Vitiating Factors 3

Question 1

What is a vitiating factor?

Answer 1

Something that affects the validity of a contract

Question 2

VOID

Answer 2

Contract never existed from the beginning

Question 3

VOIDABLE

Answer 3

Contract exists but is ‘damaged’ and it can be rescinded

Question 4

What is a mistake?

Answer 4

When a contract is entered on the basis of a misunderstanding or error on the part of one or both parties

Question 5

Legal consequence of a mistake

Answer 5

can lead to a contract being held void. BUT NOT ALL MISTAKES WILL DO SO

Question 6

Communication mistake

Answer 6

issue of whether there is consensus ad idem between the contracting parties
2 types of communication mistakes:
- MISTAKES AS TO THE TERM OF THE CONTRACT —Smith v Hughes (old oats new oats)
-MISTAKE AS TO THE IDENTITY OF THE CONTRACTING PARTY - Rogue misrepresents themselves as someone else and cons seller into selling him property —>Phillips v Brooks

Question 7

Common mistake of fundamental facts

Answer 7

There is consensus ad idem, but both parties make the same mistake. Great Peace Shipping v Tsalvliris Salvage

Question 8

How do courts determine if there was consensus ad idem

Answer 8

the courts look at what the external circumstances would have indicated to the objective bystander. If there was an objective agreement, the courts will not void the contract

Question 9

Smith v Hughes

Answer 9

Objective test: Would the reasonable observer, on the basis of external appearances, think that they buyer agreed to the seller’s terms?
A sample of the new oats was given to the buyer and he agreed and purchased it so the reasonable person would conclude that there was an agreement for the new oats

Question 10

Centrovincial Estats v Merchant Investors Assurance Co.

Answer 10

The reasonable objective observer would have assumed that the price (£65k) was correct and there was no evidence that the defendants knew or could have reasonably know that this was a mistake

Question 11

When will the objective test not apply?

Answer 11

• When one contracting party is aware( or should have known) that the other party has made a mistake
  Hartog v Colin and Shields : Seller offered hare skins at a price per pound(weight) but this was a printing error and he actually meant ‘price per hare skin’. Advertised price was much lower than what intended by the seller.
  Buyer knew the normal market price and should have been aware of the sellers mistake
• Seller causes the buyer to make a mistake
  Scriven Brothers & Co v Hindley & Co. : Seller shipped some hemp (valuable) and tow (less valuable) but put them both in crates with the same shipping mark. At the auction someone bought a crate labelled as ‘hemp’ but what was actually being sold was tow. Seller tried to enforce the agreement even though his negligence caused the bidders mistake.

Latent Ambiguity that prevent agreement: Raffles v Wichelhaus : Coincidence two ships of the same name were docking in October and December. One party assumed the Oct date and the other party assumed the Dec date. In cases like this the court will find grounds to adopt either one or the other view of the situation by using the objective test. Cases like this are rare.

Question 12

Nemo dat quoad non habet

Answer 12

can’t give what you don’t own. In contract a rogue never obtains ownership of something if he cons the seller. Therefore if he sells it to a third party, that third party never actually obtained ownership of it. THE ORIGINAL OWNER WILL THEREFORE BE ABLE TO CLAIM THE GOODS FROM A THIRD PARTY AND THE CONTRACT IS VOID FOR MISTAKE

Question 13

RULES TO DETERMINE WHETHER THE COURTS WILL SET ASIDE A CONTRACT FOR MISTAKE

Answer 13

• IF the seller intended to deal with the rogue then then contract is not void
• IF he intended to deal with who the rogue was pretending to be then the contract is void

Question 14

Contract made face to face with rogue

Answer 14

if the seller intended to deal with the person standing in front of them, then possession of the goods is passed to the rogue and the contract is not void
REBUTTING THE PRESUMPTION : Seller must have ‘regarded the identity of the offeree as a matter of vital importance’

Question 15

Phillips v Brooks Ltd

Answer 15

Rouged posed to be someone else and bought a ring and paid by cheque. The assistant checked the person’s address and let the rogue take the ring, who later pawned it to Brooks Ltd. Contract was not voided because he intended to deal with the person in front of them

Question 16

Ingram v Little

Answer 16

Sisters were selling a car, and ‘Mr Hunchinson’ came and agreed to buy the car. The sister went to the post office to check the identity of the person.
This rebutted the presumption and showed that the identity of the person they were contracting with was of vital importance.
Different to Lewis v Averay where they were checking the identity to see if he was creditworthy

Question 17

Contract was made in writing and rogue assumed the identity of someone who actually exists

Answer 17

the contract will be void as a connection is made with the name of the seller as there is noting else for the seller to go on and therefore there is no consensus ad idem
Cundy v Lindsay - Blenkarn (rogue) order handkerchiefs from Lindsay pretending to be Blenkiron and CO (a reputable firm)

Question 18

contract was made in writing and rogue misrepresents his own creditworthiness

Answer 18

The contract will not be void where the rogue pretends to be a made up company or person as there is no connection in the mind of the seller with anyone other than the rogue
Kings Norton Metal co v Edridge - rogue pretends to be company called Hallam and co and wrote to KN ordering good, which rogue then sold to Edridge. CONTRACT WAS NOT VOIDED BECAUSE HE COULD HAVE ONLY INTENDED TO DEAL WITH THE PERSON WHO SIGNED THE LETTERS

Question 19

Shogun Finance V Hudson

Answer 19

Rogue stole the identity of Mr Patel in order to enter a hire purchase agreement with shogun finance for the purchase of a car. Rogue sold car to Hudson but SF tried to recover the car.
Under the s.27 of Hire Purchase Act enables the title of the car to pass to the hire purchaser if there was a valid HP agreement. So unless the contract was void for mistake, the ownership of the car was passed to Hudson and SF wouldn’t be able to recover the car.
The case turned on whether SF intended to deal with Mr Patel. HL majority held that the rogue had not acquired the title of the car

Question 20

Common mistakes of fundamental facts 2

Answer 20

Fundamental fact upon which the agreement was made, is different from what the parties took it to be

Question 21

When is it a case of common mistake of fundamental facts

Answer 21

if the common mistake had been operative before the parties entered the contract. different to frustration where an event happens after the contract had been entered.
IF A PARTY ASSUMES RESPONSIBILITY FOR THE EXISTENCE OF THE FACT, THEN THE APPROPRIATE CAUSE OF ACTION IS TO CLAIM FOR DAMAGES.

Question 22

TEST FOR COMMON MISTAKES AS TO FUNDAMENTAL FACTS

Answer 22

IT IS A VERY DIFFICULT TEST AND HARD TO ESTABLISH.
The test was confirmed in the Great Peace v Tsavliris Salvage case.
(i) There must be a COMMON ASSUMPTION as to the non existence of a state of affairs
(ii) There must be NO WARRANTY(promise) by either party that the state of affair exists
(iii) the non existence of the state of affair must NOT BE ATTRIBUTABLE to the fault of either party (NO ASSUMPTION OF RESPONSIBILITY)
(iv) The non existence of the state of affairs MUST RENDER PERFORMANCE OF THE CONTRACT IMPOSSIBLE
(v) The state of affairs may be the existence, or a vital attribute, of the consideration to be provided or circumstances which must subsist if performance of the contractual adventure is to be possible

Question 23

nature of a common mistake

Answer 23

It is quite easy to establish that a contract is void if the common mistake relates to matters of title (ownership) or the existence of the subject matter.
it is quite difficult to establish a contract is void where the common mistake merely relates to the quality of the subject matter

Question 24

where the common mistake relates to whether the “thing” exists

Answer 24

Couturier v Hastie (1856)