Essential Invalidity Flashcards
What are the two ways in which a contract may be invalid?
It can be formally invalid (defective in form) or essentially invalid (the consent of the parties is defective).
When will a contract be void?
When the vitiating factors are so serious that objectively the parties did not reach consensus in idem.
What are the consequences of a void contract?
No contractual rights and obligations are created and as such third parties cannot acquire rights under the contract (see Morrisson v Robertson).
What causes a contract to be void?
Dissensus and lack of capacity will always render a contract void. Force and fear or error will do so but not always.
What leads to a voidable contact?
A voidable contract is created where consensus in idem is objectively reached but the consent of one of the parties is in some way defective.
What are the consequences of a voidable contract?
-The contract subsists until rescinded or reduced by the courts.
-The party entitled to sue may sue either for damages or reduction of contract but not both.
-Third parties can gain rights under the contract (see Macleod v Kerr 1965).
What are the three conditions necessary to allow for reduction of a contract?
-There must be no unnecessary delay in bringing the action for reduction.
-The plaintiff must not be personally barred by affirming the contract in the knowledge of the defect.
-Restitutio in integrum must be possible (Boyd & Forrest v Glasgow & South-Western Railway Co. = not possible as railway already built).
What are the requirements for a third party to gain rights/title under a voidable contract?
He must be in good faith and have given value, Macleod v Kerr is authority for this.
What is the significance of Spence v Crawford 1939 SC (HL) 52 for the operation of the restitutio in integrum rule?
It affirms that the rule should not be applied too literally-
-Where the value of an asset transferred under a voidable contact has depreciated this will not bar rescission so long as compensation can be made for the depreciation.
-Furthermore a defender who is guilty of fraudulent misrepresentation is not entitled to in bar of restitution to rely on dealings with the subject he purchased which he has been enabled by his fraud to carry out.
-The effect of restitutio upon the party that makes it is immaterial.
How did the court in Macleod v Kerr distinguish that case from Morrisson v Robertson so as to allow them to decide the contract in question was voidable rather than void?
Only the error in the latter case was essential, the pursuer in the former case was prepared to contract with whoever answered his advertisement whereas Morrisson has never intended to contract with the person before him.
