Unit 13- Invalidity of contracts

Question 1

When is a contract invalid?

Answer 1

When it is affected by a major flaw which undermines its enforceability at law

Question 2

What are the two kinds of invalidity?

Answer 2

Voidness/ Nulitty: contract contrary to mandatory rules (considered legally invalid from the beginning)

Avoidance/ rescission: contract that is initially valid but can be voided or cancelled at the option of one or two more parties involved

Question 3

Effects of an invalid contract

Answer 3

Nullity: contract is invalid and is never capable of producing any legal effect

Avoidance: contract is invalidad but is capable of producing legal effects until the moment where the interested parties present claim in court in order to avoid it

Question 4

Validation of an invalid contract

Answer 4

Nullity: can’t be validated

Avoidance: validated by the party entitled to claim avoidance

Question 5

What are the two general grounds of voidness?

Answer 5

• Defectiveness of the agreement between parties
• Illegality and immorality

Question 6

How do civil vs common act on impossibility of contracts?

Answer 6

Civil: contracts are not enforceable

Common: enforceable but may be subject to breach of contract

Question 7

What are the general grounds for avoidance?

Answer 7

1. Incapacity of one of the contracting parties
2. Vitiating factors
   a. Mistake
   b. Deceit or fraud
   c. Duress

Question 8

Mistake in civil vs common law

Answer 8

Civil law: Prioritize the subjective intentions of the parties. This means that if a contract is found to be affected by a mistake, it may be more likely to be avoided or set aside.

Common law: ‘expression approach’- a mistake alone may not be sufficient to invalidate a contract unless there was some form of misrepresentation involved.

Question 9

What is fraud?

Answer 9

Occurs when one of the contracting parties is intentionally induced into a mistake as to the prospective contract

Question 10

Types of fraud

Answer 10

• Fraudulent misrepresentations: if correctly informed the mistaken party would have no entered the contract
• Silence (non disclosure): if informed the mistaken party would have concluded contract, although on better terms

Question 11

When is avoidance for deceit granted?

Answer 11

When fraud is committed by the other contracting party