Week 5,6&7: Validity Of Contracts Flashcards
What is the effect of a successful challenge?
- Void or null
2. Voidable or annullable
What are void contracts?
No contract exists or ever did legally. No one can acquire rights under such a contract
What is the solution of a void contract?
Potential UE as per Stuart v Kennedy
No contract but wall built
What is a voidable contract?
Contract is good and effective until it is annulled. Parties consent but consent is tainted
How can annulment happen?
- Intimation from one party to other
2. Judicial decree CS or SC
What are the requirements for a voidable contract?
- Restitutio in integrum
As per Boyd & Forrest v Glasgow RY Co - No affirmation by homologation
- No unnecessary delay in taking action
What contrasts void and voidable contracts?
Morrison v Robertson void
Macleod v Kerr voidable
Morrison v Robertson?
M sells cows to T who claims to be son of special farmer.
T sells to R, who buys in good faith.
Contract held void since error and fraud, never would’ve sold cows if T hadn’t said he was son of. Void means goods recoverable from innocent third party
MacLeod v Kerr?
K sells car to Gall who says his name is L Craig.
Gall sells car onto G, purchased in good faith.
Police seize car and court decide contract voidable since only fraud. K would’ve sold car to anyone, wasn’t induced by misrepresentation. Voidable means can’t recover from third party.
What are the grounds for invalidity?
- Force and fear
- Fraud
- Facility and Circumvention
- Undue influence
- Error
What is force and fear?
Force exerted scares other party. Usually seen as voidable but contradicted by Earl of Orkney v Vinfra who pulled a sword to try and force consent and held void.
Threats have to be reasonable causing of fear, consent usually voidable unless clear cut like Earl of Orkney. Can’t be lawful act.
Hislop v Dickson Motors; assistant steals, boss makes her pay, then twice, second too much
What is fraud?
Usually deliberately misleading statements by one party to undue the latter to enter a contract - fraudulent misrepresentation
Also get innocent and negligent misrepresentation but these aren’t fraud
What is the remedy for fraud?
Voidable contract, reduction and damages
As per Derry v Perk
Boyd v Glasgow
Restitutio integrum must be possible
What else is fraud?
Law of delict as well as contract. In delict damages also recoverable
What is facility and circumvention?
Contract voidable and reducible when facile party has been imposed upon unfairly and misleadingly. Taking advantage.
What three elements does it require?
Weakness and facility - not insanity
Circumvention (not fraud which involves intent to deceive)
Lesion - loss
Example cases?
Mackay v Campbell
Thinks he’s dying sells island to friend for cheap, doesn’t die and court rules friend takes advantage of facile person
Anderson v The Beacon Fellowship
Depressed man donates a lot to group he was dependent on. He was facile, acceptance was circumvention
What is undue influence?
A contract obtained by the exercise of undue influence by a person in a position of authority or trust is reducible
Like doctor or lawyer
Case for undue influence?
Honeyman’s Exrs v Sharp
Woman gives expensive art collection to adviser in will. Held undue influence upon her.
What must error be about?
Error about fact or law existing or past laboured under entering contract.
Can’t be mispronounced
What does it have to be?
An error in the five substantials as set out by Bell in Stewart v Kennedy
What is the exception?
Error isn’t in the substantials but error was induced by other party’s misrepresentation which caused the party to enter into the contract.
Error in motive and therefore voidable.
What is common error?
A mistaken shared assumption about the state of affairs on which a contract is based, forming a substantial.
As per Courtier v Hastie agent sells good that have already been sold unknown to him and therefore common error and contract void
What is mutual error?
Misapprehension as to each others intention resulting cross purposes
As per Stuart v Kennedy, no clarity to meaning of per foot and therefore contract void
Mutual error isn’t really error but to do with no clarity that a court could bring as no clarity in original contract
What is unilateral error?
An error made on one side of the contract. Usually not enough for voidable
What is the exception?
Either:
Unilateral error was induced by another parties misrepresentation
Or
Error about the meaning and effect of a term which the other party knew of through course of negotiations but stayed quiet in bad faith. Contract then voidable. Error in transaction
Cases?
Angus v Bryden: would’ve been reducible
Steuarts Trs v Hart
Error in transaction?
Error about meaning or effect of term, intention doesn’t correspond with contractual declaration
Error in motive?
Intention accurately reflected but intention was based upon mistaken appreciation of the real state of facts.
Usually caused by misrepresentation of other party like in Hart
Must be in substantials
What is misrepresentation?
It is the plus factor for error plus
What two things constitute misrepresentation?
- Must be inaccurate statement of fact and not expression of opinion or intention
- Statement must have been material so as to induce a party to the contract. As per Menzies v Menzies
Will silence constitue misrepresentation?
Usually no as no duty to disclose
What exceptions?
- Contracts uberrimae fidei- utmost good faith like contracts of insurance
- Parties are in fiduciary relationship, parent and child
- Statement is falsified by circumstances
- Appearance of goods exposed for sale is misleading
What are the two natures of misrepresentation?
Innocent
Fraudulent
What’s the third?
Also negligent misrepresentation that isn’t fraudulent but still gives rise to delict
Hedley Byrne v Heller
What is pacta illicita?
The requirement of legality.
Contracts contents and obligations must be legal. If court detects illegality it can not give effect to the contract, don’t need arguments of parties
Contracts objectionable on moral grounds?
Laughland v Millar
Director and manager made contract that was illegal and therefore unebforable
What’s the issue with morality?
Concept of morality changes do cases with mora precedent may be out dated and therefore hard for a judge
Contracts contrary to public policy?
Wide field for public safety or good foreign relations. Contracts that promote corruption in public life not allowed
Cases?
Parkinson v College or Ambulance
Donated to CA for nomination for honour. Held unenforceable as promoted corruption.
Quantum Claims v Powell
P injured by As negligence. Contracted with Q/C for share of damages if claim successful, QC then instruct solicitors. Enforceable. Contingency fee however not allowed.
What is a restrictive covenant?
An agreement not to exercise a particular trade or profession.
When may it be pactum illicitum?
If it imposes a restriction wider than is reasonably necessary to safeguard the interest it is designed to protect
Three types of covenant?
- Seller or business won’t compete with purchaser
- Employee agrees not to join rival business
- Contracts with partnerships, partner leaves cannot open competing business in certain areas
Five years seen as reasonable
1?
Nordenfelt v Maxim Nordenfelt Guns
Sale of business, world wide 25 year restriction held to be reasonable
2?
Bluebell Apparel Ltd v Dickinson
2 years not allowed to work for competitor anywhere in the world. Trainee manager and upheld
3?
Anthony v Rennie
Medical practitioner not to practice within 6 miles of Galashiels for five years upheld
Contracts whereby manufacturers restrict the trading of a distributor?
Easy petroleum v Harpers Garage
Petrol company and tied garage can only supply their petrol. Held 4 1/2 years reasonable, 21 too long
What is the test?
One of reasonableness, onus falls on person seeking to uphold it that it is reasonable
What are the three main factors?
- Spatial area
- Duration of time
- Nature of restriction imposed
Also public interest
Special cases?
Courts can uphold parts and strike down others as per Mulvein v Murray
Not to sell to Muls customers
Not to sell or travel in Ayrshire traded in by Mul not upheld
Why is unlawfulness difficult under statute?
Language used not that of contract and thus tricky to know what it means
What other difficulty arises
Not directly but impliedly prohibited
As per St John Shipping Corp v Joseph Rank Ltd
Overloaded ship against rules and did not relate to contract
Question of implied prohibition
A second one?
Dowling and Rutted v Abacus FF
Illegal workers used, statute didn’t expressly say they’d broken law. Held valid.
What are the consequences of unlawfulness?
- Cannot be enforced
- Cannot sue for damages
- Court can recognise blame
- Less blameworthy can claim UE
Cases of this?
Cuthbertson v Lowes
Sale of potatoes by the Scotch acre void
Jamieson v Watts Trs
Building work above 40 pound not permitted by statutory license; payment could not be claimed above 40
