IRAC "APPLY AND CONCLUDE" TASK (10 marks)

You have been given the facts, a selection of legal issues and relevant rules relating to a problem concerning contract excuses.Mostof the issues and rules provided are relevant, butsome are not. You are required to identify therelevantissues and rules andapplythese rules to the facts to solve the legal issues and to reach aconclusion.

FACTS

Alvin was interested in buying a photography studio from Christopher. Alvin suffered from a mild intellectual disability and did not understand complex transactions. Alvin's first language is Portuguese and although he could understand English he was unable to read it very well. Christopher did not know Alvin well, but he was aware of his disabilities because Alvin had been a regular attendee at his photography classes. Christopher's partner had recently received a promotion involving a transfer to Japan. Christopher intended to start up a new business in Japan and was keen to sell his Australian business quickly. He told Alvin that the business had "lots of potential" and "if (Alvin) worked hard he could make a lot of money".Christopher showed Alvin the financial statements for the business for the past 5 years. Alvin did not understand the accounts but was too embarrassed to ask for any explanation. The statements showed that the business had never made a profit. Christopher told Alvin that others had shown interest in purchasing the business, so he would need to act quickly. Alvin signed the contract before obtaining any independent advice.

LEGAL ISSUES:

The key legal issue to be resolved is:

Can Alvin successfully argue that the contract should be set aside on the grounds of either unconscionable conduct and/or undue influence?

There are four (4) relevant sub- issues. Delete (or rule through) any sub-issues that are not relevant to resolving the key issue:

1.Was the agreement between Alvin and Christopher based on a mistaken belief held by both parties that studio was profitable?

2.Was Alvin suffering from any special disadvantage that may have impacted on his capacity to protect his own interests?

3.Was Christopher in a position of trust and confidence so that he exerted a controlling influence over Alvin's decision making?

4.Was Christopher's acceptance of Alvin's offer to purchase the studio induced by his mistaken belief that Alvin was capable of looking after his own affairs?

5.Did Christopher's behaviour towards Alvin expressly or impliedly threaten the Alvin's personal safety?

6.Did Christopher take unfair advantage of Alvin's disability when he encouraged Alvin to purchase the studio?

7.Did Christopher take unfair advantage of his influence over Alvin when he encouraged Alvin to purchase the studio?

RULES:

Only three (3) of the seven rules listed below are relevant to the issues raised above. You need to match the rules to the issues (this time each rule has two matching sub-issues). Delete (or cross-out ) any rules that are not relevant to resolving the sub-issues.

A.A contract will be voidable or unenforceable due to unilateral mistake if all of the following requirements are satisfied.

One of the parties has made a mistake.

The mistake relates to a fundamental aspect of the contract.

The other party has sought to take advantage of the mistake.Taylor v Johnson(1983) 151 CLR 422

B.Where the relationship between contracting parties is not one of recognised relationships of influence but involves a situation where the weaker party has placed their trust and confidence in a dominant party, the onus is on the weaker party to prove that there were in a relationship where the stronger party was able to exercise a 'controlling influence' over the decision-making of the weaker party. The onus then switches to the stronger party to prove that they did not take advantage of their controlling influence,Johnson v Buttress(1936) 56 CLR 113

C.Where the person who signed the contract did not read it because they were blind, illiterate or could not read English and the other party induced a mistake about the fundamental nature of the document, it will be void on the grounds of non est factum,Petelin v Cullen(1975) CLR 355

D.A contract may be set aside on the grounds of duress where one party uses illegitimate pressure, such as a threat to harm a person or their loved ones, to induce a contract.Barton v Armstrong[1973] 2 NSWLR 598

E.A 'special disability' must affect the weaker party's ability to protect their own interests. Examples include: An inability to speak or read English; lack of education; physical or mental sickness; age; intoxication,Blomley v Ryan(1956) 99 CLR 362

F.A contract will be void due to a common mistake if at the time the contract was formed both parties believed that the subject matter of the contract was in existence and that belief as incorrect,McRae v Commonwealth Disposals Commission(1951) 84 CLR 377

G.A contract will be voidable for unconscionable conduct if one party has unfairly taken advantage of a special weakness or disadvantage of the other party. The following requirements must be satisfied:

One of the parties has a special weakness or disadvantage

The other party knows about or should know about that weakness or disadvantage

The other party takes unfair advantage of the special weakness or disadvantage,Commercial Bank of Australia v Amadio(1983) 151 CLR 447