Contractual Defects: Part A - Absence of Writing, Misrepresentation
Watch on YouTubeVideo summary
The video introduces the concept of contractual defects, explaining that even when a contract possesses the three essential elements of an agreement, consideration, and intention to create legal relations, it may still be invalid due to specific flaws. The presenter outlines that these defects can render a contract either void, meaning it never legally existed, or voidable, meaning it was valid but can be cancelled by the innocent party, who would then be required to return any goods or benefits received. In this series, the focus is placed on several key types of defects, including the absence of writing, misrepresentation, duress, undue influence, and unconscionability, with the first topic being the requirement for written contracts.
Contrary to common belief, a contract does not generally need to be in writing to be valid, though doing so is considered good practice as it provides proof of the agreement and ensures certainty regarding its terms. However, specific exceptions exist under legislation such as the Statute of Frauds, which mandates that certain contracts must be written to be enforceable. These include agreements involving the sale of land, guarantees of debt, contracts not to be performed within a year, and agreements made in consideration of marriage. Additionally, consumer protection laws require written contracts for online sales over fifty dollars and direct sales, such as door-to-door transactions, exceeding one hundred dollars, ensuring that consumers receive proper documentation before purchasing goods or services from businesses.
The discussion then shifts to misrepresentation, defined as a false statement of past or existing fact that was intended to induce the other party into entering the contract, making it voidable at the option of the innocent party. A crucial distinction is drawn between statements of fact and statements of opinion; while a false statement of fact can constitute a misrepresentation, an inaccurate opinion generally cannot unless expressed by an expert whose judgment carries factual weight. The video illustrates this difference using examples from a negotiation between Sonia and Ahmed regarding the sale of a laptop, categorizing specific claims like the manufacturing year and battery replacement date as facts, while describing the laptop's lightness or status as the best on the market as opinions.
Finally, the transcript clarifies that even statements presented as opinions can be treated as facts if they originate from an expert in their field, such as an IT professional declaring a computer is in excellent condition. In contrast, a non-expert making similar claims would likely be viewed as offering an opinion rather than stating a fact. By analyzing various statements made during the laptop negotiation, the video demonstrates how to distinguish between factual assertions that could lead to misrepresentation and subjective judgments or beliefs that do not carry the same legal implications, thereby helping viewers understand the boundaries of what constitutes a valid contractual statement versus a misleading one.
Read the full video transcript
This is Whan Chow and welcome to
contractal defects part A on absence of
writing and misrepresentation.
Sometimes we could have a valid contract
that has been formed with the three
essential elements which which are an
agreement formed by offer and
acceptance, an exchange of consideration
and intention to form legal relations.
So even though we have those essential
elements which form a contract, we still
may have an invalid contract due to a
contractual defect. So in this series of
videos, we will examine a number of
different types of contractual defects.
We won't examine every type of
contractual defect out there, but we
will examine specifically the absence of
of writing, misrepresentation,
duress, undo influence, and
unconscionability
in the following slides and and videos.
Now when we do have a contractual defect
the what may happen though the
consequence of that is that the contract
can be said to be either void or
voidable. So when it's when a certain
defect causes a contract to be v void it
means that the contract was never
created.
If it's only voidable, it means the
contract was created and it is valid.
But it because of the defect, it can be
cancelled by one of the parties. And if
if it is canceled, then any goods or
benefits received need to be returned.
The first contractual defect that we
will look at is called the absence of
writing.
Contrary to popular belief, it is not a
general requirement that a contract
needs to be in writing. However, having
a contract in writing is a matter of
good practice. It's something that is a
good thing to do. It ensures that you
have proof that a contract was entered
into in case there is a dispute and also
it gives some certainty between the two
parties as to what the terms are on a
contract.
There are exceptions to the rule that a
written contract is not needed. There
are some specific types of contracts
that do have to be in writing in order
for that contract to be valid.
There's a piece of old legislation
that's still valid in most of the
provinces, I think in every province
actually, including Nova Scotia, called
the Statute of Frauds. It requires a
number of different types of contracts
to be in writing. The most notable one
is any contract relating to a sale of an
interest in land. If you have a deal to
sell real estate, it cannot be done
merely on a handshake. There has to be a
written contract. Similarly, uh
contracts for the guarantee of debt has
to be in writing. Contracts not to be
performed within a year also have to be
in writing as well as agreements in
consideration of marriage also have to
be in writing in order to be valid.
There are other contracts that also need
to be in writing and this is under
legislation called the consumer
protection act. This only applies to
contracts involving a business with a
consumer.
internet contracts, you know, online,
you know, online sales. In other words,
any sale over $50 has to have a written
contract as well. Direct sales that
involve purchases over $100
also have to have a written contract
provided to the consumer. Direct sales
typically uh would be what we would
call, you know, door-to-door sales. when
the salesperson comes to your doorstep
to try to, you know, sell you, you know,
a vacuum cleaner or some other good or
service. So, those sales, anything over
$100, a written contract has to be
provided to the consumer.
Quite often there are many things said
in the negotiations between parties that
lead up to a contract and sometimes
something is said that turns out to be
untrue and one of the parties the other
party h relies on that untrue statement
in deciding to enter into the contract.
So this this describes a contractual
defect called misrepresentation.
The definition of misrepresentation is
it's broken up into f four parts. A
false or untrue positive statement of a
past or existing fact that was intended
to and actually did induce the creation
of a contract.
A misrepresentation
makes a contract voidable at the option
of the innocent party.
In determining whether or not a
misrepresentation has occurred, we need
to discern what is a statement of fact
versus what is a statement of opinion. A
statement of fact can be a
misrepresentation if that statement
turns out to be false. A statement of
opinion, however, cannot be a
misrepresentation even if that opinion
is either false or inaccurate or just
wrong.
An opinion is considered to be a
statement of a belief or a judgment.
There are sometimes uh instances where a
statement of opinion where it's stated
by an expert may be considered to be a
statement of fact.
Let's revisit our friends Sonia and
Ahmed. Remember Sonia and Ahmed had
reached an agreement for Sonia to sell
her Apple laptop to Ahmed for $700.
In trying to convince Ahmed to buy to
buy the laptop, Sonia had made a number
of different statements that Ahmed
relied upon in making his decision to
buy the laptop. Let's look at these
different statements and see if they are
considered to be statements of fact or
statements of opinion.
The first statement, this laptop was
manufactured in 2021. So that is a
statement of fact. The battery was
replaced last month. Another statement
of fact,
this laptop feels very light and
portable. That's more of a statement of
of opinion. It's a it's based on Sonia's
belief and judgment about the lightness
and portability of of the laptop.
The next statement Sonia is saying, "As
an IT professional, I can tell you that
this computer is in excellent
condition."
So that potentially could be said to be
a statement of fact. Sonia in this
instance is an expert as an IT
professional. In her expert opinion, the
computer is in excellent condition. If
that was said just by a normal person
who's not an IT professional, that would
likely be considered a statement of
opinion. But because it comes from an
expert, it can be said to be a statement
of fact.
The next statement, the hard drive has
500 gigs of storage. Another statement
of fact,
I think it's the best laptop on the
market. So the So that's more of a
statement of opinion. And the last
statement, it's an awesome computer.
Another statement of opinion.