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COMMERCIAL CONTRACT VOCABULARY A-Z: I - INDUCE

To ‘induce’ (pron: in-joos) means to persuade someone to do something, or to cause something to happen.


Commentary:

You will see the verb ‘to induce’ used in a number of contexts connected with contracts. In this post, we will look at two.


Sometimes, a party to a contract will argue that statements made by the other party before the contract was entered into were false. Under English law, if certain conditions are satisfied, a court may decide that those statements were misrepresentations. If so, a number of consequences may follow, depending on the circumstances. For example, the contract may be rescinded and the party who made the statements may have to pay compensation (called ‘damages’) to the other party.


The conditions that must be satisfied to establish misrepresentation under English law are:


· a statement has been made by one party to the other

· that statement must be of existing fact or law (and not, for example, simply opinion)

· generally, the statement must be made ‘positively’. In other words, silence is not, usually, deemed to be a ‘statement’ (although there are exceptions to this)

· the statement must have induced the other party to enter into the contract, at least in part.


Another example of the use of the verb ‘to induce’ in a contractual context can be seen if someone does something, during the performance of the contract, to make one of the parties breach the contract. Inducing a breach of contract is a civil wrong, called a ‘tort’, under English law. Inducing a breach of contract is a particular kind of civil wrong (tort), called an ‘economic tort’.


The English Court of Appeal has recently (18th January 2021) handed down judgment in the case of Kawasaki Kisen Kaisha Ltd v James Kemball Limited [2021] [1]. In this case, the Court of Appeal looked at the test for inducing a breach of contract which should be applied in relation to a case involving a corporate restructuring. It also looked at the kind of conduct that might amount to ‘inducement’ in this situation.


Essentially, the Court of Appeal said that conduct cannot amount to ‘inducement’ if it amounts to no more than preventing a party from fulfilling its contractual obligations as one of its consequences. The court said there must be conduct that amounts to “persuasion, encouragement, or assistance” in relation to the party who is alleged to be breaching the contract. Basically, the conduct must have operated on the will of the party alleged to be in breach and influenced the decision to breach the contract.


Notes:

[1] [2021] EWCA Civ 33.



EXERCISES

In the Commentary, above, you will see five verbs, in bold. In Exercise 1, match each of the verbs (1)-(5) to its meaning (a)-(e). In Exercise 2, choose the most appropriate verb (in its correct tense) to complete each of the five sentences.


Exercise 1

1. to breach

2. to deem

3. to induce

4. to rescind

5. to enter (into)


(a) to consider or judge something a particular way

(b) to revoke, set aside, or cancel something, such as a contract

(c) to move into or join something

(d) to break something, such as a contractual obligation

(e) to persuade someone to do something, or cause something to happen





Exercise 2


1. My client only …………………………. the contract because you told him that the turnover of the shop last year was £200,000 – which was false!


2. The goods delivered were not of satisfactory quality under the terms of the contract and we therefore consider that you have ………………………… the contract.


3. We deny that our client made any statements of fact during the contractual negotiations. You will know, of course, that silence is not ………………… to be a positive statement.


4. We suggest that your statement about the turnover of the shop amounts to a misrepresentation, and that our client is therefore entitled to ……………………… the agreement.


5. Your client ………………………….. our client into signing the contract only because of your client’s statement that the turnover of the shop was £200,000 last year.




ANSWER KEY

Exercise 1

1(d)

2(a)

3(e)

4(b)

5(c)


Exercise 2

1. entered into

2. breached

3. deemed

4. rescind

5. induced


Note: This post is for study and educational purposes only. It is not and is not intended to be legal advice, nor is it intended to be a full, accurate, and up-to-date statement of English law. If you need legal advice, you should always consult an appropriate lawyer or legal adviser.


© Cambridge Legal English Academy 2021

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