vitiating factors Flashcards
void and voidable contracts
- Mistake (void)
- Duress (voidable)
- Undue influence (voidable)
- Illegality or contravention of public policy (void)
- Misrepresentation (voidable)
Void Contract
A void contract is one that is totally without any legal effect
from the beginning
Voidable Contract
A voidable contract is one that operates as a valid contract
until a party elects to avoid (‘rescind’) it. Until it is rescinded
the contract remains in full force and effect. The innocent
party can choose (‘elect’) to rescind or affirm (carry on) the
contract. Rescission has the effect of putting the parties back
into the position they would have been in had the contract
not been entered into
MISTAKE
A contract can be void (not voidable) for mistake either at
common law or in equity. This is known as an operative mistake. For a contract to be void for mistake, the mistake must
be so fundamental that:
* It operates to** prevent formation** of the contract in the first place—in other words, the parties are not properly in
agreement, so there can be no valid contract; or
* It makes what has been agreed between the parties** fundamentally different** from what was intended.
Common or Identical Mistake
Common mistake occurs when the parties are in agreement but both have made the same mistake. Typically this will be in respect of the existence (as opposed to the quality) of
the subject matter of the contract. This sort of mistake will render the contract void at common law.
Mutual Mistake
- Mutual mistake can be said to occur where the parties are
mutually mistaken but about different things: they are at
cross purposes. - In evaluating a mutual mistake, the courts will consider whether a reasonable person would take the agreement to mean what each party did.
- If the court applies
this test and the result is a totally ambiguous contract, then
there is no agreement between the parties and the courts
will consider the contract to be void.
Unilateral Mistake
- A unilateral mistake occurs when one party is mistaken as to
the terms of the contract and the other party is aware of the
mistake. An example of this would be an error in price when
the other party realised the error (or could be assumed to
have realised it). There is no agreement between the parties
and therefore the contract is void
2.Like common mistake,
though, a mistake as to the quality of the subject matter of
the contract will not be sufficient
Mistake as to Identity
- This type of mistake can occur when one party believes they
are contracting with a person that the other party is pretending
to be. - What the courts are required to determine is** whether
the innocent party would have contracted irrespective of the identity of the other party.** - If that is the case, the innocent party might have a remedy for misrepresentation(voidable), but it is unlikely
the contract would be void for mistake. - However, if the other
party’s identity was fundamental to the first party’s decision to
enter into the contract, then it will be void for mistake.
Non Est Factum
- The doctrine of non est factum operates to protect those
who sign a document in the mistaken belief that it represents
something completely different from what it actually does
represent.
2.There are restrictions on its use. ((1) Firstly, there must
be a fundamental and radical difference between what was
signed and what the signatory thought they were signing and,
(2) secondly, the mistaken signatory must not have been careless in signing the document.
duress
A contract entered
into under duress is voidable (that is, the innocent party can
elect whether to set it aside), but it is not automatically void.
The innocent party must take steps to rescind the contract
types of duress
- duress of person
- duress of goods
- economic duress
Duress of the Person
Duress of the person is physical duress. Here, the innocent party must show that the duress suffered, for example, threats to kill them if they do not enter into a contract, was
one of the reasons that they entered into the contract. There
is no requirement for the duress to be the only reason.
Duress of Goods
Duress of goods generally means that one party** unlawfully keeps goods** belonging to another to exert some form of influence over them to enter into a contract
Economic Duress
- Economic duress occurs where one party is in a stronger
economic position than the other and they use this stronger
position in an illegitimate manner to force the other party into entering into a contract. - Mere commercial pressure is not enough.
factors considered for economic duress
- Does the threat deprive the innocent party of a practical
choice? - Is the threat unlawful–for example, a threatened breach
of contract? However, this may not be decisive if, forexample, the unlawful threat is made in good faith (this would be the case where the party making the threat believed that their act was lawful, albeit wrongly). - Did the innocent party seek to rely on the contract?
- Did the innocent party protest?