Validity of Contracts

Wise International School

 Misrepresentation
• Misrepresentation is the giving of false information by one party (or their
agent) to the other before the contract is made, which induces them to make
the contract.
• Misrepresentation may occur where a fiduciary fails to disclose material facts
of which they have knowledge.

• Fiduciary – Relationship between 2 people (buyer and seller)

 Elements of Misrepresentation
• What amounts to an untrue statement
• What is a material fact – Is a fact that is important, significant or essential to
a reasonable person in deciding whether to engage or not to engage in a
particular transaction
• Whether it is made by one party to the contract to the other or not
• Whether it is during negotiations and in order to induce the entry into the
contract
 Types of Misrepresentation
• Fraudulent misrepresentation – where a false representation has been made
knowingly, or without belief in its truth, or recklessly as to its truth. For
example, if a jeweler sells you a diamond ring which you later discover is
crystal, that is a fraudulent misrepresentation.
• Negligent misrepresentation – Representation made carelessly and in breach
of duty owed by Party A to Party B to take reasonable care that the
representation is accurate. if you tell a person that a stereo system is brand
new when it is four-years-old and has been used heavily
 Types of Misrepresentation cont.…
• Innocent Misrepresentation – A false statement of material fact by the
defendant, who was unaware at the time of contract signing that the
statement was untrue. A seller unknowingly offering defective merchandise,
or if a person on Craigslist sells a used TV but does not know it's broken.
• A misrepresentation is innocent where a trader believes that the statement
they are making is true and consequently has no intention to deceive the
buyer.
 Mistake
• A mistake is an erroneous belief, at contracting, that certain facts are true.
• It can be argued as a defense, and if raised successfully can lead to the
agreement in question being found void ab initio or voidable, or alternatively
an equitable remedy may be provided by the courts.
 Types of Mistakes
• Common mistake –where both parties make the same mistake
• Mutual mistake – where the parties are at cross purposes
• Unilateral mistake – where only one party is mistaken

• Cross Purposes – A way that causes confusion or failure because people are working or
talking with different goals or purposes
 Discharge of Contract
• Discharge of contract means termination of the contractual relationship
between the parties.
• A contract is said to be discharged when it ceases to operate, i.e., when the
rights and obligations created by it come to an end.
 Discharge of Contract – Performance
• Discharge of Contract by Performance – A contract is said to be discharged
by performance when both the parties perform all the primary obligations
both express and implied which are set out under the contract.
• Substantial Performance - If a party has done substantially what was required
under the contract, then the doctrine of substantial performance can apply.
(Lesser to than what has been done).
• Part Performance - Where one of the parties has performed the contract,
but not completely, if the other side has shown willingness to accept the part
performed.
Discharge of Contract – Performance Cont.…
• Time for Performance - The specific time or times indicated in the Contract
at which or within which delivery or other performance is to be completed, ,
but not within the time stipulated, this will give rise to damages because a
breach has occurred, but not repudiation of the contract.
 Discharge of Contract – Agreement
• Discharge of Contract by Agreement – Is when you end a contract when the
terms and conditions have been met or fulfilled. However, the involved
parties can also choose to terminate a contract even when the primary terms
and conditions of the said contract have not yet been fulfilled.
• Existing Contract – The contract that is currently being obliged/fullfiled
coming to an end
• New contract – originally creating a new contract either by amending the
terms of the new contract based on the old contract or automatically which
ends the old contract
 Discharge of Contract – Breach
• Discharge of Contract by Breach – When a contracting party refuses or fails
to give performance or disables himself from giving performance or makes
the performance of the contract impossible by his conduct according to the
contract
• Actual Breach – This is where a party to a contract does not perform their
obligations under the contract at all.
• Anticipatory Breach – An action that shows one party's intention to fail to
fulfill its contractual obligations to another party.
 Discharge of Contract – Frustration
• Discharge of Contract by Frustration – A contract may be frustrated where
there exists a change in circumstances, after the contract was made, which is
not the fault of either of the parties, which renders the contract either
impossible to perform or deprives the contract of its commercial purpose.
The doctrine will be applied in 3 areas;
• Impossibility – This is where the contract is frustrated because performance
has become impossible due to Death of either party, Unavailability of the
party, Destruction or unavailability of something essential for the contract’s
performance, Method of performance is impossible.
Discharge of Contract – Frustration Cont.….
• Illegality – This is where after the contract is formed, a change in the law
makes its performance illegal. This can often happen in times of war when
laws may change rapidly and cause a contract to be frustrated.
• Commercial Sterility – This is where the commercial purpose of the contract
has disappeared as a result of the intervening event, the contract may be
frustrated. It is also sometimes known as ‘pointless’ - performance of the
contract becomes pointless, even though it is still technically possible.