CILEx L3 Contract Law Fundamentals 4 — Questions and Answers
Question 1: What is 'misrepresentation' in contract law?
- A false statement of fact made by one party that induces the other to enter the contract (Correct answer)
- Any statement made during negotiations
- Failure to disclose relevant information
- A mistake about the terms of the contract
Correct answer: A false statement of fact made by one party that induces the other to enter the contract
Misrepresentation is a false statement of existing fact (not law or opinion) made by one contracting party to the other, which induces that party to enter the contract.
Question 2: What remedy is available for fraudulent misrepresentation?
- Rescission of the contract and damages in the tort of deceit (Correct answer)
- Damages only under the Misrepresentation Act 1967
- Specific performance of the contract
- Only an injunction preventing further misrepresentation
Correct answer: Rescission of the contract and damages in the tort of deceit
Fraudulent misrepresentation (Derry v Peek [1889]) entitles the innocent party to rescind the contract and claim damages in the tort of deceit, including all losses flowing from the fraudulent statement.
Question 3: What is 'common mistake' in contract law?
- Both parties make the same fundamental mistake about a matter that goes to the root of the contract (Correct answer)
- Both parties make different mistakes about the contract
- One party makes a mistake about the subject matter
- The parties are mistaken about the law
Correct answer: Both parties make the same fundamental mistake about a matter that goes to the root of the contract
Common mistake occurs where both parties share the same fundamental mistake about a matter of fact that goes to the root of the contract, such as the existence of the subject matter (Couturier v Hastie [1856]).
Question 4: What is the effect of duress on a contract?
- A contract entered into under duress is voidable at the option of the innocent party (Correct answer)
- A contract entered into under duress is automatically void
- Duress has no effect on an otherwise valid contract
- A contract under duress is only voidable if violence was threatened
Correct answer: A contract entered into under duress is voidable at the option of the innocent party
Duress (including economic duress) makes a contract voidable, meaning the innocent party may elect to rescind it. The contract is valid unless and until rescinded.
Question 5: What is 'undue influence'?
- Equitable doctrine allowing a contract to be set aside where one party improperly influenced the other's decision (Correct answer)
- A type of fraudulent misrepresentation
- Pressure applied during arms-length commercial negotiations
- The use of superior bargaining power alone
Correct answer: Equitable doctrine allowing a contract to be set aside where one party improperly influenced the other's decision
Undue influence is an equitable doctrine that allows a court to set aside a transaction where one party has used their position of influence to improperly override another party's free will (Allcard v Skinner [1887]).
Question 6: What is the 'doctrine of privity of contract'?
- Only parties to a contract can enforce it or be bound by it (Correct answer)
- Contracts must be kept private between the parties
- All terms of a contract must be confidential
- Third parties can always sue on a contract
Correct answer: Only parties to a contract can enforce it or be bound by it
The doctrine of privity (Dunlop v Selfridge [1915]) states that only a party to a contract can sue on it or be bound by it. The Contracts (Rights of Third Parties) Act 1999 created statutory exceptions.
CILEx L3 Contract Law Fundamentals 4
What is 'misrepresentation' in contract law?