Chapter 12 - Mistake, Chapter 14 - Economic Duress, Undue Influence and Unconscionability Chapter 9 - Capacity

Question 1

What is the difference between ‘Void” vs “Voidable”?

Answer 1

Void: The contract is effectively “gone” from the start. Automatic. No quality of consent, if mistaken to there’s no consent.
Voidable: Parties can elect to rescind (revoke) the contract. If pushed into, there’s little consent.

Question 2

What are some remedies for Mistakes?

Answer 2

1) Mutual Mistake: void
2) Common Mistake: void (law); voidable (equity)
3) Unilateral Mistake to the term: void (law): voidable (equity)
4) Unilateral Mistake to the identity: depends, but generally voidable only

Question 3

What are the remedies for
1) Duress
2) Undue influence
3) Restraint of trade illegality
4) Misrepresentation?

Answer 3

1) Duress: voidable
2) Undue influence: voidable
3) Restraint of trade illegality: void
4) Misrepresentation: voidable

Question 4

What is “Bars to Recession”?

Answer 4

Restituto in integrum impossible: It is impossible to restore parties to their original positions, rescission will not be granted. What is required is substantial restitution.

Affirmation: The contract cannot be rescinded after the party elects to affirm the contract.

Question 5

What are the 3 types of Mistake?

Answer 5

1) Common: at law/ at equity
2) Mutual
3) Unilateral: at law/ at equity

Question 6

What is the Doctrine of Mistake?

Answer 6

A party to a contract is bound even though he may have made a mistake in entering into the contract. Chwee Kin Keong v Digilandmall.com.

When both parties are mistaken and no consent.
One party takes advantage to coerce the other to consent.

Question 7

What are the 3 factors of “Common Mistake at Common Law”?

Answer 7

1) Same mistake that is shared by both parties
2) Two common situations
(a) Non-existence of subject matter (res extincta)
(b) Subject matter already belongs to the buyer (res sua)
3) Contract is void

Question 8

What are the 3 factors of “Common Mistake in Equity”?

Answer 8

1) No longer exists in the UK, but still does in Singapore
2) Unclear what the test is. More flexible
3) Result: contract is voidable

Question 9

What is the definition of Mutual Mistake?

Answer 9

1) Parties are dealing at cross-purposes, not under the same mistaken impression.
2) No contract due to no “consensus ad idem). Void.

Question 10

What is the definition of unilateral mistake?

Answer 10

One part is mistaken, other party is aware of their first’s party mistake.
Unilateral mistake is at common law and at equity

Question 11

What are the two situations for Unilateral Mistake?

Answer 11

1) Mistake to term
2) Mistake to identity

Question 12

What are the 3 situations for Unilateral Mistake as to term at common law?

Answer 12

1) Mistake by one party
2) Fundamental mistake
a) Mistake to term of contract (not fact)
b) Mstake as a party\s identitiy
3) Other party knows of the mistake

Question 13

What is the difference between Actual Knowledge vs Constructive Knowledge?

Answer 13

Actual Knowledge: “Has to have known”/ Admits that they know of the other party’s mistake
Constructive Knowledge: No actual knowledge, but only constructive knowledge, unilateral mistake in equity applies.
Also, an additional requirement of impropriety: Sharp Practice/ Unconscionable (Unethical) conduct

Question 14

What are the 2 “Formulas” for unilateral mistake to term?

Answer 14

Mistake as to term + actual knowledge = unilateral mistake at common law = contract is VOID
Mistake as to term + constructive knowledge + impropriety = unilateral mistake in equity = contract is VOIDABLE

Question 15

Why is void vs voidable important?

Answer 15

Void: Void from the VERY start, so blame would not go to 3rd party
Voidable: TOO LATE to void the transaction, blame might go to 3rd party

Question 16

What are the 2 situations for Unilateral Mistake as to Identity?

Answer 16

1) Parties contracting face-to-face
(a) Presumption that offeror intend to deal with offeree: voidable
(b) Rebut by showing importance of identity, but contrast mistake as to creditworthiness. Void. E.g. Wanting a specific singer.
2) Parties not contracting face-to-face
(a) No such presumption - easier to prove mistake as to identity. Void.

Question 17

What is Duress?

Answer 17

Exertion of illegitimate pressure which forces a person to enter into a contract.
Effect of finding duress: recission, contract is voidable

Question 18

What are the 3 categories of Duress?

Answer 18

1) Duress of the person
2) Duress of the goods
3) Economic duress

Question 19

What is Freedom of Contract?

Answer 19

“…men of full and competent understanding shall have the utmost liberty of contracting, and their contracts, when entered into freely and voluntarily, shall be held sacred and enforced by Courts of Justice.”

Question 20

What are 2 factors of economic duress?

Answer 20

Unlawful conduct creates fear of economic hardship which prevents the exercise of free will in engaging in a business transaction.

1) Hard to differentiate between economic duress vs legitimate commercial pressure
2) A threat to breach contract, results to modification of contract.

Question 20

What are 2 factors of economic duress?

Answer 20

Unlawful conduct creates fear of economic hardship which prevents the exercise of free will in engaging in a business transaction.

1) Hard to differentiate between economic duress vs legitimate commercial pressure
2) A threat to breach contract, results to modification of contract.

Question 21

What are the elements that form Economic Duress?

Answer 21

Economic Duress = Pressure
Pressure:
1) Sufficient to coerce (persuade to do something by using force/ threats
(a) Protest
(b) Alternatives
(c) Independent advice
(d) Prompt action to avoid modification
(e) Response of victim
2) Illegitimacy
(a) Nature of threat
(b) Nature of demand
3) Caused the resultant contract/ modification of contract

Question 22

What is the difference between Duress vs Undue Influence?

Answer 22

Duress: Threaten you
Undue Influence: Taking advantage of you because of close relations. E.g. Family member

Question 23

What are the 2 categories of Undue Influence?

Answer 23

Class 1: Actual Undue Influence, the party proved undue influence & the other party had exercised undue influence over him. Can show undue influence.
Class 2: Presumed Undue Influence - Class 2A: Involving relationships where trust and confidence is presumed
- Class 2B Trust and confidence is to be proved

Question 24

What is the effect of finding Undue Influence?

Answer 24

Contract becomes voidable (because consent is low quality) & No damages.

Question 25

How do you rebut Undue Influence?

Answer 25

Show that the claimant (person making claim) acted freely and independently in entering a transaction.

Question 26

How to establish Undue Influence?

Answer 26

Nature of Relationship
Is there trust & confidence?
Yes:
Transaction calls for explanation?
Yes
Presumption undue influence exercised?
Yes: Transaction voidable
No: No undue influence
No:
Were there facts/ influence of improper pressure/ coercion?
No: Transaction valid
Yes
Did influence result into transaction?
Yes: Transaction voidable

Question 27

What is Doctrine of Infection?

Answer 27

A 3rd party is affected by undue influence. E.g. Bank.

Question 28

What are the 2 principles of Doctrine of Infection?

Answer 28

1) If 3rd party does not know (actual or constructive knowledge) about undue influence, the action of Doctrine of Infection will fail.
2) If 3rd party has knowledge, the contract with 3rd party could be voidable.

Question 29

How does 3rd party build constructive knowledge for Doctrine of Infection?

Answer 29

1) 3rd party (Creditor) must be put on inquiry
2) 3rd party (Creditor) must have failed to take reasonable steps to minimise the risk of undue influence being committed.

Question 30

What is Capacity? Hint: 2 types.

Answer 30

1) Minors, contract in unenforceable against a minor, but minor can enforce the contract.
2) Mental Incapacity, Mental disability/ Intoxication.
Contract voidable if Mental Incapacity prevents the person from understanding what they’re doing &
The other party knows/ should have known about Incapacity at the time of entering the contract.