Definition of Crime (CASES)

Melling v O’Mathghamhna [1962] IR 1.

• The plaintiff, Peter Melling, was charged in the District Court on fifteen charges, all of which were of a similar nature, relating to the smuggling of butter into the State.
• The court had to determine if this amounted to a criminal charge.
• The Supreme Court held it did. Kingsmill Moore J. held that a criminal charge could be identified by three elements:-
• a) offences committed must be against the community at large and not against an individual
• b) the punitive nature of the sanction
• c) the requirement of mens rea, for the act must be done knowingly.

McLoughlin v Tuite [1986] IR 235; [1989] IR 82.

• The plaintiff was required by notice issued by the first defendant (an Inspector of Taxes) to deliver returns of income for certain income tax years. The plaintiff failed to comply with the notice within the time specified. The first defendant sued the plaintiff, claiming penalties which arose under s. 500 of the Income Tax Act, 1967, by virtue of the plaintiff’s failure to comply with the terms of the notice.
• The court used the decision in Melling’s case to see if the indicia of a criminal offence are present.
• (a ) Whether there is a crime against the community”If an offence must of necessity be implied by reason of the existence of a penalty, therefore it would be an offence against the community at large and not against an individual. The fact that the Inspector of Taxes can sue in his own name does not mean that he is entitled as an individual to the money. It is the Central Fund which is entitled to the penalty, i.e., the community at large.”(b ) Whether the sanction is punitive, and failure to pay involves imprisonment

  “The sanction is first of all coercive. It is calculated to make taxpayers send in their returns within a limited time for fear of having to pay a penalty. If the coercive element does not work then it becomes punitive. I do not think it could be argued that a penalty of £500 for failure to make each return was not punitive. It is a penalty which is intended to pinch. However, if the penalty is not paid there is no provision for imprisonment.”

  (c ) Whether mens rea is required

  “As to the existence of mens rea , it is not an ingredient in a failure to make a return of income. The penalty arises for failure to make a return, not because of a deliberate decision not to make a return. The fact that the liability to pay the penalty does not cease on death but continues against the estate of the deceased, indicates that mens rea is absent.”

• Judgment was duly entered in favour of the first defendant.

People (DPP) v Boyle [1993] ILRM 128.

• The defendant was a registered bookmaker.
• Under section 24(1) of the Finance Act 1982 all bookmakers were required to pay a duty on every bet entered into. Failure to do so would result in an excise penalty of up to £500 under s.24(5).
• The court held, following Melling, that the provision was a criminal offence.

From the Treaty of Paris to the Treaty of Rome

Robert Schuman, Declaration of 9th May 1950

“Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity. The coming together of the nations of Europe requires the elimination of the age-old opposition of France and Germany. Any action taken must in the first place concern these two countries.With this aim in view, the French Government proposes that action be taken immediately on one limited but decisive point.It proposes that Franco-German production of coal and steel as a whole be placed under a common High Authority, within the framework of an organization open to the participation of the other countries of Europe. The pooling of coal and steel production should immediately provide for the setting up of common foundations for economic development as a first step in the federation of Europe.”

• The Schuman Declaration was presented by French foreign minister Robert Schuman on 9 May 1950. It proposed the creation of a European Coal and Steel Community, whose members would pool coal and steel production.
• This Plan formed the basis of the Treaty of Paris in 1951, which established  the European Coal and Steel Community (ECSC). It was signed in Paris on 18 April 1951 and entered into force on 23 July 1952.
• It was valid for 50 years. The Treaty expired on 23 July 2002.
• It set up a common market in coal and steel controlled by a single, independent, supranational authority (High Authority).
• The Treaty of Paris was signed by six states: France, Germany, Italy, Belgium, Netherlands and Luxembourg.
• The United Kingdom had been invited to negotiations but refused to participate as it opposed both the idea of the High Authority and the remit of its powers.

The European Defence Community

• French Defence Minister Rene Pleven proposed a European Defence Community.
• It was signed by the same six states that signed the ECSC in 1952.
• In 1954 the French National Assembly refused to ratify the treaty.
• ” The failure of the EDC discredited the idea of political integration for decades. European integration consequently returned to the philosophy of economic integration” (Schutze, 2012, p.18).

The Treaty of Rome 1957

• Established the European Economic Community (EEC) Treaty and the European Atomic Energy Community (EURATOM).
• EURATOM Treaty was formed in order to contribute to the formation and development of Europe’s atomic energy/ nuclear industries.
• The treaties duly entered into force on 1 January 1958.

European Economic Community (EEC) Treaty Aims

• The aim of the EEC Treaty was to establish common market. To remove barriers to trade for four factors of production (goods, services, capital and labour )
• Create a customs union in goods with common external tariff.
• Establish common commercial policy.
• Establish agricultural policy, transport policy, fisheries policy and competition policy.

Illegal and Void Contracts

Categories of illegal contracts:

1. Contracts illegal under Statute
2. Contracts illegal at Common Law

Illegal contracts under legislation

Express Illegality

• This is where an act is prohibited by statute and the parties enter into a contract to do that act.
• If an act is illegal under statute then a contract to do that act will also be illegal and unenforceable.

Gray v Cathcart (1899) 33 I.L.T.R 35

• An agreement to lease unsanitary premises was deemed unenforceable on the ground that it was an offence under statue to occupy unsanitary lodgings.

Illegality by Implication

• This is where the breach arises in the course of performance.

St. John Shipping v Rank (1957) 1 Q.B. 267

• The plaintiffs agreed to transport cargo belonging to the defendants .
• Contrary to the legislative requirements , the plaintiff’s ship was deliberately overloaded, the plaintiff reasoning that the excess profit would outweigh any possible fine it might occur.
• The court concluded, on a reading of particular statute, that the contract was enforceable.
• The contract itself was not contrary to law, though there was illegality in the manner in which it was performed. Such illegality was not fatal to the enforcement to the contract.

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Illegal contracts at Common Law

A contract to commit a crime or a tort

The principle of ex turpi causa non oritur actio arises, suggesting that from the circumstances of a crime there can arise no action in law.

Allen v Rescous (1676) 2 Lev 174

• Allen gave Rescous money to beat up a 3rd party.
• Rescous promised that if he did not beat up this 3rd party that he would give Allen double the original money.
• Rescous did not beat up the 3rd party and Allen sued for his money.
• It was held that the action must fail because the contract was illegal and void.

Beresford v Royal Insurance Co. Ltd (1937) 2 AER 243

• A Major Rowlandson had insured his life for £50,000.
• He ran out of money and had debts.
• To pay the debts he committed suicide so that his creditors could benefit from the insurance policy.
• At this time suicide was a crime in England.
• The court held that his executors could not recover from the insurance company because the court would not enforce a transaction which would enable criminal or personal representatives to recover fruits of his crime.

A contract involving immortality

Pearce v Brooks (1866) LR 1 EX 213

• Miss Brooks was a prostitute.
• She hired a carriage for the purpose of practicing her profession.
• The plaintiff later sued her for non-payment of the hire.
• It was held that the plaintiff could not recover.
• Their knowledge that the carriage was to be used for prostitution made the contract an illegal one.

Upfill v Wright (1911) 1 KB 506

• Upfill let a flat to Miss Wright.
• Upfill knew that Miss Wright was the mistress of a certain man and that the man would be giving her money to pay the rent.
• Upfill sued Miss Wright for arrears of rent.
• It was held that as the landlord knew that the flat was to be used for an immortal purpose the lease was tainted with immorality and the landlord could not recover.

Contracts to prejudice the administration of justice

a) Contracts to discontinue legal proceedings

• Contracts in this category usually concern agreements that compromise legal proceedings of a criminal nature.
• The most important element here is public concern at prosecuting the accused. However, there can be an exception to this if the particular crime the person is accused of does not contain any element of public concern.

Keir v Leeman (1846) 9 QB 371

• ‘ In the present instance the offence is not confined to personal injury, but it is accompanied with riot and obstruction of a public officer in execution of his duty. These are matters of public concern and therefore not legally subject of a compromise.’ (Denman CJ)

b) Contracts to refrain from legal proceedings.

Rourke v Meady (1879) 4 LR (Ir) 166 

• An agreement that the defendant would honor a negotiable instrument, which had been forged by a relative, in the face of a threat of prosecution against the defendants relative was held to be valid.

c) Maintenance and Champerty

Maintenance involves ‘ improper stirring up litigation and strife by giving aid to one party to bring or defend a claim without just cause or excuse’

Uppington v Bullen (1842) 2 Dr. & War. 184

• A solicitor sold sold land to Mr Fleming for £400 but agreed to accept £100.
• The remainder of the proceeds was to be used by the solicitor to take a case on Fleming’s behalf.
• The agreement was deemed illegal, as it involved supporting or ‘maintaining’ a third party in pursuing litigation.

Champerty , like maintenance , concerns agreements to fund speculative litigation. A contract is champertous if it involves providing financial support for litigation in exchange for a right to share the winnings.

McElroy v Flynn (1991) I.L.R.M. 294

• A contract to share an inheritance in exchange for helping to make a legal claim upon it was deemed illegal.

Contracts to defraud the Revenue 

A contract that is created with a view to evading taxes owed to the Revenue is illegal in Irish law.

Miller v Karlinski (1945) 62 TLR 85

• Miller was employed by Karlinski.
• Miller was to be paid £10 a week and expenses. But it was also agreed that under ‘expenses’ he could include his income tax liability.
• Miller later sued to recover 10 weeks arrears of salary plus £21 in expenses.
• It emerged at the trial that about £17 of the £21 really represented his liability for income tax.
• It was held that the whole contract was illegal since it constituted a fraud upon the revenue. Therefore, the court held that Miller could not recover his expenses or his salary.

Alexander v Rayson (1936) 1 KB 169

• Alexander rented a flat in Picadilly to Mrs Rayson for £1,200 p.a. However, in order to lower the rateable value of the flat, Alexander gave her 2 agreements.
• 1) A lease of the lat for £450.
• 2) A contract for services for £750.
• After a disagreement Alexander sued for money owed under the agreement.
• It was held that the agreement constituted a fraud upon the Revenue and that Alexander could not recover under either agreement.

Contracts liable to corrupt public life

This category refers to the buying and selling of public offices, and it also included the buying and selling of titles.

Parkinson v College of Ambulance Ltd & Harrison (1925) 2 KB 1

• Colonel Parkinson was told by the secretary of the College of Ambulance that if he made a large donation to the charity that the charity would get him a knighthood.
• Parkinson donated £3,000.
• He never got the knighthood and he sued to recover his money.
• It was held that his action would fail because a contract for the purchase of a title was illegal and void.

A contract prejudicial to Public Safety

Contracts in this category relate to dealing with the ‘enemy’ countries.

Ross v Shaw (1917) IR 367

• A contract concerning goods to be obtained from Belgium could not be lawfully performed because of German occupation During WWI.
• The plaintiff’s action for non-delivery of the goods failed.

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Consequences of Illegality

a) A contract illegal in itself.

• The general rule regarding contracts in this category is that both parties are denied any right or remedy whatsoever.
• The contracts which are illegal as formed are void ab initio.

There are 2 exceptions to the rule that a party cannot recover what he had given to the other party under an illegal contract.

1. if the parties are not in pari delicto ( equally to blame), the courts may allow the less- blameworthy party to recover what he had given to the other party under the contract. It is necessary for the party who seeks to be allowed to do this to prove that he had been the victim of fraud, duress or oppression on the part of the defendant. Courts may also grant relief where the illegality comes from a statute whose aim is to benefit a protected class of people when the less blame -worthy party is a member of this class

Kiriri Cotton Ltd v Dewani (1960) 1 AER 177

• A prospective tenant paid a premium to a landlord in order to secure the lease of a flat.
• This was contrary to an ordinance which had been passed for the protection of tenants. However, neither the landlord or the tenant knew of this ordinance.
• The tenant later sued to recover the premium.
• It was held that he could succeed.

2. Where a party to an executory contract repents before performance, he may recover what he has transferred to his co-contractor provided that he takes proceedings before the illegal purpose has been substantially performed.

Kearley v Thomson (1980) QBD 742

• The Court of Appeal stated that because no creditors had been defrauded the party could ‘repent’ and be reimbursed, notwithstanding the illegality.

Collateral Contracts

A subsequent or collateral contract which is based on an illegal contract is also deemed to be illegal and void.

Fisher v Bridges (1854)

• Bridges had promised by deed to pay Fisher £630, which represented the balance of the purchase price for land that he had bought earlier.
• Both parties knew that the land was to be disposed of by an illegal lottery- therefore the contract of the sale of the land was illegal and void.
• Fisher sued under the second contract – the deed regarding the balance of money.
• The action failed.

b) A contract illegal in its performance

In these situations, the contract is lawful in its formation, but one party, unknown to the other, intends to exploit it from an unlawful purpose.

Cowan v Milbourn (1867) LR 2 Exch 230

• Milbourn let a room to the plaintiff.
• He then discovered that the room was to be used to the purpose of delivering blasphemous lectures ( advocating atheism), so he told the plaintiff that he would not allow his to use the room.
• The plaintiff then claimed damages for the breach of contract.
• It was held that the plaintiff could not recover damages as he had intended to use the room for an unlawful purpose.

Unconscionability

Unconscionable Bargains

Fry v Lane (1888) 40 Ch.D.312 – Factors which will cause the courts to set aside a contract for unconstitutionality were set out. They are :

1. The poverty and ignorance of the plaintiff.
2. An undervalued consideration.
3. A lack of independent advice.

Rae v Joyce (1892) 29 LR (Ir) 500

• A pregnant woman mortgaged an interest in real property at an undervalue to a money lender.
• The money lender was clearly more commercially astute than the woman.
• The woman was also not in the best of health and in very needy circumstances but had no independent advice.
• The interest rate was 60% .
• The contract between the money lender and the woman was set aside by the Court of Appeal, which substituted and interest rate of 5%.

Rooney v Conway (1986, unreported NI)

• An elderly man sold his farm at an undervalue to a young man who had befriended him and helped him in his old age.
• The sale was set aside even though there was no evidence of improper behavior.
• The court stated that in case where the sale is at large undervalue and the parties are not on an equal footing then there is no need to show improper behavior before relief will be granted.

In England a different approach is used. In the case of Hart v O’Connor (1985) 2 AER 880 it was stated that the stronger party must have shown behavior which is ‘morally reprehensible’ or shocking ‘ to the conscience of the court’ before relief will be granted in equity.

Upholding the Bargain

The stronger party must show that the agreement is fair, just and reasonable. The stronger party must convince that the other party knew what he was doing when he entered the contract and that he got the market value of his property.

Smyth v Smyth ( unreported. HC November 22, 1978)

• A young man who was an alcoholic  asked the other party to buy his property.
• This sale took a long time to complete so that there was no question of not giving the vendor enough time to reflect the contract.
• Costello J upheld the bargain. He found that the consideration was adequate and did not find that the transaction was unconscionable because the same solicitor acted for both sides.

Undue Influence

Contracts which are entered into as a result of one party putting pressure on the other are dealt with under the doctrine of undue influence in equity.

In Barclays Bank Plc v O’Brien (1993) 3 AER 417

• The house of lords divided contracts which may be rescinded for undue influence into 2 categories:

1. Actual Undue Influence
2. Presumed undue influence – (a) Relationships which give rise to the presumption of undue influence as a matter of law. (b)  Relationships of actual confidence

Actual Undue Influence

The claimant must prove affirmatively that the wrongdoer exerted undue influence on the complainant to enter into a particular transaction.

William v Bayley (1886) LR 1 HL 200

• A man forged  his father’s name on some promissory notes.
• A representative from the bank met with the father and stated that the son would be prosecuted if some solution could not be reached and transportation for life was even mentioned.
• The father was extremely upset and felt that he no other option than to mortgage property to the bank in return for the promissory notes,
• It was held that the agreement between the bank and the father was invalid as the bank had exerted undue pressure on the father by exploiting concerns for his son.
• This was not a case of duress because the banks threats were lawful.

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Special Relationships which give rise to the presumption of undue influence

(a) Relationships which give rise to the presumption of undue influence as a matter of law

Certain relationships are deemed automatically to attract the presumption of undue influence. Relationships in which undue influence exists are doctor/patient, trustee/beneficiary, solicitor/client, parent/child, guardian/ward, religious adviser/ discipline.

Allcard v Skinner (1887) 36 Ch D 145

• The plaintiff entered the convent, of which the defendant was Mother Superior.
• On entering the convent she took vows of poverty, chastity and obedience. The vow of poverty required that she surrender all of her personal property.
• She gave gifts to the defendant that valued at £7,000. After 8 years she left the convent and £1,600 remained of her gifts.
• She did not take any action against the defendant for 6 years.
• She then sued the defendant for the recovery of her money.
• It was held that no personal pressure was exerted on the plaintiff while she was in the convent, nor was any unfair advantage taken of her position. Despite this, the court found that the gifts were made under a pressure which she could not resist. No independent advice had ever been given to her and even if she did want such advice, the rules of the convent forbade the seeking of it.
• However, the court held that she was not entitled to recover the money due to her delay in seeking relief.

(b) Relationships of Actual Confidence

This is a relationship in which the presumption of undue influence does not arise as a matter of law, but where there is a relationship between the parties and the party setting to set aside the transaction did, in fact, have trust and confidence in the other party.The weaker party must show that he trusted and placed his confidence in the other party and that the other party dominated him in some way.

McGonigle v Black (unreported, High court, November 1998)

• The presumption arose from a relationship between an elderly farmer ( who was lonely, ill and unable to generally to cope) and his neighbor, a relationship that on the facts was one in which the farmer placed considerable trust and confidence in his neighbor.

Royal Bank of Scotland PLC v Etridge (No.2) (1998) 4 AER 705

• Stuart Smith LJ reviewed the principles as set out in the O’Brien case regarding the issue of constructive notice. He reiterated the fact that it is necessary that the complainant receive independent legal advice.

Bank of Ireland v Smyth (1995) 2 IR 102

• The Supreme Court held that where a spouse is giving consent to a mortgage of the family home her consent must be fully informed consent. The bank should inquire as to whether she understood the nature and effect of the transaction.
• The bank should also advise the wife to obtain independent legal advice; otherwise the mortgage is valid.

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Loss of Right to avoid the contract.

1. Where there has been a delay in seeking relief.
2. Where the contract has been affirmed.
3. Where a third party has acquired goods under the contract for value and without notice.

Duress

Duress at common law

• Duress is a defence rendering a contract voidable. Duress may basically be defined as illegitimate pressure brought to bear on one of the parties with the result that the latter has no reasonable alternative but to enter into the contract.
• At common law the doctrine of duress is restricted to actual physical violence or threats of physical violence or imprisonment (unless the imprisonment be lawful) against one party.
• In the 1970’s the doctrine was also extended to cover case of economic duress.

Skeate v Beale (1840) 11 A & E 983

• A tenant agreed to pay his landlord more than he owed him because the landlord had threatened his goods.
• He later attempted to recover the extra money because the threat was unlawful and he had only paid the extra money as a result of the threat.
• It was held that he could not recover the extra money.
• This is due to the fact that the threat was related to goods and not to actual physical violence or threats of physical violence or imprisonment.

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The duress must have induced the other party to enter into the contract even if it was not the only reason why they entered it.

Barton v Armstrong (1976) AC 104

• The defendants abducted the plaintiff and threatened to kill him and harm his family if he didn’t sign a deed, entering a business agreement with them.
• It was also in the interests of the plaintiff to enter this agreement as it would benefit his company.
• The defendants argues that the plaintiff’s plea of duress should fail because the threat was not his sole reason for entering the contract.
• The court held that the contract was voidable for duress.

Onus of Proof

Once the plaintiff can show that unlawful threats were made to him, the onus is on the defendant to show that they were not a reason for his entering the contract.

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Griffith v Griffith (1944) IR 35

• The High Court held that a marriage entered by a nineteen year old man as a result of threats of imprisonment by his father, the girl’s mother and the parish priest was void ab initio for duress.

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Economic duress 

It has been acknowledged that certain forms of economic pressure may constitute duress, even where there is no threat to life ,limb or liberty.

Economic duress had occurred in North Ocean Shipping v Hyundai (1979) QB 705

• The defendants had agreed to built a tanker for the plaintiffs.
• The agreed price was US $30 m. and it was agreed that it would be paid in 5 installments.
• The first installment was paid but after this the value of the dollar plummeted.
• The defendants then demanded a price increase of 10%.
• They threatened that they would not complete the tanker if the increase was not paid.
• The plaintiffs had already contracted with a third party to charter the ship when it was finished. Therefore the plaintiffs paid the extra money and received the tanker.
• 8 months later they claimed repayment of the extra money.
• Mocatt J held that this constituted economic duress. The threat by the defendants was both wrongful and highly coercive of the plaintiffs will. Despite the finding of the presence of economic duress the plaintiffs were held to have affirmed the contract because they had not demanded the extra money for 8 months. Therefore, they lost their right to avoid it.

Atlas Express v Kafco Ltd (1989) 1 AER 641

• The defendant engaged the plaintiff carrier company to deliver cartons to a third party (Woolworth’s) in June 1986.
• The plaintiffs manager had been mistaken when he calculated the contract price and the plaintiff was actually transporting the cartons at a loss.
• In November the plaintiff and the defendant agreed that the plaintiff would get more money.
• The defendant agreed because its business was entirely dependent on its contract with Woolworth’s and it would be impossible to find another carrier in time to fulfill its obligations under this contract.
• If they had not agreed to increase the price, Woolworth’s would have sued it for loss of profit and would have ceased trading with them.
• The defendants manager stated in court that he felt he was ‘over a barrel’
• It was held that the agreement was unenforceable on the ground that it had been obtained by economic duress.

Misrepresentation

A contract will be voidable where a party was induced by a false statement of fact to enter into the contract.

The Nature of Representation

Statements of opinion

• May give rise to a misrepresentation if it did not represent the true state of mind of mind of the person making the statement, or if the person making the statement ought to to have know better due to her skills and expertise.
• If what is really an opinion is stated as if it was a fact, it will be held to constitute a representation of fact.

Bisset v Wlikinson (1927) AC 127

• Defendant decided to go into sheep-farming and bought approx. 2,300 acres of land from the plaintiff.
• The plaintiff told the defendant that the land would would carry 2,000 sheep.
• Even thought the plaintiff was a farmer he never worked this particular land with sheep.
• The defendants did not manage to work near that number of sheep on the land.
• The defendant alleged misrepresentation and counter claimed rescission when Bisset sued them to recover money payable to him under contract.
• It was held that the plaintiff’s statement was an honest statement of his opinion and that there was no actionable misrepresentation.

Smith v Land & House Property Corporation (1884) 28 Ch D 7

• It was held that there was misrepresentation as the statement about the tenant being desirable was not a statement of opinion as the plaintiff knew that the tenant had fallen behind his rent.

Reese River Silver Mining Co. Ltd v Smith (1869) LR 4 HL 64

• The promoters of a mining company wanted to magnify the future earning capacity of a mine and published forecasts of experts as though they were positive facts.
• This was held to ground an action of misrepresentation.

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Statements of intention

Edington v Fitzmurice (1884) 29 Ch D 459

• A company used a circular which invited the public to take out subscriptions for debentures and the circular stated that the money raised would be used to improve the company’s premises and to buy some horses and vans.
• This was untrue as the real intention was to use the money to discharge some debts.
• It was held that the misstatement of the company’s intention was a material misstatement of fact.
• Bowen, LJ, stated: ‘ A misrepresentation as to the state of man’s mind is .. a misstatement of fact.’

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Statement of law

A representation as to law will not be generally found an action for misrepresentation.

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Silence as Misrepresentation

The general rule is that silence does not constitute misrepresentation.

Turner v Green (1895) 2 Ch 205

• In this case it was held that mere silence as to a material fact which the plaintiff was not bound to disclose could not constitute misrepresentation.

3 circumstance under which silence can be held to constitute a misrepresentation:

1. Where silence distorts a positive representation
2. In contracts uberrimae fidei
3. Where a fiduciary relationship exists between the parties.

1. Where silence distorts a positive representation

Tapp v Lee (1803) 3 Bos. & P. 367

• The plaintiff asked for a reference in respect of a man called Brunell who wished to buy some goods from the plaintiff.
• Lee said  that Brunell was honest and that he trusted him.
• He did not disclose the fact that Brunell was bankrupt.
• It was held that what left unsaid had positively falsified what was said and the plaintiff succeeded in his action for misrepresentation.

If  the facts change the representor is under a duty to disclose any change of circumstances .

With v O’Flanagan (1936) Ch 575

• Defendant was a doctor who told the plaintiff that his medical practice was worth £2,000 a year.
• The statement was made in Jan. 1934.
• In May 1934, the plaintiff entered a contract to buy the practice.
• Between January and May the defendant had fallen ill.
• By April the practice was earning £5 per week.
• The plaintiff claimed rescission and repayment of the purchase money.
•  It was held that the defendants silence with regard to the change in circumstances amounted to a positive misrepresentation.

2. In contracts uberrimaei fidei

Most commonly encountered in respect of insurance contracts, this doctrine requires ” utmost good faith” of the parties making the contract.The party seeking insurance bears a duty of total honesty and must reveal all material of facts.

Keenan v Shield Insurance (1987) I.R. 113

• Failure to disclose a previous claim rendered an insurance contract voidable.

3. Where a fiduciary relationship exists

A fiduciary relationship is one of confidence and trust between 2 parties. E.g. a solicitor and his client.

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The nature of the Inducement.

The misrepresentation must have caused the party complaining of the defect to enter into the contract.

A misstatement has no legal effect if the other party:

1. was unaware of its existence, or
2. knew that it was false,or
3. did not allow it to affect his/her judgement.

1) Was unaware of its existence

Horsfall v Thomas (1862) 1 H & C 90

• Thomas employed the plaintiff to make him a gun.
• The plaintiff did make him the gum, but it had a defect. The plaintiff concealed the defect by covering it with a metal plug.
• The defendant never examined the gun. The gun burst after 6 shots had been fired.
• It was held that because the defendant never examined the gun, that the attempt to conceal the defect had not produced any defect on his mind.

2) Knew that it was false

Gahan v Boland (1984) Unreported, Supreme Court

Phelps v White (1881) 5 LR 318

3) Did not allow the representation to affect his/her judgement

Smith v Chadwick (1884) 9 App Cas 187

• A company prospectus contained a statement that a certain important person was on the board of directors.
• The statement was false.
• The plaintiff admitted in questioning that his judgement had not been influenced by this statement.
• It was held that the plaintiff could not avoid the contract on the ground of misrepresentation as he had not been influenced by the misstatement.

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Types of misrepresentation 

1) Fraudulent misrepresentation

A fraudulent statement is, according to the House of Lords in Derry v Peek (1889) 14 A.C. 337, a false statement ” made (a) knowingly,[with knowledge of its falsity] or (b) without belief in truth, or (c) recklessly as to whether it be true or false”.

Remedies- Rescission and or damages ( for tort of deceit)

2) Negligent misrepresentation

Hedley Byrne & Co. Ltd v  Heller Partners Ltd (1964) AC 465

• The plaintiffs entered into advertising contracts on behalf of a third party called Easipower.
• Under the rems of the contract the plaintiff would be liable if Easipower defaulted on the contract.
• They told their bank to check Easipower’s credit with the defendants, Easipower bankers.
• The plaintiff lost a lot of money when Easipower went into liquidation.
• The plaintiff sued the defendants for the negligent report they had been give.
• It was held that the defendants were not liable because of the presence of an exemption clause. However, the court went on to state that if there had been no such clause, an action for negligence could lie in such circumstances.

Remedies

• In contract the innocent party may be entitled to rescission.
• In tort- entitlement to damages if the representation falls within the scope of Hedley Byrne.
• There is a statutory remedy under the Sale of Goods & Supply of Services Act 1980. Part v of the Act deals with misrepresentation and s.45 gives the court discretion to award damages in lieu of rescission for non fraudulent misrepresentation.

3) Innocent misrepresentation

An innocent representation is a false statement of fact made without negligence and with honest belief in its truth.

Bannerman v White (1861) 10 CBNS 844

• The parties were negotiating for the sale of hops.
• The defendant said that he would not take the hops if sulphur had been used in the field where it was grown.
• The plaintiff innocently misrepresented that no sulphur was used.
• The defendant took the hops and discovered that sulphur had in fact been used.
• It was held that the defendant was entitled to rescission in equity.

There is also a statutory remedy for innocent misrepresentation under s.45 of the Sale of Goods & Supply of Services Act 1980, whereby the court has discretion to award damages instead of rescission.

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Rescission 

When a contract is rescinded, each party is put back to his former position as though the contract never existed. The contract is nullified ab initio. Therefore, rescission will not be granted unless it is possible to restore both parties to their original position.

Whittington v Seale-Hayne (1900) 82 LTR 49

• The plaintiff were induced to take a lease on defendants premises.
• The defendant made an innocent representation that the premises were sanitary.
• In fact it had contaminated water supply.
• Most of the poultry died and the manager and his family became ill.
• The plaintiff claimed rescission of the lease and indemnity to cover rent paid, rates, value of stock lost, loss of profit and sales, loss of breeding season , repair of drains and medical fees.
• It was held that the plaintiffs which were entitled to recover rent, rates and repairs. These were obligations which were created by existing contract. They could not recover the other items since there was no obligation to carry on a poultry farm or to appoint a manager.

The right to rescind a contract may be lost in certain circumstances:

1. if the contract is affirmed
2. if restitution in integrum is impossible
3. if a 3rd party has acquired rights under the contract in good faith and for value
4. if there has been lapse of time.

1) If the contract is affirmed

• This is where the innocent party became aware of the misrepresentation but nonetheless  continued to act under the contract.

Long v Lloyd (1958) 1 WLR 753

• Lloyd sold a lorry to the plaintiff, stating that it was in exceptional condition.
• Long bought it and after one journey he noticed some defects and informed the defendant.
• Lloyd offered to pay half of the repair cost.
• On the lorry’s second journey it  broke down.
• Long sought rescission of the contract.
• It was held that he was not entitled to rescind the contract because the second journey amounted to an affirmation of the contract.

2) Restitutio in Integrum is impossible

If goods have been consumed or property has deteriorated the representee will not be entitled to rescission at common law because the parties cannot be restored to their exact original position. However, where the subject-matter of the contract has merely deteriorated somewhat, rescission is possible on the terms that the representee pay compensation for the deterioration.

3) A 3rd party has acquired rights

• Where goods have been sold to a 3rd party.
• Anderson v Ryan (1967) IR 34

4) Lapse of time

Leaf v International Galleries (1950) 2 K.B. 86

• Rescission was refused because the person discovered five years after purchasing a painting that it was not painted by Constable, as originally claimed.
• The delay in claiming rescission was a factor in the refusal.

Contract Law- Mistake

3 Types of Mistake

• Common Mistake- The mistake is said to be shared. Both parties are mistaken, each making the same error.
• Mutual Mistake- The parties misunderstand each other. One party believing X, the other Y. No agreement on point.
• Unilateral mistake- Only one party makes a mistake but the other party either knows or should have known that the mistake has been made.

Common Mistake

Contract will only be void if it relates to:

(a) Existence of a thing or survival of a person (res extincta)

(b)Ownership of the subject matter (res sua)

(c) Mistakes as to quality

(a) Res extincta

Couturier v Hastie (1856) 5 HL Cas 673

• The contract was void from the beginning as there was an absence of the subject-matter.
• A buyer contracted for the purchase of corn which both parties believed was on ship bound to England.
• Unknown to either of the parties, the corn has fermented and had to be sold by the ship’s captain before the contract was made.

Under section 6 of the Sale of Goods Act 1893 now stipulates that a contract for the sale of goods will be void if those goods have been perished at the time of the contract ( provided that the seller is not aware that the goods have been perished)

Galloway v Galloway (1914) 30 TLR 531

• The two parties made a separation agreement.
• It was later discovered that the man’s first wife was alive.
• It was held that the separation agreement was void as it had been entered into on the basis of the common assumption that the parties were married to each other.

(b) Res Sua

Cooper v Phibbs (1867) LR 2 HL 1495

• The plaintiff agreed to take a lease on the defendants salmon fishery.
• It turned out that the plaintiff owned the fishery and not the defendant.
• Thus the lease was void.

(c) Mistake as to quality

Bell v Lever Brothers (1932) AC 161

• Bell was made redundant. Lever Brothers gave him £30,000 compensation.
• Few months later, Lever Brothers discovered that Bell had committed breaches of duty during his employment.
• Lever Brothers could have just fired him without pay and therefore they sought to recover the money on the grounds of common mistake.
• The mistake was not unilateral- the jury found that Bell’s mind had not been directed to his breaches of duty at the time the compensation agreement had been made.
• Lord Atkin stated ” Mistake as to quality of the thing contracted for raises more difficult questions. In such a case a mistake will not affect assent unless it is a mistake of both parties, and is as to the existence of some quality which makes the thing without the quality essentially different from the thing as it was believed to be.”

Solle v Butcher (1950) 1 KB 671

• Parties negotiated for the lease of a flat on mistaken assumption that the rent was unaffected by the Rent Restriction Acts.
• The agreed rent was £250. Later discovered that it was controlled by the acts and the rent was £140.
• Solle sued to recover the amount that he had overpaid.
• The court found that the mistake was not important enough to render the contract void at common law.

Equity

Where relief is not available in common law because of some common mistake does not mean that the Irish law will not grant relief at all. Based upon equitable principle, a court may do on of the 3 things:

1) Refuse to grant a decree of specific performance. (Baskcomb v Beckwith (1869) LR 8 Eq 100)

2) Set aside the contract. (Solle v Butcher (1950) 1 KB 671)

3) Rectify a written contract that does not accurately record the real agreement made by the parties.

Conditions for rectification

• There must have been prior completed agreement.
• The intention of the parties must have continued unaltered.
• the existence of the mistake must be clear.
• only ‘literal’ faults can be rectified.

Mutual Mistake

At common law only fundamental mistakes are operative.

Scriven Brothers v Hindley & Co. (1913) 3 KB 546

• Plaintiffs bid for two lots which they believed contained hemp at an auction.
• Auction catalogue did not disclose that the second lot contained tow and not hemp.
• The defendants made a very high bid for the tow because they believed it was hemp.
• When they discovered that it was tow they refused to pay.
• It was held that there was no binding contract because the court was not able to determine the ‘sense of the promise’

If an objective bystander, observing the conduct of the parties, can find an agreement between the parties by reference to their words and conduct, the agreement will be enforced. (Scott v Littledale(1858) 8 E&B 815)

Unilateral Mistake

Unilateral mistakes not only covers the situation where one party actually knows the other is mistaken but it also covers where one party ought to know of the other’s mistake ( would have been obvious to a reasonable man)

Hartog v Colin & Shields (1939) 3 AER 566

• Defendant offered to sell a number of Argentine hare-skins, the price to be determined at a certain sum per pound.
• The plaintiff accepted this offer
• The standard practice was to sell by the piece. The vendor was aware of this mistake, which worked out to his benefit.
• The contract was thus void.

Errors as to identity

In order to succeed in avoiding the contract the mistaken party must show that:

1. The other party’s identity mattered to the contract.
2. The mistake was one of identity and not of attribute.

• Cundy v Lindsay (1878) 3 APP CAS 459
• King’s Norton Metal Co. v Edtridge, Merrett & Co. (1897) 14 Tlr 98
• Phillips v Brooks Ltd (1919) 2 KB 243

Non est factum- it is not my deed

Generally, when someone signs a document, he is bound by it, even if he hasn’t read it or understood it. However, there are some circumstances under which a person who has signed a contract will not be bound by it. The contract will be void if a party signs the contract because he has been induced by a false statement.

Lewis v Clay (1897) 67 LJ QB 224

• The plaintiff pretended to the defendant that he needed him to witness some deeds.
• He had placed blotting paper with holes cut into it over the “deeds”, allegedly to keep their contents private.
• The defendant signed .
• The “deeds” turned out to be promissory notes, obliging the defendant to pay the plaintiff £11,000.
• The defendants plea of non est factum was easily supported.

Saunders v Anglia Building society (1970) 3 AER 961

• Elderly woman signed a document which she believed had the effect of gifting her house to her nephew.
• She did not read the document because her glasses were broken.
• The document dealt with the sale of her house to a man called Lee.
• The court held that the widow could not pray the doctrine of non est factum in aid.
• Even if she was an elderly woman with limited education she should still have checked what she was signing.

Company Law- Separate Legal Personality

Separate Legal Personality

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The Rule in Salomon v Salomon & Company Limited (1897) A.C.22

• Company which is registered according to the Companies Acts 1963-2012 has a distinct legal personality.
• In Limited Liability companies shareholders are not liable for the debts of the company to its creditors ( only have to pay the remaining unpaid shares that were issued to him according to to the terms of the articles and memorandum of association)

Facts of the case

• Mr Salomon was a sole trader who owned a boot manufacturing and leather business. His sons worked in the business and pressed him to give them a stake. Mr Salomon incorporated a newly formed limited company.The company purchased Salomon’s business for £39,000. His wife and five eldest children became subscribers and two eldest sons also directors.
• The consideration was made up of 20,000 fully paid shares of £1, a cash payment of approx. £9,000, a loan from Mr Salomon to the company of £10,000 secured by floating charge.
• The company went into liquidation.
•  The question was whether Mr Salomon’s secured debt of £10,000 should be paid by the company in priority to debts amounting to £7,500 owning to company’s unsecured creditors.
• Liquidators argued that unsecured creditors should have priority over the debenture issued to Mr Salomon. Liquidators said that the incorporation of business by Mr Salomon was a mere scheme to enable him to carry on business in the name of the company with limited liability, contrary to the true intent and meaning of Companies Act.
• However, House of Lords held that the creditors had to respect the principles of incorporation and that the company could not be treated as an agent of the controller. The company was separate and distinct from those within it and legally had to be treated separately.
• Lord McNaghten- ” The company is at law a different person altogether from the subscribers to the Memorandum; and, although it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or a trustee for them. Nor are the subscribers, as members, liable in any shape or form, except to the extent provided by the Act.”

Application of the principle 

Quigley Meats Ltd v Hurley (2011) IEHC 192

• The Plaintiff (Quigley’s) supplied Hurley’s with meat produce for their bar and restaurant called ” An Seanachie Bar”.
• The plaintiff were of the impression that they were dealing with the defendant personally. However, payments for the produce were always made to Quigley Meats Ltd from a company account ” The Seanachie Cottages Ltd”.
• Defendants got into financial difficulty and stopped paying the plaintiff for the produce.
• Quigley Meats Ltd took legal action against Hurley for unpaid bills.
• The court initially found for the Quigley’s ordering the defendants to pay the debt of €26,719.
• The defendants appealed arguing that they could not be found personally liable as the debt was for their company to pay.
• High Court agreed with the defendants on the grounds that when they did pay the Quigleys they had paid with cheques which had the company’s name printed on them. Therefore they ought to have known that they were dealing with a limited liability company and not individuals.

Lee v Lee’s Air Farming Ltd (1961) AC 12

• The fact that the deceased could control the company “did not alter the fact that the company and he were 2 separate distinct persons”

Macura v Northern Assurance (1925) AC 619

• Damage to a company’s property was not recoverable under an insurance policy because the policy was in the name of the company’s controller and not that of the company.
• The company owned the property.