 Hello, this is Waylon Chao and welcome to Contractual Terms and Defects, Module 3B Part D. In this part, we'll look at the first two contractual defects of an absence of writing and misrepresentation. We know that we need three essential elements to form a legally binding contract. Just to refresh your memory, those three elements are, number one, an agreement formed by an offer and an acceptance. The second requirement is a mutual exchange of consideration and the third is an intention to create legal relations. So even in situations where we have all three of those essential elements satisfied, there may still be something considered to be a contractual defect, which may make a contract either void or voidable. When we say a contract is void, it means that because of that defect, no contract was ever created. Now, there could be certain defects which cause a contract to be voidable, which means a contract is valid and was created, but may be canceled at the option of one of the parties. So when the contract is canceled, any goods or benefits received would need to be returned. Sometimes a contract that is not in writing may be invalid. However, you need to remember that the general rule is that contracts do not need to be in writing in order to be a valid contract. What you do need to remember as well is that it's usually a good idea, as a matter of good practice, to put contracts in writing for the purposes of certainty, making sure that both parties know that an agreement, a contract, is being formed, and also that both parties clearly know what the terms of the agreement are. When you put it in writing, everyone can see it and can agree to those terms. There are exceptions to the rule that contracts do not need to be in writing. So there are some specific types of contracts that have to be in writing in order to be a valid contract. Under legislation called the Statute of Fraud, there are three types of contracts that have to be in writing. The first is contracts for the sales of interests in land. So if you are doing a deal to buy real estate, that deal has to be done with a written contract. You cannot do a real estate deal on just a handshake. The second type of contract is contracts for guarantees for the repayment of debt. So this is where someone is guaranteeing someone else's debt. So if you apply for a loan from the bank, the bank won't lend you money unless someone else provides a guarantee on the loan. So what happens is that you still owe that money under the loan, but if you got your, let's say, your mom to provide a guarantee, if you fail to pay back that loan, the bank can turn to your mom and make her liable for that loan under the guarantee. So that guarantee contract between the bank and your mom has to be in writing based on the requirement of the Statute of Frauds. The third requirement applies to contracts not to be performed within a year. So if the obligations under the contract do not need to be completed within a year, if it goes beyond a year, then the contract has to be in writing. Another piece of legislation that requires some contracts to be in writing is the Consumer Protection Act. So this deals with transactions involving consumers. So personal development services contracts that require payment in advance are required to be in writing. So this covers health club memberships, fitness club memberships, diet plans, contracts with modeling or talent agencies, martial arts clubs, sports clubs, and dance clubs are all examples of personal development services contracts. 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 relies on that untrue statement in deciding to enter into the contract. So this describes a contractual defect called misrepresentation. The definition of misrepresentation is broken up into 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 instances where a statement of opinion where it's stated by an expert may be considered to be a statement of fact. Let's look at a number of different false statements that Daria may have made to Jamal to get him to enter into the contract to buy her laptop. The first statement, it's got the latest Mac operating system. That would be considered a statement of fact. All of the software on the laptop is legit with copyright licenses. That's another statement of fact. This laptop feels very light and portable. That's a statement of opinion. As an IT professional, I can tell you that this computer is in excellent condition. Now, that usually would be a statement of opinion, but because the statement is coming from an expert, an IT professional, it could very well be considered a statement of fact. It has the fastest available Intel microprocessor. That's another statement of fact. This computer is very good for schoolwork. That's a statement of opinion, and it's an awesome computer. That's another statement of opinion.