Mistake
Copyright Guy Harley 2004
Mistake
 A party cannot get out of a contract because
they made a mistake
 Exceptions:
 Mistake due to other party’s misrepresentation,
unconscionable conduct etc.
 Common mistake
 Mutual mistake
 Unilateral mistake
Copyright Guy Harley 2004
Mistake
 Common mistake
 Both parties make the same mistake
 Mutual Mistake
 An objective test
 Unilateral Mistake
 One party is mistaken as to a fact; and
 Other party is aware of the mistake
Copyright Guy Harley 2004
Misrepresentation
Copyright Guy Harley 2004
Elements of Misrepresentation
 The statement was false
 The statement was one of fact
 Statement was addressed to the representee
before or at the time that the contract was
entered into
 The statement induced the representee to
enter into the contract
 See Attwood v Small (Outline p 8-8)
Copyright Guy Harley 2004
History
 1880’s – Caveat Emptor – Let the buyer beware
 Court of Equity
 Relief for fraudulent misrepresentation
 Rescission was only remedy
 Common Law Courts
 Relief for innocent misrepresentation only if it
became a term of the contract
 Tort of negligent misrepresentation
 Only remedy was damages
Copyright Guy Harley 2004
History
 1970’s – Statutory Reform
 S52 Trade Practices Act & s11 Fair Trading Act
 Removed distinction between fraudulent, negligent
and innocent misrepresentation
 Built upon previous law regarding
misrepresentation
Copyright Guy Harley 2004
Causes of action for misrepresentation
Action for
damages for tort
of deceit
(fraud)
Action for
damages for
tort of
negligence
common law
misrepresentations
Copyright Guy Harley 2004
Action for misleading or
deceptive conduct
(breach of TPA s 52,
Fair Trading Act or
ASIC Act)
statutory
misrepresentations
Action for breach of
contract
contract
law
Categories of Misrepresentation
 Fraudulent misrepresentation
 Representor knew it to be false or was reckless as
to whether it was true or false
 If Representor believed it to be true, no action for
fraudulent misrepresentation even if negligent
Copyright Guy Harley 2004
Fraudulent misrepresentation (deceit)
Step 1
A false representation
of fact was made (beware
promises, opinions or a
mere puffery)
Step 2
The representation was
intended to (and did)
induce the representee to
act ; (eg, by creating a
contract)
Step 3
The representor
knew the statement was
untrue, or was reckless as to
its truth
 Liability for fraud cannot be excluded
 Remedy for fraudulent misrepresentation is damages.
Copyright Guy Harley 2004
Categories of Misrepresentation
 Negligent Misrepresentation
 Representor owed a duty of care to representee
 Representor failed to exercise the required
standard of care
 Loss, which was a reasonably foreseeable
consequence of the misrepresentation, was
caused by misrepresentation
 Originally restricted to cases where there was a
physical loss – now can claim for pure economic
loss – Hedley Byrne v Heller
Copyright Guy Harley 2004
Negligent misrepresentation
Step 1
Did the
representor owe
a duty of care to
the representee?
Step 2
Has the representor
failed to exercise the
required standard of
care?
Step 3
Were the representee’s
losses caused by the
negligence and were the
losses reasonably
foreseeable?
 Liability for negligence can be excluded by an
exemption clause
 Remedy for negligence is damages.
Copyright Guy Harley 2004
Categories of Misrepresentation
 Innocent misrepresentation
 Representor did not know it was false and owed
no duty of care to the representee
 No remedy at common law or equity
Copyright Guy Harley 2004
Categories of Misrepresentation
 Misleading & Deceptive Conduct
 Section 52 Trade Practices Act
 No need for fraud or negligence
Copyright Guy Harley 2004
Misleading & Deceptive Conduct
 Section 52 Trade Practices Act
‘A corporation shall not, in trade or commerce,
engage in conduct that is misleading or
deceptive or is likely to mislead or deceive’
 Section 9 Fair Trading Act
‘A person shall not, in trade or commerce,
engage in conduct that is misleading or
deceptive or is likely to mislead or deceive’
Copyright Guy Harley 2004
Misleading & Deceptive Conduct
 No requirement for:
 Fraud; or
 Negligence
 Will not be liable if:
 Not the source of the information; and
 Disclaims responsibility
Copyright Guy Harley 2004
Remedies for Misrepresentation
 Common Law
 Recission
 Contract is void ab initio
 Not the same as termination
 Damages
 Trade Practices Act
 Recission, damages, injunctions
Copyright Guy Harley 2004
Duress, Undue Influence and
Unconscionable Conduct
Copyright Guy Harley 2004
Duress
 A contract entered into due to coercion or
force can be rescinded by the victim
 Coercion can be:
 To the person;
 To goods; or
 Economic duress
Copyright Guy Harley 2004
Duress (cont.)
 Duress to the Person
Actual or threatened
 Violence or
 Unlawful imprisonment
to the person, his family or friends
 Duress to Goods
 Threats that are made against a person’s property
Copyright Guy Harley 2004
Duress (cont.)
 Person threatening violence must show that it
was not a contributing cause to victim’s
decision to enter into the contract
 Violence must occur at or before the time that
the victim entered into the contract
Copyright Guy Harley 2004
Economic duress
 An economic threat that is not “legitimate”
 No rule that that commercial parties have to
be fair to one another
 A threat to break a contract can be economic
duress
 A lawful threat may be illegitimate
Copyright Guy Harley 2004
Undue influence
 The unconscionable use by one person of
power possessed by him over another in
order to induce the weaker party to enter into
a contract
 Presumed in special relationships and where
one party is in a position of dominance or
confidence
Copyright Guy Harley 2004
Undue influence (cont.)
 There must be more than mere reliance or
influence
 Innocent party must show that the contract
would not have been made without the undue
influence
 Court will look at:
 The equality of the bargain
 The weaker party’s ability to make free and
independent choices
 Whether the weaker party received independent
advice
Copyright Guy Harley 2004
Undue influence (cont.)
 Court will presume undue influence for
contracts between:
 Parent and child
 Trustee & beneficiary
 Physician & patient
 Solicitor and client
 Guardian and ward
 Religious advisor and devotee
 Any fiduciary relationship
 Tasker v Algar (Outline p 8-9)
Copyright Guy Harley 2004
Unconscionable Conduct
 One party takes advantage of the other
parties special disability to the extent that the
contract is unfair or unconscionable
 Commercial Bank of Australia Ltd. V. Amadio
[1983] HCA 14
 Louth v. Diprose [1992] HCA 61
 Elements
 Special disability
 Absence of any equality between the parties
 Disability evident to other party
Copyright Guy Harley 2004
Unconscionable Conduct - Remedies
 Originally, only rescission was available
 s51AA Trade Practices Act and s7 Fair Trading Act
permits damages
A corporation must not, in trade or commerce,
engage in conduct that is unconscionable within the
meaning of the unwritten law, from time to time, of the
States and Territories.
 S82 Trade Practices Act & s159 Fair Trading Act
A person who suffers loss or damage by conduct of
another person … may recover the amount of the
loss or damage by action against that other person or
against any person involved in the contravention.
Copyright Guy Harley 2004
Provision
TPA
ASICA
FTA
52
12DA
9
Predictions
51A
12BB
4
Injunctions
80
12GD
149
Damages
82
12GF
159
Other remedies
87
12GM
158
Unconscionable conduct
51AA
12CA
7
Unconscionable conduct –
consumers
51AB
12CB
8
Unconscionable conduct – small
business
51AC
12CC
8A & 8B
Misleading or deceptive
conduct
Copyright Guy Harley 2004