Principles of Contract: Vitiating Factors, Termination and Remedies

Question 1

What are the vitiating factors?

Answer 1

• misrepresentation
• mistake
• unfair contract terms
• duress and undue influence
• illegality

Question 2

What is the difference between a contract being void and a contract being voidable?

Answer 2

Where a contract is void it will be as if it never existed, whereas if it is voidable the innocent party can choose to bring the contract to an end or continue with it

Question 3

What is misrepresentation?

Answer 3

Where a false statement of fact made by one party induces the other party to enter into the contract and the statement does not form part of the contract

Question 4

In order to be an actionable misrepresentation what elements must be present?

Answer 4

• a statement of fact
• inducement

Question 5

Could statements of opinion that a party might take into consideration form the basis of a misrepresentation?

Answer 5

Not generally

Question 6

When can silence amount to misrepresentation?

Answer 6

• Where material facts have been given to the innocent party which subsequently change before the contract has been entered into and the other party says nothing
• Or where a party gives some material information but does not volunteer elements that are damaging to them

Question 7

For a party to be induced to enter the contract the statement must what?

Answer 7

It must have materially influenced their decision to enter into the contract

Question 8

Is there a requirement on a party to investigate whether the statement is in fact true when it comes to inducement?

Answer 8

No. A party might suspect that the representation is untrue but still be able to argue that they were induced by it to enter the contract and so have a claim for misrepresentation

Question 9

Does the inducing statement have to be the only reason a party enters a contract?

Answer 9

No, as long as they were influenced by it in some way

Question 10

What are the types of misrepresentation?

Answer 10

• fraudulent misrepresentation
• negligent misstatement
• negligent misrepresentation
• innocent misrepresentation

Question 11

What are the requirements for fraudulent misrepresentation?

Answer 11

when a false representation has been made:
1. knowingly; or
2. without belief in its truth; or
3. recklessly, careless whether is be true or false

Question 12

In order to pursue an action under negligence what must there be between parties?

Answer 12

A special relationship

Question 13

If misrepresentation is found to exist what does this render the contract?

Answer 13

Voidable - a party can therefore decide whether or not they want to bring the contract to an end

Question 14

If a contract is voidable and the innocent party chooses to bring the contract to a end how would they do this?

Answer 14

By rescission

Question 15

What happens if rescission is granted?

Answer 15

The contract will be treated as if it is terminated ab initio (from the very start) so the parties would be restored to the position that they were in before the contract was made

Question 16

What are the situations where rescission would not be available?

Answer 16

1. where a party has chosen to affirm the contract either expressly or impliedly
2. where a party has taken an unduly long time before they elect to rescind the contract so their right to do so is barred by lapse of time
3. it might be impossible to return the parties to their original position
4. it might be a third party has legitimately acquired rights to the property which it would be unfair to deprive them of
5. the court might decide that the most equitable approach is to award damages instead of rescission

Question 17

What are the elements of mistake?

Answer 17

• it will have to be considered to be operative and therefore go to the very heart of the contract
• it must be operative before the contract was made not after it

Question 18

What are the three types of mistake?

Answer 18

• common
• mutual
• unilateral

Question 19

What is ‘common’ mistake?

Answer 19

Where both parties are labouring under the same mistake as to the substance of the contract

Question 20

What is ‘mutual’ mistake?

Answer 20

Where the parties are talking at cross purposes and so there is no true agreement between them as they believe they are contracting for different things

Question 21

What is ‘unilateral’ mistake?

Answer 21

Where one party is mistaken and the other party is aware of their mistake but still seeks to make a contract. Knowledge need not be express but can be implied from the circumstances

Question 22

What is duress?

Answer 22

Where illegitimate pressure is put on one of the parties to the contract and this is one of the factors which compels them into the contract

Question 23

What is the difference between duress and undue influence?

Answer 23

The threshold for undue influence is lower and does not have to involve any illegitimate pressure

Question 24

What are the types of undue influence?

Answer 24

Actual and presumed

Question 25

How may a contract terminate?

Answer 25

• expiry or other specified event
• breach
  -frustration
• basic principles of restitution and unjust enrichment

Question 26

What are the various methods in which requirement of entire performance can be avoided?

Answer 26

• substantial performance
• acceptance of partial performance
• divisible v entire contracts
• prevention of performance

Question 27

What is meant by frustration of a contract?

Answer 27

Where the contract becomes impossible to perform and it is not the fault of either party

Question 28

What are the bars to frustration applying?

Answer 28

• the obligation must be different to that which the parties agreed to perform - it is not sufficient for the contract to become more difficult or expensive
• if the parties have some degree of control over events and their consequences
• if the party induces the frustration themselves
• where a party is aware that a frustrating event could occur but still goes ahead with the contract

Question 29

What are the effects of frustration?

Answer 29

• the contract comes to an immediate end and the parties have no further obligations
• where a party has paid money, such as a deposit, it must be returned
• where a party has obtained valuable benefit other than money due under the contract they might have to pay the other party the value of that benefit

Question 30

What are the remedies available?

Answer 30

• damages
• liquidated sums and penalties
• specific performance
• injunctions
• duty to mitigate
• indemnities
• guarantees