up to 3 million and s
  51AC(3) lists a number of guidelines for the
  court to take into account in determining what is
  unconscionable.

28
Unconscionable contracts

• The Fair Trading legislation of the States and
  Territories also prohibits persons or suppliers
  from engaging in such conduct.
• CASE S H Lock (Aust) Ltd v Kennedy (1988)
• CASE West v AGC (Advance) Ltd (1985)