Business Law - Contracts: Mistake and Misrepresentation Case Analysis

This document provides comprehensive solutions to a Business Law assignment focusing on the concepts of mistake and misrepresentation in contract law. It defines key terms such as void, voidable, and rescission, and explains the legal outcomes associated with each. The assignment explores different scenarios where consent may be obtained through coercion or undue influence, detailing the circumstances under which a party may lose the right to rescind a contract. It differentiates between the legal remedies for mistake (void contract) and misrepresentation (voidable contract), and discusses the availability of equitable remedies. Furthermore, the assignment delves into the classifications of mistake, including unilateral, mutual, and common mistakes, referencing relevant case law such as Raffles v Wichelhaus and Bell v Lever Bros. Ltd. It also examines the types of misrepresentation (fraudulent, negligent, and innocent), their elements, and legal implications, supported by cases like Cundy v Lindsay and Phillips v Brooks Ltd. The solutions address specific exercises, analyzing case facts, court decisions, and the application of legal principles to determine outcomes and remedies, including the right to rescind contracts and claim damages. The assignment concludes with a case study analysis, outlining the issue, rules, application, and conclusion based on principles of misrepresentation.

Running head: BUSINESS LAW
Mistake and Misrepresentation
Name of the student:
Name of the university:
Author note

1BUSINESS LAW
Exercise 10.1
1.
Void: (D) to cancel, revoke or repeal or to treat a contract as is it never existed.
Voidable: (A) can be declared void at the option of the innocent parties. Legal
outcomes can be achieved until option is existed.
Rescind: (C) legally non-existent. No legal outcomes are possible. A contract treated
as if it never existed.
Rescission :(B) to put a contract to an end such a way as to treat it as if it is never
existed.
2.
In certain times, it has been observed that one party to a contract get the consent of the
others by way of coercion or undue influence (Chew 2017). In this process, the aggrieved
party shall have the power to cancel the contract. This is known as rescind a contract.
However, the party will lose this right by way of following:
 If the party agrees to continue the contract even after knowing his right to
rescind the contract.
 If the position of the aggrieved party has been lost or the subject matter of the
contract has been destroyed, the party will lose the right.
 It is required that the aggrieved party will apply the right within appropriate
time.

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3.
The legal remedy for misrepresentation is to make the contract voidable as per the
will of the innocent party.
The legal remedy of mistake is to declare the contract void at the very inception of the
contract. Unilateral mistakes are such kind of mistake (Poole 2016).
4.
Equitable remedies are available for operating the conscience of the defendant and
they are based on the discretion of the court (Gergen 2013). In case of mistake, the common
law prescribes the remedy to revoke the contract treated as void at the beginning and in
certain situation; the contract can be voidable in nature. In this case, an equitable remedy can
also be claimed.
In case of misrepresentation, the grounds of common law will be applied and there is
no application of equitable remedy in this case.
Exercise 10.2
Besides mistake of law and mistake of facts, mistake can be divided into three
categories. They are: unilateral mistake, mutual mistake and common mistake. When one
party to a contract do the mistake, it cause unilateral mistake. Caveat emptor can be a good
example of it. When both the parties to the contract had caused mistake, it becomes mutual
mistake. Meeting of mind plays an important role in this case. An important case in this
behalf is Raffles v Wichelhaus (1864). When in a contract, both the parties do similar
mistakes regarding certain facts, it will be treated as common mistake. The principle of
common mistake has been proved in the case of Bell v Lever Bros. Ltd [1932].

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Exercise 10.3
1.
Decision of the court of House of Lords regarding the case of Cundy v Lindsay
[1877] is that no agreement had made in between the parties regarding the handkerchief and
it can therefore be stated that a contract can be revoked automatically.
In case of Phillips v Brooks Ltd [1919], it was held by the court that a contract can
only be revoked after the meeting of minds of the parties.
2.
The similarities are that both the cases are attracting the provinces of mistake and both
the cases are from the English provisions of law. In both the cases, the principle regarding
make the contract void have been applied.
3.
It has been held in the case of Cundy v Lindsay [1877] that when the terms of the
contract are based on the fraud, there is no existence of contract in between the parties. In this
case, it has been observed that Cundy has been given certain goods to the purchaser and the
contract made between them is based on fraud and therefore, it is the right if Cundy to get
back all the goods he delivered to the ultimate purchaser.
4.
The facts of the case are based on the principle of mistake to identity. It has been
observed in the case that Phillips ran a jewellery shop and sold a ring to a person who
fraudulently told a different name to Phillip and gave him a bounced cheque. After that the
person pawned the ring to one Brook. The court had decided that Phillip could not retrieve

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the ring from Brook as he is allowed to recover the ring from that person who came to his
shop only as the contract was made in between them and not with Brook.
5.
Phillip has a right to rescind the contract made between him and the person who had
falsified his identity to Phillip. Phillip could rescind the contract on the basis of this.
6. This term is used under the provision of common law. It means when a party
purchased certain properties without the notice of any other party’s claim to the title of that
property (Harder 2014).
Exercise 10.4
1.
Following are the three types of misrepresentation that are fraudulent
misrepresentation, negligent misrepresentation and innocent misrepresentation. Element of
fraudulent representation is to make a false statement knowingly. Element of negligent
misrepresentation is failure to ensure reasonable care (Davies 2016). Element of innocent
misrepresentation is when a party represent something by knowing the fact as true.
2.
Following are the three types of misrepresentation that are as follows:
Fraudulent misrepresentation- Bisset v Wilkinson [1927] AC 177
Negligent misrepresentation- Johnson v Chesebrough 918 Supp. 543

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3.
In fraudulent misrepresentation, a representation will be made that is needed to be
false. In this case, the wrongdoer has the knowledge regarding the falsification of the matter
and the intention of the defendant is to misguide the plaintiff.
4.
It is required under the law that an opinion must be made falsely. If the express of
opinion is based on an honest opinion, it will not cause any misrepresentation.
5.
It is a fact that mere silence could not constitute misrepresentation. However, if
silence occurs regarding the procession of a negotiation process, it can be accurate to make
the misrepresentation.
6. It has been observed in case Redgrave v Hurd (1881) that a contract can be rescinded
even for the innocent misrepresentation. It is necessary to verify the false statement.
7. The party can rescind the contract under the misrepresentation. Damages can also be
claimed in such cases.
Exercise 10.5
1. Negligent misrepresentation.
2. Innocent misrepresentation.
3. Innocent negligence.

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Exercise 10.6
1.
Issue:
The main issue of the case is whether Marcel has any legal right against the written
agreement or not.
Rules:
The case is based on the misrepresentation of fact and fraudulent misrepresentation.
Application:
It has been observed in the case that the car seller told Marcel to give him a high
quality tyre for the car he bought. However, later it was proved that the tyres are not good.
Therefore, fraud has been done by the seller.
Conclusion:
Marcel can sue the seller to the court under misrepresentation and claim damage from
the car seller.

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Reference:
Chew, C.Y., 2017. Mistake in its variety of forms: the injustice of giving securities
supporting financial institution debts on an error of judgement or without informed consent.
Davies, P.S., 2016. RESCISSION FOR MISREPRESENTATION. The Cambridge Law
Journal, 75(1), pp.15-17.
Gergen, M.P., 2013. Negligent misrepresentation as contract.
Harder, S., 2014. Claims between a person liable for misrepresentation and the representee's
contract-partner. Journal of Business Law, (2), pp.121-139.
Korobkin, R., 2013. The borat problem in Negotiation: Fraud, assent, and the behavioral law
and economics of standard form contracts. California Law Review, pp.51-106.
Lando, H., 2016. Optimal rules of negligent misrepresentation in insurance contract law.
International Review of Law and Economics, 46, pp.70-77.
Poole, J., 2016. Textbook on contract law. Oxford University Press.
Smith, J.T., 2017. Cheater's Justice: Judicial Recourse for Victims of Gaming Fraud. UNLV
Gaming LJ, 7, pp.61-223.