Question

1. a) From the following, determine which would be contracts for necessaries and which would not? Explain your answer. i) Car to drive to lecture theatre if staying in USP hostel? ii) Money for an around the world air ticket? iii) A loan from an uncle for USP fees and then using it to buy a new laptop?

2. Explain in your own words what you understand about common mistake and how you can distinguish it from mutual mistake.

3. If you wanted to buy a house and the landlord (seller) knew that the tenant had not paid rent for the last 6 months, yet he stated that the tenant was the most desirable tenant, would you be able to successfully bring a claim for fraudulent misrepresentation or not? Explain your answer with reference to relevant cases.

4. You are the Captain of a ship which sails from Port Vila to Suva, then to Nukualofa and back to Sydney within a week. You can only afford to stay at the Ports for less than six hours whilst the cargo is offloaded. When you arrive at Suva wharf to offload cargo, the Stevedore operators at the wharf are on strike. They want double salary. You are under pressure as you have to off-load the cargo and set sail. You agree to pay them because if you don’t then you will be liable in losses for failing to deliver on time, and some of the cargo may be perishable. Can you set aside the contract afterwards on the ground of economic duress? Explain.

5. Imagine that John asked his wife to sign a guarantee over the family home for debts of his business stating that it would increase the business and profits, whilst knowing very well that the business was not doing well. Can John’s wife later claim undue influence, unfairness or unconscionability and get the contract set aside? Refer to relevant cases to assist you in your answer.

Answer 1

ANSWERS

1. i) Car to drive to lecture theatre if staying in USP Hostel is not a contract for necessaries as it clearly doesn't appears to be an item required for the student's health and safety and he/she is already staying at USP Hostel which is adequately satisfying his/her needs.

ii) Money for 'around the world ticket' is not a contract for necessaries as the ticket doesn't deem to be a necessity .

The definition of necessaries includes obvious purchases, such as food and clothing, but also services or goods which are in furtherance of education or apprenticeship.

iii) A loan from uncle for USP fees would have been a contract for necessaries if it would have been used by the student to pay the fees . But because he/she uses it to buy a laptop which might help him/her in his/her education, makes it an invalid contract.

2. A Common Mistake is when both the parties enter into a contract under the same misunderstanding/misapprehension which directly affects the basic definition of what the parties are contracting for.

As in the famous case Bell Vs Lever Bros it was said that a contract may be void if the mistake is as to the existence of some quality essentially different from the thing it was believed to be.

Whereas, Mutual Mistake is when both the parties are in a situation where there is a common understanding in the formation of the contract, but the parties are mistaken. Hence, the contract becomes Voidable.