Contract 5: Vitiating Factors Flashcards
What are the different types of mistake?
Common Mistake
Mutual Mistake
Unilateral Mistake
Mistake as to Identity
Non Est Factum
What is of common mistake and what is the effect?
Contract void
- When parties are in agreement but both have made same mistake
- Typically in respect of existence of subject matter of contract
Exception
- mistake as to quality not sufficient
What is of mutual mistake and what is the effect?
Void
Where parties are mutually mistaken but about different things
Test:
- Court will consider whether a reasonable person would take the agreement to mean what each party did
- If result is ambiguous contract then no agreement
What is a unilateral mistake and what is the effect?
Void
- Where one party is mistaken as to terms of contract and
- Other party is aware of mistake, or should be aware of it
Exception
- Mistake as to quality not sufficient
What is Mistake as to Identity and effect?
one party mistakenly believes they are contracting with a person that the other party is pretending to be
Void if:
- if C can show that identity of buyer and not their attributes was of vital importance
- would not have entered contract had they known
- more likely in distance vs face to face transaction
Not Void if:
- if they would have entered contract irrespective of identity
- may be able to claim misrepresentation (but this makes it voidable so if subject matter has been sold to bona fide purchaser for value C may have no remedy)
What is Non Est Factum? When does it apply?
Protects party who signs document in mistaken belief that ir represents something different
Criteria
- must be a fundamental and radical difference between what was signed and what they thought they were signing
- signatory must not have been careless in signing
- claimant must special difficulty understanding document to succeed
What is rectification of mistake and when is it available?
- it is open to courts to rectify mistake if there was a common intention of parties that was not recorded accurately
- common intention can be deduced from evidence of each parties understanding
Cannot be used if:
- inequitable such as if 3rd party has acquired rights under contract
What are the types of duress?
Duress of the person
- physical duress
- must be one of the reasons to enter contract
Duress of goods (less successful)
- one party is unlawfully keeping goods belonging to another to exert some form of influence over them to enter into contract
Economic Duress
- where one party is in a stronger economic position and uses this in illegitimate manner to force other party into contract
- must be more than mere Commercial pressure
When might claim of economic duress succeed?
Must have been significant factor in decision to enter contract
Courts will consider:
- does threat deprive party of practical choice
- is threat unlawful (ie. threat of breach of contract)
- did innocent party seek to rely on contract
- did innocent party protest
- did innocent party affirm (ie not take immediate action when pressure was gone such as refuse to pay)
Can duress arise after a contract has been formed?
Yes if a party uses duress to vary contract
- even if both sides provide consideration
When might actual undue influence claim succeed?
- requires the innocent party to prove that the other party overly influenced them into entering into a contract by improper pressure
Can be direct or indirect
- threats
- subjecting them to intolerable pressure
- misleading or tricking
What is presumed undue pressure?
A rebuttable presumption will be presumed if C can show:
- Relationship of trust and confidence
- presumed in specified cases
- otherwise have to show this relationship - Transaction that requires explanation
- If it does not fit with what would usually be expected in the relationship concerned
- Of suspicious types or suspiciously high value
Presumption can be rebutted
- Must show that other party entered into contract of own free will and with informed consent
- Eg. They obtained independent lega advice
In what relationships can undue influence be presumed?
- fiduciary relationship
- parent /child
- doctor/patient
- guardian/ward
- solicitor/client
When might a transaction be set aside due to undue influence from 3rd party? How can this be avoided?
- If a party to the contract is aware there they may have been undue influence on other party but does not take reasonable steps to ensure that other party is entering contract of their own free will transaction may be voidable
Party can be put on notice by:
- actual notice of undue influence
- presumed notice of undue influence
- By relationship of third party and innocent party
- Nature of transaction (does innocent party get benefit, is it more commercia in nature)
When might a contract be effected by illegality?
Illegal by Statute or common law
Damaging to government
- trading with enemy at wartime
Interfere with justice
- Any agreement that attempts to undermine the courts jurisdiction (eg to conceal a crime)
Anti-Competitive Agreement
- Such as agreements between business not to compete with one another, to fix prices or apportion markets
- Likely void as breach competition law
Restraint of trade (sometimes)
- Eg: non-competes, non-solicits etc.
