CONTRACT LAW B NOTES

1. Misrepresentation
a. Elements of actionable misrepresentation
b. Types of misrepresentation
i. Fraudulent
ii. Innocent
iii. Negligent
c. Statement of fact
d. Statement of opinion
e. Must be false
f. Intention
g. Partially true
h. Material Inducement
i. Remedies
2. Mistake
a. Types of mistake
i. Common mistake
ii. Mutual mistake
iii. Unilateral mistake
b. Remedies
3. Quick identification test
• To identify Duress:
o Whether any applied pressure induced the victim to enter into the contract
o Did that pressure go beyond what the law is prepared to considered legitimate
• To identify Undue Influence:
o Does a special relationship exist between the parties? OR
• To identify Unconscionable conduct:
o Did the other party have a special disadvantage?
4. Duress
a. Five step test
b. Duress to the person
c. Duress of goods
d. Economic duress
e. Remedies
5. Undue influence
a. Categories of undue influence
i. Where there is a special relationship between the parties (arises a rebuttal
presumption of undue influence)
ii. Where no special relationship exists à actual undue influence (rare)
b. Actual undue influence
c. Presumption undue influence
i. Class 2A undue influence
ii. Class 2B undue influence
d. Meredith duress notes
6. Unconscionable conduct
a. Elements
 i. Special disadvantage
ii. Knowledge
iii. Unconscientious exploitation of the disadvantage
b. Defences
i. Independent advice
ii. Improvidence
iii. Laches
c. Remedies
d. Statutory unconscionability ACL
e. Unconscionable conduct pursuant to the unwritten law (s 20(1))
f. Unconscionable conduct in connect with goods and services (s 21(1))
7. Statutory unconscionability pursuant to the Australian consumer law
8. Privity
a. Relationship with the doctrine of consideration
b. Remedies
c. Damages in common law
i. Exceptions to the common law rule
d. Specific performance in equity
e. Trident General Insurance v McNeice Bros Pty Ltd
f. Exceptions to the doctrine
g. Exclusion clauses and third parties
h. Bill of landing
i. Covenants on land
j. Trusts
k. Equitable estoppel
l. Unjust enrichment
m. Statutory exception
9. Construction of exclusion clauses
a. Elements
b. Exclusion clauses and negligence
c. Principles of construction
d. Exclusion clauses and ACL
i. S 64
10. Misleading and Deceptive Conduct
a. Elements
i. Person
ii. Engages in conduct
iii. In trade or commerce
iv. Was it misleading and deceptive or likely to mislead or deceive
v. Causation
b. Pre-contractual statements
c. Types of cases where misleading and deceptive conduct is likely to arise
d. Six factual categories
i. Comparative advertising
ii. Character merchandising
iii. Contractual promises
e. Remedies
11. Statutory Unconscionability
 a. S 20 ACL
b. Historical context
c. Elements of common law unconscionable conduct (S 20(1))
d. Elements of statute law unconscionable conduct (S 21)
e. Breakdown of unconscionable conduct
f. Matters the court may have regard to for the purposes of section 21
g. Substantive and procedural unconscionability
h. Remedies
i. Action for damages
ii. Civil pecuniary penalties
iii. Injunctions
12. Unfair Contract Terms
a. Summary
b. Elements
i. Consumer contract
ii. Standard form contract
iii. Unfair term
iv. Consideration of s 24(2)
c. Examples of unfair terms
d. Remedies
13. Consumer Guarantees
a. Definition of consumer
b. Definition of ordinarily acquired for personal, domestic or household use or
consumption
c. Guarantees relating to the supply of goods
i. Title of goods
ii. Undistributed possession of goods
iii. Undisclosed securities
iv. Acceptable quality
d. Reasonable consumer test
e. If the ‘unacceptable quality’ was bought to the consumers attention
f. Fitness for disclosed purpose
g. Supply of goods by descriptions (advertisements)
h. Supply of goods by sample or demonstration
i. Repair of facilities
j. Express warranties
k. Guarantees relating to the supply of services
l. Fitness for a particular purpose
m. Excluding or limiting liability
n. Limitation for goods
o. Limitation of services
p. The consumer may also argue no limitation clause should apply because it is ‘not fair
or reasonable’ for the person who supplied the good or service to rely on that term of
the contract
q. Remedies
 MISREPRESENTATION

Statements that are made during pre-contractual representations may become party of a contract
which is subsequently made. Where those statements are false the innocent party has a right to seek
damages for breach of contract.

Whether such statements constitute terms or not is a matter of ascertaining the parties intention.

If such statements are not contractual terms, they may be misrepresentations. Misrepresentations give
rise to certain remedies that may be available to the innocent party. The primary remedy is rescission
(restore the parties to their original status before the contract was made). If representation was
fraudulent or negligent misstatement, the representee can pursue remedies in the tort of deceit.

The misrepresentation must be of a fact past or present. It must be a misrepresentation of fact, not
law. In the context of mistake, the distinction between fact and law has been rejected. Classic
International v Lagos

TYPES OF MISREPRESENTATION
1. Fraudulent
a. Makes a statement knowing it to be false or without believing in its truth
b. Test in Krakowski v Eurolynx
c. Consider the sense in which the seller intended the other party to understand the
statement.
2. Negligent
3. Innocent – not actionable
a. Believes the statement is true and consequently has no intention to deceive the buyer

ELEMENTS OF ACTIONABLE MISREPRESENTATION

To establish actionable misrepresentation, the party to whom the representation has been made
(representee), must show, before or at the time of making the contract, the person who made the
misrepresentation (representor) directly or indirectly
1. Made a false statement of fact;
2. Which was intended to induce the innocent party to enter into the contract;
3. That it did in fact operate as an inducement to enter into the contract.

It need not be the sole inducement. Dadourian Group International

a. Sole inducement or;
b. Partial inducement

**if ambiguous, the court will determine the meaning of representation using an objective approach:
Krakowski v Eurolynx

The onus of proof is on the party whom the representation has been made (the representee).
THE REPRESENTATION MADE MUST BE A STATEMENT OF FACT

A representation must be of past or present fact

• Excludes statements of law
• The law makes no distinction anymore between mistakes of fact and mistakes of law. Both
are now actionable.
a. Classic International Pty Ltd v Lagos

Statements of law:
• If the misstatement is both a statement of fact and law it can be misrepresentation
• Misstatements as to a persons private rights, the effect of a private instrument and the effect
of private Acts of parliament can amount to misrepresentations - Public Trustee v Taylor
• If the misstatement of law is deliberate or wilful it can amount to misrepresentation – Public
Trustee v Taylor

Advertising puffery cannot be regarded as a misrepresentation

• A puff is a promotional statement that no reasonable person would believe to be a statement
of fact. Mitchell v Valherie

STATEMENTS OF FACT
Promises or assurances as to the future are not statements of fact for the purposes of misrepresentation
(Civil Service Co-operative Society of Victoria v Blyth).

• Statements of future intention are not misrepresentations as such a statement cannot be either
true or false at the time it is made, it cannot be a statement of a presently existing fact. Beattie v
Lord Ebury

• However a statement of future will be a statement of presently existing fact, if there is no

previous intention to do that which the representor state is his or her future intention.

TEST: Will be held as misrepresentation if:

2. The maker makes the statements without the genuine intention of fulfilling them; or
3. There are no reasonable prospects of fulfilling those expectations.

STATEMENT OF OPINION
Where a person makes a statement of intention or opinion it can be implied that their state of mind is
consistent with that intention or opinion. If that is not the case, the representation will be regarded as
fraudulent. Ritter v North Ide Enterprises

Statements of opinions are not generally regarded as statements of fact. Bisset v Wilkinson

Take into account the material facts of the transaction, the knowledge of the parties respectively and
their relative positions the words of representations used and the actual condition of the subject matter
spoken of.
Bisset v Wilkinson

Thus, if the statement of opinion is made upon the basis of facts known to the representor, but
unknown to the representee, the statement will be regarded as one of fact
Smith v Land and House Property Corporation
• As Smith clearly knew the tenant’s track record, it was held that the misrepresentation was
one of fact.

REPRESENTATION MUST BE FALSE

Falsity of a statement requires a positive act by the representor. This may be a little nod, wink or
shake of the head. Walters v Morgan

Silence is not a false misrepresentation

Where there is no legal obligation to divulge a material fact, the silence of the representor is not
regarded as actionable. There is no general obligation on a person to disclose facts. Concut v Worrell

The representor may remain silent unless there is a special relationship between the parties in which
there is a duty to disclose a material fact.

Parties to a contract may remain silent on a matter which is in the other parties interest, other than:
(exceptions to the limitation)
1. If there is the existence of a special relationship between the parties
2. If there is the existence of statutory provisions requiring disclosure of information
(E.g. section 18 of the Australian Consumer Law – Misleading and deceptive
conduct).
3. Contracts in upmost good faith impose duties to disclose material facts - Bell v Lever
Bros Ltd
4. In the context of insurance contracts – it is required that a person seeking out to take
insurance must disclose all the facts that are material to insurers decision whether to
accept the insured risk - Khoury v GIO
§ Regulated by ss 21-22 of the Insurance Contract Act 1984 Cth
§ The circumstances in which there is no statutory duty of disclosure are in the
following situations:
1. A fact which diminishes the risk; or
2. A fact of common knowledge; or
3. The insurer knows in the ordinary course of business as an insurer
ought to know; or
4. Where compliance with the duty of disclosure is waived by the
insurer.

Common law rule of caveat emptor (buyer beware):

The onus is on them to make due diligence checks to see that the product that they are getting is what
it is represented to be. Non-disclosure in such contracts means there is nothing material to disclose.
Wilful non-disclosure from which the innocent party suffers loss is actionable.
What is material
1. Where the insured is aware that it is a material fact, that the insurer would want to know
before deciding whether to accept the risk and if so, on what terms or reject the risk
altogether.
2. A reasonable person would be expected to know that the fact that is undisclosed would be
relevant to the insurer in that he would have wanted to know.

If the statement is only partially true or a distortion of a truth, the failure to disclose the whole truth
amounts to a misrepresentation (Tipperary Developments v WA)

Representations may continue without being expressly repeated, unless they are modified or
withdrawn o long as they remain relevant to the dealings between the parties.

If the statement is true at the time, but becomes untrue, the representor has an obligation to disclose.
Brownline v Campbell

EVEN IF A STATEMENT IS ONLY PARTIALLY TRUE OR IT IS A DISTORTION OF THE

TRUTH IT IS STILL A MISREPRESENTATION.

Dimmock v Hallett
The vendor’s statement was held to be a misrepresentation, although at the time of making it, it was
literally true.

Krakowski v Eurolynx Properties Ltd

• Failed to disclose to Krakowski that they had a side agreement with the tenant.
The features of the side agreement between Eurolynx and the tenant, said the High Court amounted to
a misrepresentation to the Krakowskis. In fact, the High Court went as far as holding that it was
misleading and deceptive conduct under Section 18 of the ACL as well as fraudulent
misrepresentation.

If mere silence does engender reasonable expectations, then the context in which silence as a false
representation may be found.
Demagogue Pty. Ltd v Ramensky

Also, representations may continue without being repeated unless modified or withdrawn. The
representations must relate to the dealings between the parties.
Mbakwe v Sarkis

Changed circumstances. If a representation is true when made but over time is no longer accurate,
there is an obligation to disclose changed circumstances. With v O’Flanagan, it was held that there
was duty to disclose the change of circumstance.
• Only disclose what is adverse to the transaction

In the Australian case of Lockhart v Osman, the failure to disclose the changed circumstances, was
held to be a fraudulent misrepresentation, particularly if the initial representation was clearly known
to be inaccurate.