Vitiating Factors Flashcards
When is can a contract be void or voidable?
- Mistake (Void)
- Duress (Voidable)
- Undue Influence (Voidable)
- Illegality or contravention of public policy (void)
- Misrepresentation (Voidable)
What is a void contract?
Contract with no legal effect from beginning
What is a voidable contract?
Contract that is valid until voided (rescinded) by a party
What is the key difference between a void and voidable contract?
Void = cannot be enforced
Voidable = election to confirm or rescind the contract
What is the effect of mistake on a contract?
Void
What is common or identical mistake?
Parties agree but they both made same type of mistake (typically about existence of subject matter, rather than quality)
What is mutual mistake?
Mutual mistake about different things
At cross purposes
What is unilateral mistake?
One party makes a mistake as to the terms
Other party is aware of mistake
What is mistake as to identity?
When one person contracts with someone being impersonated
What is the test for mistake?
Would you have contracted had you known their actual identity?
What is the doctrine of non est factum?
Protects you if you signa document in mistaken belief that it represents something else
What factors must be present for non est factum to apply?
- Fundamental and radical difference between hat was signed and what they thought they were signing
- Mistaken signatory must not have been careless in signing
Burden is on party seeking to rely on defence to prove it (special difficulties etc)
When is rectification of a contract possible?
Both parties agree on terms but it was recorded incorrectly in writing.
When is recitification not possible?
When inequitable, such as if third parties have acquired rights under the contract as written
What is duress and what effect does it have on a contract?
Some pressure is exerted over one of the parties, therefore no “free contracting”
Makes contract voidable
What is the difference between duress and undue influence?
Duress = common law
Undue influence = equitable
What type of pressure is required for duress to apply?
Illegitimate pressure
What is duress of the person?
Physical duress (threat to kill for example)
What is economic duress?
One party is in stronger economic position than the other and use this to force the other to contract
What is the difference between economic duress and duress of the person in terms of what needs to be proven?
For duress of person, you just need to prove that there was some duress
For economic duress, you need to show that duress was a significant factor (commercial pressure is not enought)
If a threat is lawful, will the courts still find duress?
Only in exceptional circumstances
A contract is formed and the other party applies duress to increase the purchase price, he also provides additional practical beenfit fulfilling the consideration element, is this contract voidable for duress?
Yes, i
What is undue influence?
Discretionary doctrine to ensure one person’s influence over another is not open to abuse
If there is undue influence, is a contract void or voidable?
Voidable
Duress deals with what type of pressure?
Illegitimate pressure
What is undue influence concerned with?
If a party arrived at their own decision and have true consent
What is undue influence?
Coercion from an external source which the influencer exploits for some degree of personal gain
How do you prove undue influence
- Actual undue influence from overt acts
- Presumed undue influence froma relationship between two parties
When proving actual undue influence, how does it differ from duress?
You don’t need to prove that the influence is in bad faith or unlawful
Does the transaction need to be a bad deal for an innocent party to rely on undue influence?
No
What does presumed undue influence require?
- Relationship of trust and confidence between the parties
- Fiduciary (directors, partners)
- Family (married, children)
- Professional (client and solicitor) - The transaction calls for an explanation (objectively)
Is the presumption of undue influence rebuttable?
Yes
Prove that other party contracted out of free will and with informed consent
Proving they took advice is very helpful
What is third-party undue influence?
One party aware that a third party exerted undue influence on the other party to contract and did not take reasonable steps to ensure free contracting
What is the effect of a contract that is illegal or contrary to public policy and when does it arise?
- Void
- Illegal contracts and contracts that are detrimental to society
What happens when a contract is performed illegally ?
The guilty party cannot claim rights under the contract and the innocent party cannot claim any further performance
What are the types of illegal contracts?
- Illegal by statute
- Illegal at common law (like a crime or tort)
- Contrary to morality or institution of marriage
- Damaging to the government (trading with enemy during war)
- Interfere with justice (conceal a crime)
Are restraints of trade enforceable?
if (a) reasonable and (b) legitimate interest
Explain the legitimate interest portion of the test for enforceability of a restraint of trade?
Geographical Scope
Duration
= PROPORTIONATE
