Pre-contractual misrepresentation and mistake in the subject matter of the contract
1: The key legal issues in the current matter are:
Pre-contractual misrepresentation:
Peter deliberately misrepresented himself before the publisher in receiving a free sample of the astronomy textbook in exchange for the book review. The publisher would not have provided a free copy to Peter if he was aware of the fact that Peter is a third-year student and not an astronomy teacher with that fictitious name(Craswell, 2005). Thus, there was a pre-contractual misrepresentation in this matter.
Mistake in the subject matter of contract:
In this matter, the misrepresentation was done by Peter with the fraudulent intentions to sell this sample copy instead of his old text book which was a previous edition of this new book. Therefore, the misrepresentation was not only under the law of contracts but would also amount to a tort. Further, there was no delay on the part of the publisher(Swan, Adamski & Na, n.d.). As soon as he figured out that the book was in the hands of a student (Joshua) instead of the astronomy teacher, he stopped the access to the website of that book and also demanded its return.
Fraud amounting to tort:
As regards, the contract between Peter and Joshua, there appears to be a mistake regarding the subject matter of contract. The book which Peter had received from the publisher was a free sample and that Peter was not supposed to sell the same.However, Joshua was innocent and had no knowledge of the fraudulent activity committed by Peter and believed on the false assertion of Peter that he was the rightful owner of that book(Neyers, Bronaugh & Pitel, 2009).
2: In case litigation is initiated by the publisher against Joshua, Joshua would not be required to return the book since there is no contract between the publisher and Joshua and that he is the rightful purchaser of this book.
In the current situation, there appear to be two contracts:
Firstly, the contract was between the publisher and Peter (under a fake identity) wherein the consideration was a book review and payment of shipping charges by Peter.
Secondly, the contract was between Peter and Joshua in consideration of 75% of the original price of the book paid by Joshua to Peter. Joshua was not aware of the means in which Peter had obtained the book and believed that this book had previously belonged to Peter.
Thus, there is no direct contract between the publisher and Joshua(Fridman, n.d.).
No obligation for buyer to return the book
These circumstances are similar to the matter of King’s Norton Metal Co. v. Edridge((1879), 14 T.L.R. 98) in which the manufacturer, King’s Norton Metal Co. wereduped to send the goods to Wallis (purchaser)who used a fake identity for the transaction. He subsequently sold the goods to Edridge and after receiving the money, disappeared. Edridge was not aware of the fraud committed by Wallis. It was held that though the contract between the two parties – King’s Norton Metal Co. and Wallis was voidable. However,Edridge was an innocent purchaser and the title to those goods had passed on to Edridge. The goods were not to be returned to the manufacturer(Stone & Cunnington, 2007).
Similar to this case, in the current matter, Peter hadadopted a fake identity and that Joshua was an innocent buyer of the book. Therefore, even though the contract between the publisher and Peter is voidable, the book rightfully belongs to Joshua.
3: The remedy available to Joshua against Peteris two-fold(Schroeter, 2013). To begin with, the contract between Joshua and Peter is voidable since it was based on a material misrepresentation on the part of Peter due to his fraudulent activity of duping the publisher by adopting a fake identity. Thus, Joshua has the right to rescind this contract.
Further, Joshua is also entitled to receive compensation for the expenses incurred by him before the rescission of the contract. In this case, the compensation may amount to 75% of the price of the book which was paid by Joshua to Peter for the purchase of the book.
However, it is pertinent to note that this option is available only on the decision of Joshua since the contract is voidable and not void. If Joshua chooses to rescind the contract, the book would be returned to Peter, who will return the amount paid by Joshua for the book.
Next option available to Joshua is claiming damages against Peter for his fraudulent misrepresentation under the law of torts since the subject matter of the contract (book) was received by Peter in a fraudulent manner and amounts to tort against Joshua, who was not aware of this pre-contractual mistake of Peter(Burns & Blom, 2009). In this scenario, Joshua may or may not choose to rescind the contract(Birks, Rickett & Grantham, 2008). However, he is liable to the compensation from Peter. The doctrine of caveat emptor (let the buyer beware) will not apply in the current matter as Peter did not disclose the issue of ownership of the book to Joshua.
4: Key takeaways for the business professionals from the current problem are:
1. Nature of mistake:
A contract can be declared to be void or voidable depending on the nature of mistake done by either party to the contract. The mistake must be in the nature of a legal mistake which affects the contract materially. In case the mistakes are common or mutual and can be rectified, the action regarding the same must be taken by both the parties to correct the mistake(Bridge, 2004). However, if the mistake affects the subject matter of the contract or its value or identity of the parties, then such a mistake cannot be refined and that it would result in the contract being voidable.
2. Misrepresentation – explicit or implied:
A misrepresentation can occur even if the other party is silent about the facts in the contract(Fridman, 2011).
3. Delay:
If the mistake in a contract has been realised, then there should not be any undue delay done by the innocent party after it has realized the mistake and must take steps to either rectify the same or rescind the contract, whichever is applicable in the case.(Grundmann, 2011)
4. Claim compensation:
The wrong doer must compensate the victim who suffered losses or expenses due to the intentional wrongful activity.
References:
Birks, P., Rickett, C., & Grantham, R. (2008). Structure and justification in private law. Oxford: Hart.
Bridge, M. (2004). Innocent Misrepresentation in Contract. Current Legal Problems, 57(1), 277-304. doi: 10.1093/clp/57.1.277
Burns, P., & Blom, J. (2009). Economic interests in Canadian tort law. Markham, Ont.: LexisNexis.
Craswell, R. (2005). Taking Information Seriously: Misrepresentation and Nondisclosure in Contract Law and Elsewhere. SSRN Electronic Journal. doi: 10.2139/ssrn.827685
Fridman, G. (2011). The law of contract in Canada. Toronto: Carswell.
Fridman, G. Sale of goods in Canada.
Grundmann, S. (2011). The Future of Contract Law. European Review Of Contract Law, 7(4). doi: 10.1515/ercl.2011.490
Neyers, J., Bronaugh, R., & Pitel, S. (2009). Exploring contract law. Oxford: Hart Pub.
Schroeter, U. (2013). Defining the Borders of Uniform International Contract Law: The CISG and Remedies for Innocent, Negligent or Fraudulent Misrepresentation. SSRN Electronic Journal. doi: 10.2139/ssrn.2231841
Stone, R., & Cunnington, R. (2007). Text, cases and materials on contract law. London: Routledge-Cavendish.
Swan, A., Adamski, J., & Na, A. Canadian contract law.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
