Exiting your Contract.

This is not as easy as most people expect it to be. However, there are rules when entering into a contract and as such, if the rules have been broken by a party then the other party will have the right to rescind (cancel) the contract in part or whole. Further to the above statement and as the contract is subject to the jurisdictional law which regulates the contract, in existence will be Statutes (laws) which could provide a pathway which results in extended protection for a consumer. Contract exits and the option to track onto an exit strategy require a party to think carefully as to the reasons why seeking an exit is the best option available to them. This will involve lengthy discussion with an expert so that your case and your quest does not flounder leaving you subjected to cost orders from the other party.  With respect to timeshare exit solutions the two main avenues to achieve an exit are:

  • Breach of express, implied or statutory terms.
  • Misrepresentations

And listed below is a brief outline of the issues contract law and misrepresentation brings to the table when considering embarking on a claim. You will appreciate that a layman will struggle with the legal concepts however if a consumer has seen a solicitor they can easily read the brief and give just consideration to the information which was gleaned from the consumers legal representative.

Contract Law

1) In common law legal systems (the UK is just such a one), a contract is an agreement having a lawful effect when entered into voluntarily by two or more persons/parties, each of whom wants to and intends to create one or more legal obligations between them. The elements of a contract are simple and in 3 stages “offer” and “acceptance” by “competent persons” (having legal capacity to exchange) and “consideration” (payment/value/reward) to create mutuality of obligation.

2) These can be achieved in writing in part or whole orally in part or whole or by the parties conduct.

3) If the contract is broken by a party a remedy will be sort for ‘breach of contract’ claiming either ‘damages’ in the form of compensation or specific performance dealt with through an injunction. The parties may be natural persons or not (i.e. a company)

4)  A contract is a legally enforceable promise or undertaking that something will or will not occur. The word promise can be used as a legal synonym for contract, although care is required as a promise may not have the full standing of a contract, as when it is an agreement without consideration.

5) Contract law is based on the principle “agreements must be kept” but more literally means “pacts must be kept”.

6) Jurisdictions vary in their principles of freedom of contract. In common law jurisdictions such as the United Kingdom , a high degree of freedom is expected.

7)  Not all agreements are necessarily contractual, as the parties generally must have an intention to be legally bound (or the functional equivalent under the objective theory of contracts).

8)  In England, a gentlemen’s agreement is one which is not intended to be legally enforceable; ‘binding in honour only.’

9) At the core of a relationship between a Timeshare company, owners club and of course the owner of the timeshare, there is a contract. When a party to that contract wholeheartedly believes the another party to the contract is acting in a manor which appears unfair its that contract which the parties to the agreement should look to, so as to refresh themselves as to the bargain they struck, intended to strike or believed the bargain struck deferrers from what they expected. This being said it it’s those terms condition obligation contained in the contract which one should refer to so as to begin the investigation as to the rights of each party.

 Offer and acceptance

10)For a contract to be formed, parties to the contract must reach mutual assent (also called a meeting of the minds). This is typically reached through offer and an acceptance which does not vary the offer’s terms; this is known as the “mirror image rule“.

11)If an acceptance does vary the terms of an offer, it is not an acceptance but a counteroffer and, therefore, simultaneously a vacation of the original offer.

12)As a court cannot read minds, the intent of the parties is interpreted objectively from the perspective of a reasonable person.

13) Contracts involving Timeshare are bilateral contracts.

Consideration

14) Consideration is something of value given by a promissor to a promisee in exchange for something of value given by a promisee to a promissor.

15) Scottish law-based systems do not require consideration, and some commentators have suggested that consideration be abandoned, and estoppel be used to replace it as a basis for contracts[3].

16)Courts will typically not weigh the “adequacy” of consideration as long as the consideration is determined to be “sufficient”, with sufficiency defined as meeting the test of law, whereas “adequacy” is the subjective fairness or equivalence. However, consideration must be given as part of entering the contract, not prior as in past consideration. In addition to the elements of a contract:

17)   A party must have capacity to enter a contract .That means parties in a contract must justify their majority in age to understand terms of the contract and be mentally able. The purpose of the contract must be lawful The form of the contract must be legal The parties must intend to create a legal relationship The parties must consent.

18) As a result, there are a variety of affirmative Defences that a party may assert to avoid their obligation.

Affirmative Defences

Vitiating factors constituting defences to purported contract formation include: Mistake (such as non est factum) Incapacity, including mental incompetence and infancy/minority Duress, Undue influence, Unconscionability, Misrepresentation or fraud Frustration of purpose.

19)Such defences operate to determine whether a purported contract is either: (1)  Void or (2)  Voidable.

20) Void contracts cannot be ratified by either party. Voidable contracts can be ratified.

21) The aforementioned are therefore the common and basic positions to be explored to challenge the assertions of a timeshare contract. It is not necessary to wait to be pursued by a Timeshare company; any party to a contract can ask the courts for a determination as to the contract they entered into.

Formalities and writing

22) Typically, contracts are oral or written, but written contracts have typically been preferred in common law legal systems in respect to timeshare; in 1677 England passed the Statute of Frauds.  If the contract is not required by law to be written, an oral contract is valid and therefore legally binding.

23) If a contract is in a written form, and somebody signs it, then the signer is typically bound by its terms regardless of whether they have actually read itprovided the document is contractual in nature. However, affirmative defences such as duress or unconscionability may enable the signer to avoid the obligation. Further, reasonable notice of a contract’s terms must be given to the other party prior to their entry into the contract.

Invitation to treat

24)Where a product in large quantities is advertised in a newspaper or on a poster, it generally is not considered an offer but instead will be regarded as an invitation to treat, since there is no guarantee that the store can provide the item for everyone who might want one. However, an exception to this rule may be made if an advertisement includes a reward, which is what happened in the famous case of Carlill v. Carbolic Smoke Ball Company, decided in nineteenth-century England.

25) Performance varies according to the particular circumstances. While a contract is being performed, it is called an executory contract, and when it is completed it is an executed contract. In some cases there may be substantial performance but not complete performance, which allows the performing party to be partially compensated.

Uncertainty, incompleteness and severance

26) If the terms of the contract are uncertain or incomplete, the parties cannot have reached an agreement in the eyes of the law. An agreement to agree does not constitute a contract, and an inability to agree on key issues, which may include such things as price or safety, may cause the entire contract to fail. However, a court will attempt to give effect to commercial contracts where possible, by construing a reasonable construction of the contract.

27) Courts may also look to external standards, which are either mentioned explicitly in the contract or implied by common practice in a certain industry. In addition, the court may also imply a term. If there are uncertain or incomplete clauses in the contract and all options in resolving its true meaning have failed, it may be possible to sever and void just those affected clauses if the contract includes a severability clause. The test of whether a clause is severable is an objective test (whether a reasonable person would see the contract standing even without the clauses).

28) In respect to Timeshare some companies are in short making up terms and conditions as the original contracts are silent as to the terms which are required to provide those timeshare companies with benefit, comfort etc. Such introductions of terms unilaterally will be deemed unfair unless the construction of the contact in respect to its workability is ineffective without them. The implementer of additional terms will have to show that they are not enriched; the term does not frustrate the contract or deprive the other party of rights which they enjoy in the contract.

29) It is always difficult for the author of a contract to add in new terms which seek to benefit them without firstly enriching the other party for the rights they have lost or have perceived to have lost.

30) It is always good practice to listen to what the implementer of new term is saying and applying a test benefit before a challenge.

Classification of terms

31) Contractual terms are classified differently depending upon the context or jurisdiction. Terms establish conditions precedent. English common law distinguishes between important conditions and warranties, with a breach of a condition by one party allowing the other to repudiate and be discharged while a warranty allows for remedies and damages but not complete discharge. Whether or not a term is a condition is determined in part by the parties’ intent. In a less technical sense, however, a condition is a generic term and a warranty is a promise. Not all language in the contract is determined to be a contractual term. Representations, which are often pre-contractual, are typically less strictly enforced than terms, and material misrepresentations historically was a cause of action for the tort of deceit. Statements of opinion may be viewed as “mere puff”.

32) In specific circumstances these terms are used differently. In the United Kingdom the courts determine whether a term is a condition or warranty.

Representations versus warranties

33) Statements of fact in a contract or in obtaining the contract are considered to be either warranties or representations.

34)  Traditionally, warranties are factual promises which are enforced through a contract legal action, regardless of materiality, intent, or reliance.

35)Representations are traditionally pre-contractual statements which allow for a tort-based action (such as the tort of deceit) if the misrepresentation is negligent or fraudulent; historically a tort was the only action available, but by 1778, breach of warranty became a separate legal contractual action.  In modern English law, sellers often avoid using the term ‘represents’ in order to avoid claims under the Misrepresentation Act 1967. Statements in a contract may not be upheld if the court finds that the statements are subjective or promotional puffery. English courts may weigh the emphasis or relative knowledge in determining whether a statement is enforceable as part of the contract.

 Implied terms

36) A term may either be express or implied. An express term is stated by the parties during negotiation or written in a contractual document. Implied terms are not stated but nevertheless form a provision of the contract.

Terms implied in fact

37)Terms may be implied due to the factual circumstances or conduct of the parties. In the Australian case of BP Refinery Westernport v. Shire of Hastings [1977] the UK Privy Council proposed a five stage test to determine situations where the facts of a case may imply terms. The classic tests have been the “business efficacy test” and the “officious bystander test”. Under the “business efficacy test” first proposed in The Moorcock [1889], the minimum terms necessary to give business efficacy to the contract will be implied. Under the officious bystander test (named in Southern Foundries (1926) Ltd v Shirlaw [1940] but actually originating in Reigate v. Union Manufacturing Co (Ramsbottom) Ltd [1918]), a term can only be implied in fact if an “officious bystander” listening to the contract negotiations suggested that the term be included the parties would promptly agree. The difference between these tests is questionable.

Terms implied in law

38) In the United Kingdom, implied terms are created by the Sale of Goods Act 1979, the Consumer Protection (Distance Selling) Regulations 2000 and the Supply of Goods and Services Act 1982.

Misrepresentation

  39) Misrepresentation means a false statement of fact made by one party to another party and has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation.

40) There are two types of misrepresentation: fraud in the factum and fraud in inducement. Fraud in the factum focuses on whether the party alleging misrepresentation knew they were creating a contract. If the party did not know that they were entering into a contract, there is no meeting of the minds, and the contract is void. Fraud in inducement focuses on misrepresentation attempting to get the party to enter into the contract. Misrepresentation of a material fact (if the party knew the truth, which party would not have entered into the contract) makes a contract voidable.

Mistake

41) A mistake is an incorrect understanding by one or more parties to a contract and may be used as grounds to invalidate the agreement. Common law has identified three different types of mistake in contract: common mistake, mutual mistake, and unilateral mistake.

Duress and undue influence

42) Duress has been defined as a “threat of harm made to compel a person to do something against his or her will or judgment; esp., a wrongful threat made by one person to compel a manifestation of seeming assent by another person to a transaction without real volition.”

Incapacity

43) Sometimes the capacity of either natural or artificial persons to either enforce contracts, or have contracts enforced against them is restricted. For instance, very small children may not be held to bargains they have made, on the assumption that they lack the maturity to understand what they are doing; errant employees or directors may be prevented from contracting for their company, because they have acted ultra vires (beyond their power). Another example might be people who are mentally incapacitated, either by disability or drunkenness. In these cases the contract is either void or voidable.

Illegal Contracts

44) If based on an illegal purpose or contrary to public policy, a contract is void.

Breach of Contract

Breach of contract is defined in the Unfair Contract Terms Act 1977 as: i. non-performance, ii. poor performance, iii. part-performance, or iv. performance which is substantially different from what was reasonably expected.

45) Innocent parties may repudiate (cancel) the contract only for a major breach (breach  of condition), but they may always recover compensatory damages, provided that the breach has caused foreseeable loss.

Damages

 46) There are several different types of damages.

47) Compensatory damages, which are given to the party which was harmed by the breach of contract. With compensatory damages, there are two heads of loss, consequential damage and direct damage.

48) Liquidated damages are an estimate of loss agreed in the contract, so that the court avoids calculating compensatory damages and the parties have greater certainty. Liquidated damages clauses may be called “penalty clauses” in ordinary language, but the law distinguishes between liquidated damages (legitimate) and penalties (invalid).

49) Nominal damages consist of a small cash amount where the court concludes that the defendant is in breach but the plaintiff has suffered no quantifiable pecuniary loss, and may be sought to obtain a legal record of who was at fault.

50) In the UK, exemplary damages are not available for breach of contract, but are possible after fraud. Although vitiating factors (such as misrepresentation, mistake, undue influence and duress) relate to contracts, they are not contractual actions, and so, in a roundabout way, a claimant in contract may be able to get exemplary damages.

51) Compensatory damages compensate the claimant for actual losses suffered as accurately as possible. They may be ‘expectation damages’, ‘reliance damages’ or ‘restitutionary damages’. Expectation damages are awarded to put the party in as good of a position as the party would have been in had the contract been performed as promised. Reliance damages are usually awarded where no reasonably reliable estimate of expectation loss can be arrived at or at the option of the Claimant. Reliance losses cover expense suffered in reliance to the promise.

52) After a breach has occurred, the innocent party has a duty to mitigate loss by taking any reasonable steps. Failure to mitigate means that damages may be reduced or even denied altogether.

53) Damages may be general or consequential. General damages are those damages which naturally flow from a breach of contract. Consequential damages are those damages which, although not naturally flowing from a breach, are naturally supposed by both parties at the time of contract formation. An example would be when someone rents a car to get to a business meeting, but when that person arrives to pick up the car, it is not there.

54) General damages would be the cost of renting a different car.

55) Consequential damages would be the lost business if that person was unable to get to the meeting, if both parties knew the reason the party was renting the car. However, there is still a duty to mitigate the losses the fact that the car was not there does not give the party a right to not attempt to rent another car.

Specific performance

56) There may be circumstances in which it would be unjust to permit the defaulting party simply to buy out the injured party with damages. For example where an art collector purchases a rare painting and the vendor refuses to deliver, the collector’s damages would be equal to the sum paid.

57) The court may make an order of what is called ‘specific performance’, requiring that the contract be performed. In some circumstances a court will order a party to perform his or her promise (an order of “specific performance“) or issue an order, known as an “injunction” that a party refrain from doing something that would breach the contract.

58) Both an order for specific performance and an injunction are discretionary remedies, originating for the most part in equity. Neither is available as of right and in most jurisdictions and most circumstances a court will not normally order specific performance. A contract for the sale of real property is a notable exception. In most jurisdictions, the sale of real property is enforceable by specific performance. Even in this case the defences to an action in equity (such as laches, the bona fide purchaser rule, or unclean hands) may act as a bar to specific performance.

59) Related to orders for specific performance, an injunction may be requested when the contract prohibits a certain action. Action for injunction would prohibit the person from performing the act specified in the contract.

60) In England and Wales, a contract may be enforced by use of a claim, or in urgent cases by applying for an interim injunction to prevent a breach.

Misrepresentation

  Seeking to claim/defend by way of Misrepresentation

  1. In certain proceeding buyers either allude to be discontented with their timeshare. Each of them believes that they were misled about the nature of what they purchased and identifies particular representations which were made to them during the sales process, which after reflection they understand not to be true.
  2. This gives rise to a potential claim to rescind a contract for damages for misrepresentation. A detailed review of the merits of each case is beyond the scope of this introduction; however it is necessary when considering the possibility of a claim for misrepresentation in taking into account how to approach a claim.

 

  1. The first point to make is that in each case the relevant limitation period for misrepresentation may have expired. The ordinary period of Limitation is six years from the date which the cause of action accrued (i.e. the date that each a person entered into the contract). However, in the case of fraudulent misrepresentation, the limitation period does not begin to run until the claimant discovered the fraud or could with reasonable diligence have discovered it.

 

  1. Fraudulent misrepresentation is where it is shown that a false representation has been made:

(1)    Knowingly;   (2)    Without belief in its truth;   Or   (3)    Recklessly, careless whether it is true or false; see Derry v Peek (1889) 14 App Cas 337.

  1. The other requirements of the cause of action are that the representation must have induced the innocent party to enter into the contract and which the party making the representation must have intended the innocent party to rely on the statement. There is a rebuttable presumption of inducement where the misrepresentation was fraudulent.

 

  1. It almost goes without saying that the buyer will need good evidence to prove fraudulent misrepresentation. Detailed accounts will be required from each buyer before the merits of their respective claims can be properly assessed. Buyers have a further difficulty if they signed a document entitled memorandum of understanding confirming, amongst other things, “they had not relied on any representations not recorded in the documents”. Such declarations are not fatal to a claim but certainly increase the standard of evidence required to prove the claim.

 

  1. If and to the extent that people have used their timeshare after discovering that the representations made to them prior to their purchase were false, the party selling the timeshare will likely argue that the contract has been affirmed.

 

  1. For present purposes then, it is sufficient to note that buyers do have a potential claim for misrepresentation but they will require good evidence of fraudulent misrepresentation to succeed and those people who signed the memorandum of understanding referred to above will face particular difficulty in proving their case. It would no doubt assist people if their claims could be heard together, as there is then more evidence before the Court of the nature of the selling techniques deployed on behalf of the club.

Who are the Defendants to a claim for misrepresentation?

  1. Typically, sellers facing a claim for misrepresentation should be the party who made the representation. However, if the representation was made by an agent on behalf of his principal, the principal will be liable.

 

  1. Likewise, if A is induced by a misrepresentation made by B to enter into a contract with C, A may be able to set aside the contract with C, if C had actual or constructive knowledge of B’s misrepresentation.

 

  1. The question is of importance because, fairly obviously, as a buyer can only rescind the contract as against the other contracting party. There is some difficulty in some actions because although the contract is with the seller, it is for membership of the club. In due course it may be argued that buyers may only rescind as against the club not the seller. That said most contracts state that they sell as agent of “the owner”, and it seems tolerably clear that is intended to refer to the club. But even in the case of the aforementioned proposition there is a good argument that the club would have been aware of the misrepresentations.

 

  1. In any event, damages will be available against the sellers even if rescission is not.

 

  1. Buyers may also sue the finance company who provided him with the credit to finance his purchase, pursuant to Section 75 Consumer Credit Act 1974, which makes the finance company concurrently liable with the supplier. Obviously, that claim would be limited to damages and rescission would not be available, but the jurisdictional issues referred to below do not arise.

 

  1. Buyers should consider whether they may have used finance in part (including a credit card) to fund their purchases and should discuss this with instructing solicitors.

Jurisdictional issues

  1. The difficulty that immediately presents itself in bringing a claim against any the companies in the previous part of this Advice as they are all based outside of the jurisdiction of the UK courts.

    Misrepresentation against an assignee

  1. If the seller has the rights to assign any rights against a buyer then it will follow, that the assignee it must be a assignee of the party who originally had the right to receive (say) maintenance fees (either the club or the seller as the case may be). It is therefore bound by such arguments as could rise against the original assignor, because an assignee takes his assignment subject to equities. It follows, in my view, that the claim to misrepresentation could be used as a defence to the claim or as a defence by way of set-off.

 

  1. Ideally, buyers would want relief from the contract based on misrepresentation on a much wider scale. Defeating the claim may only avoid this year’s maintenance fees. Buyers could expect to receive claims against them in future years. Moreover, simply running the argument as a defence to the claim by a particular debt would not enable buyers to obtain full relief by way of rescission or damages.

 

  1. In order for buyers to obtain any kind of more widely effective judgment, at least the representor’s would need to be party to the action. For the reasons I have highlighted above, however, it seems likely that any claim against the sellers or the club would need to be brought in a jurisdiction acceptable in the contract.

Tactics within proceedings

  1. Any court is entitles to reach its own finding of fact and should be presented with a variety of reasons why the buyers contract ought to be voided. This will give the court far more visual information as to the events which took place at the sales meeting, the attitude of the seller as well as the reasonable expectations of the buyer. It will also bring to the fore the sales environment, any duress and expectations of the buyer. It will also provide the court with the negotiating parity of the parties.

 

  1. This all said the court will have the opportunity to reason as a reasonable man would as to events which occurred. Being able to do this the court may discount contractual evidenced of fact but all courts are permitted to make a finding of fact involving a particular set arguable statements. This being so Misrepresentations claims can and do serve as (what some say is) “a second bite at the cherry” or an opportunity for a court to assist what they believe is an injustice.

 

  1. Exploring further and side-stepping for a moment. At all times the Misrepresentation which a buyer seeks to make will have to be backed up with honest (clear , truthful and unexaggerated) witness testimony and the Timeshare Consumer Association has details of others who may claim the same Misrepresentation and at the same venue you attended and indeed at the same time. These people although not privy to the agreeing of your contract will provide a back drop and background as the events which occur as a sellers meeting. This can only reinforce your position.

 

  1. This now aside and say you have made a claim for Misrepresentation and you have other unconnected parties who support your assertions the seller will have to either rely on discrediting your honest evidence or bring forward the witness who was in the room when the sale took place (the salesman, the sectary etc). The likelihood is that those people have moved on which will leave the seller at a disadvantage as they will have no evidence to bring before the courts to challenge your facts in respect to Misrepresentation.

Conclusion  

  1. A lot is banded about by lay people as to the effectiveness of a misrepresentation claim or defence; I therefore hope that those issues are fully explained herein. That said it can be used very powerfully if your set of circumstance fit. That said it is always worth bringing the claim into proceeding as an alternative claim in pleading.

[1] As determined in the early English case of Smith v Hughes [1871]. It is important to note that where an offer specifies a particular mode of acceptance, only an acceptance communicated via that method will be valid.

[2] A bilateral contract is an agreement in which each of the parties to the contract makes a promise or set of promises to each other. For example, in a contract for the sale of a Timeshare, the buyer promises to pay the seller £10,000 in exchange for the seller’s promise to deliver title of time for a property. These common contracts take place in the daily flow of commerce transactions, and in cases with sophisticated or expensive promises may involve extensive negotiation and various condition precedent requirements, which are requirements that must be met for the contract to be fulfilled.

[3] However, legislation, rather than judicial development, has been touted as the only way to remove this entrenched common law doctrine. Lord Justice Denning famously stated that “The doctrine of consideration is too firmly fixed to be overthrown by a side-wind.”

[4] For instance, agreeing to sell a car for a penny may constitute a binding contract if a party desires the penny.[18] This is known as the peppercorn rule, but in some jurisdictions, the penny may constitute legally insufficient nominal consideration. Parties may do this for tax purposes, attempting to disguise gift transactions as contracts. Transferring money may be sufficient, particularly if there is accord and satisfaction.

[5] For example, in the early English case of Eastwood v. Kenyon [1840], the guardian of a young girl took out a loan to educate her. After she was married, her husband promised to pay the debt but the loan was determined to be past consideration. The insufficiency of past consideration is related to the pre-existing duty rule. In the early English case of Stilk v. Myrick [1809], a captain promised to divide the wages of two deserters among the remaining crew if they agreed to sail home short-handed; however, this promise was found unenforceable as the crew were already contracted to sail the ship. The pre-existing duty rule also extends to general legal duties; for example, a promise to refrain from committing a tort or crime is not sufficient.[19]

[6] The United Kingdom has since replaced the original Statute of Frauds, but written contracts are still required for various circumstances such as land (through the Law of Property Act 1925).

[7] The Carbolic Smoke Ball offer In Carlill, a medical firm, advertised a smoke ball marketed as a wonder drug that would, according to the instructions, protect users from catching the flu. If it did not work, buyers would receive £100 and the company said that they had deposited £1,000 in the bank to show their good faith. When sued, Carbolic argued the ad was not to be taken as a serious, legally binding offer. It was merely an invitation to treat, and a gimmick (a “mere puff”). But the court of appeal held that it would appear to a reasonable man that Carbolic had made a serious offer, and determined that the reward was a contractual promise.

[8] A contractual term is “an/any provision forming part of a contract”. Each term gives rise to a contractual obligation, breach of which can give rise to litigation. Not all terms are stated expressly and some terms carry less legal weight as they are peripheral to the objectives of the contract. Standard timeshare forms of contracts contain “boilerplate”, which is a set of “one size fits all” contract provisions. However, the term(s) may also narrowly refer to conditions at the end of the contract which specify the governing law provision, venue, assignment and delegation and force majeure. Restrictive provisions in contracts where the consumer has little negotiating power (“contracts of adhesion”) attract consumer protection scrutiny.

[9] for example, an actress’ obligation to perform the opening night of a theatrical production is a condition, but a singer’s obligation to rehearse may be a warranty. Statute may also declare a term or nature of term to be a condition or warranty; for example the Sale of Goods Act 1979 s15Aprovides terms as to title, description, quality and sample are generally conditions. The United Kingdom has also contrived the concept of an “intermediate term” (also called innominate), first established in Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962].

[10] In the English case of Bannerman v. Whitethe court upheld a rejection by a buyer of hops which had been treated with sulphur since the buyer explicitly expressed the importance of this requirement. The relative knowledge of the parties may also be a factor, as in English case of Bissett v. Wilkinson where the court did not find misrepresentation when a seller said that farmland being sold would carry 2000 sheep if worked by one team; the buyer was considered sufficiently knowledgeable to accept or reject the seller’s opinion.

[11] According to Gordon v Selico [1986] it is possible to misrepresent either by words or conduct. Generally, statements of opinion or intention are not statements of fact in the context of misrepresentation. If one party claims specialist knowledge on the topic discussed, then it is more likely for the courts to hold a statement of opinion by that party as a statement of fact.

[12] An example is in Barton v Armstrong [1976] in a person was threatened with death if they did not sign the contract. An innocent party wishing to set aside a contract for duress to the person need only to prove that the threat was made and that it was a reason for entry into the contract; the burden of proof then shifts to the other party to prove that the threat had no effect in causing the party to enter into the contract. There can also be duress to goods and sometimes, ‘economic duress’. Undue influence is an equitable doctrine that involves one person taking advantage of a position of power over another person through a special relationship such as between parent and child or solicitor and client. As an equitable doctrine, the court has discretion. When no special relationship exists, the question is whether there was a relationship of such trust and confidence that it should give rise to such a presumption. See Odorizzi v. Bloomfield School District.

[13] In the 1996 Canadian case of Royal Bank of Canada v. Newell a woman forged her husband’s signature, and her husband signed agreed to assume “all liability and responsibility” for the forged checks. However, the agreement was unenforceable as it was intended to “stifle a criminal prosecution”, and the bank was forced to return the payments made by the husband.

[14] A test for determining which category a clause falls into was established by the English House of Lords in Dunlop Pneumatic Tyre Co. Ltd v. New Garage & Motor Co. Ltd [1914].However, Professor Michael Furmston  has argued that “it is wrong to express (the mitigation) rule by stating that the plaintiff is under a duty to mitigate his loss”, citing Sotiros Shipping Inc v. Sameiet, The Solholt. If a party provides notice that the contract will not be completed, an anticipatory breach occurs.

[16] To recover damages, a claimant must show that the breach of contract caused foreseeable loss. Hadley v. Baxendale [1854] established that the test of foreseeability is both objective and/or subjective. In other words, is it foreseeable to the objective bystander, and/or to the contracting parties, who may have special knowledge? On the facts of this case, where a miller lost production because a carrier delayed taking broken mill parts for repair, the court held that no damages were payable since the loss was foreseeable neither by the “reasonable man” nor by the carrier, both of whom would have expected the miller to have a spare part in store.  

[17] A claim for fraudulent misrepresentation is an action based upon a fraud for the purposes of Section 32 Limitation Act 1980; see Regent Leisuretime Limited v Natwest Finance Ltd (2003) EWCA Civ 391, paragraph 100.  

[18] see Barclays Bank plc v O’Brien (1994) 1 AC 180.  

[19] We  take this from the seller’s warranty included on the contract, which warrants that “the owner” holds the property in the occupation rights and not the property itself, which is owned by another company; Sociedade de Empreendimentos Imobiliarios do Sul.

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Last modified: March 11, 2016