Chapt 6: Vitiating Factors Flashcards
Types of vitiating factors (4)
Incapacity, Restraint of trade clause, Illegality and Misrepresentation
Incapacity: The Minors
Explain the General position and what happens if it is executed.
General position is that contract with minors is generally unenforceable. (There are exceptions)
If minors have performed their obligations already (Executed) He will not be able to claim the money paid and goods sol, whether or not is it necessary or benefit him.
3 types of Minor contract (Executory)
Valid contract, Voidable contract and Ratifiable contract.
What about valid contracts?
The contract must benefit the minor. If yes, it binds both the minor and adult.
Cover contracts such as:
1. Contract for Necessaries (Good&Services)
- Beneficial contract for employment, apprenticeship and education.
- Loan
Explain valid contract for necessaries (Good&services)
Based on S3 of sales of good act, adults need to prove:
1. Goods are suitable to the condition in life of minor.
- Must show that minor has an actual need for the goods.
- Show that overall benefits the minor.
Based on S3(2) of SOGA,
in return must pay a reasonable price.
Explain Valid contract for education, employment.
Just need to show that benefits the minor.
Explain voidable contract.
It binds both minor and adult. UNLESS, the minor repudiates while still being a minor or reasonable time after attaining majority.
Explain Ratificable contract
Only bind adults. UNLESS, the minor ratifies the contract after attaining majority, then both minor and adults are bind.
Vitiating factor: Restraint of trade clause. Explain, what is the general position and Elements for it to be valid.
General Position: ROTC is unenforceable, it will be void.
However, 3 elements to fulfil for it be valid:
1. Convenentee has a legitimate interest to protect such as trade secret, trade contact.
- The ROTC must be reasonable in the scope of time duration, Geographical area and subject matter.
- It must be in public interest. The public interest refers to the having healthy competition in market.
Vitiating Factor: Misrepresentation.
How to answer the question?
- Is the elements for actionable misrep fufiled?
- What is the type of Misrep and remedies for each.
- Did they rescind to void or not?
- Any bars to rescission?
Misrep: Elements for enforceable misrep?
- false statement of fact?
- Statement must be communicated by representor to representee prior to contract.
- Induce and relied upon by representee to alter his position such as entering into contract.
Explain: False statement of fact.
it must be an existing or past fact.
It must be false.
Silence does not generally amount to misrep.
However, there are exceptions to it.
Exceptions to the general rule of silence not amounting to misrep.
- Half-truth.
- change in a circumstance prior to contract
- Fiduciary contract (Insurance)
Does the representee having an opportunity to verify truth but did not, be deprived of claiming misrep?
No!!
What are the 3 Types of misrepresentation
- Fraudulent misrep
- Negligent misrep
- Innocent misrep
Explain Fraudulent misrep and what’s the remedies?
Statement made with dishonesty and lied. Did not believe for it be true. Don’t care whether if it is true or false.
Remedies: Rescission and common law damages.
Explain Negligent misrep and what’s the remedies?
Statement made: Honestly believe for it to be true. But had no reasonable grounds for it be true.
Based on S2(1) of misrep, states that burden of proof on representor to show that it has reasonable grounds for it to be true and still honestly believe it to be true till the time contract was made. If proved = Innocent misrep.
Remedies: Rescission or damages in lieu (S2(2) of misrep)
and statutory damages.
Explain Innocent Misrep and what remedies?
Statement made:
Honestly believed it was true and has reasonable ground to believe for it to be true.
Remedies: Rescission or damages in lieu (s2(2) of Misrep act)
and Indemnity
step 4 of analysing misrep question:
Once rescinded contract is unenforceable and void.
both parties would return to the position prior to the contract.
If not rescinded, contract is voidable
What are the bars to rescission?
- Lapse of reasonable time
- if the contract has been affirmed by representee even after knowledge of misrep.
- Impossible to return to prior position before contract was made.
