7 Contract defects

Negligent misrepresentation is:

• A)   an incorrect statement made with due care for its accuracy

• B)   an incorrect statement made without due care for its accuracy

• C)   a correct statement made with due care for its accuracy

• D)   more difficult to prove than fraudulent misrepresentation

• E)    not grounds to rescind a contract

Fraudulent misrepresentation is:

• A)   a correct statement;

• B)   an inaccurate statement that may or may not have been done intentionally

• C)   an incorrect statement made knowingly with the intention of causing injury to another

• D)   an incorrect statement made without the intention to cause injury to another

• E)   a type of mistake in contract law

In some cases, the Court will not grant the remedy of rescission. In which of the following sitations would a court refuse to grant rescission?

• A)   resale of the property to a purchaser who knows of the misrepresentation

• B)   undue haste in claiming rescission

• C)   the goods involved were very expensive

• D)   resale of property to a bona fide purchaser who did not know of the misrepresentation

• E)    rescission is not granted in any of the above situations

Mary was selling her house. The purchase asked if it had termites and Mary replied in horror, “absolutely not”.  However, it did have termites. But clever insects that they are, they kept well inside the wood so Mary never saw them and didn’t have any idea that they were there. There was no mention of this statement in the contract for sale of the house. Mary’s statement is considered in law to be

• A)   an innocent misrepresentation

• B)   a negligent misrepresentation

• C)   a false warranty

• D)   of no consequence because it was not included in the written contract

• E)    of no consequence because she believed that there were no termites and was honestly mistaken

Angel Cabrera owns a store and is showing it to Crista D Alimonte who wants to lease it to run a coffee shop. Angel thinks he saw a newspaper report that a new bus route with a main stop across from the shop was to be started soon. He tells Crista that a new bus stop is soon to be established. She signs a lease that sets out only the rental amount and the length of the lease. There is no mention of the bus stop. It turns out the city had never said it was planning a new bus route in this area, it was in a different part of the city. Which of the following is TRUE?

• A)   Cirsta has no remedy because there is no term in the lease guaranteeing that a bus stop would be started at that location.

• B)   Crista has no remedy because Angel honestly believed a bus stop would be started at that location

• C)   The statement by Angel was an innocent misrepresentation.

• D)   The statement by Angel was a negligent misrepresentation.

• E)    The statement by Angel was a fraudulent misrepresentation.

The legal term for the termination of a contract by a court because of a breach of the contract is:

• A)   rectification.

• B)   damages

• C)   rescission

• D)   an injunction

• E)    novation

Assume you live in British Columbia or another province with similar consumer protection legislation. You take your car in for repair of the carburetor, and the service person falsely insists that you need a new exhaust pipe. You get the pipe. The contract you sign contains an entire agreement clause. Do you have a remedy?

• A)   Yes. The service person engaged in a deceptive practice. This is an offence for which a penalty can be imposed.

• B)   Yes. The entire agreement clause is ineffective under such legislation.

• C)   Yes. The representation concerning the pipe is a term of this consumer contract.

• D)   Both B and C

• All of the above

Sheldon Hamer quoted a price to Cynthia Hui and she placed an order based on that price. Sheldon quoted too low, forgetting to include shipping and handling charges, so he now wants to get out of the deal, claiming that the price difference is so great that Cynthia should have known something was wrong. What is the name of the legal grounds that Sheldon will use in a court section to set aside the transaction?

• A)   Misrepresentaion.

• B)   Unjust enrichment

• C)   Unfair advantage

• D)   Mistake

• E)    Non est factum

Andrew’s restaurant was experiencing financial problems. His sales were down and he needed help. Andrew requires $20,000 to cover outstanding accounts within three days or face closing the restaurant. His bank refused to increase his line of credit so Andrew went to his accountant for suggestions. The accountant told him he could lend Andrew $20,000 but only if Andrew signed over a 50% interest in the business. In desperation, Andrew agreed. If Andrew wants to have the agreement set aside, which of the following would he rely on?

• A)   Duress.

• B)   Mistake

• C)   Misrepresentation

• D)   Non est factum

• E)    Restitution

Undue influence is that type of influence which prevents a party to a contract from 
exercising independent judgment or decision making when signing a contract.

• TRUE

• FALSE