Vitiating Factors

Question 1

Effect of:
* Misrepresentation
* Mistake
* Duress
* Undue Influence
* Illegality

Answer 1

Misrep: Voidable (recission)
Mistake: Void (no legal effect from outset)
Duress: Voidable (recission)
Undue Influence: Voidable (recission)
Illegality: void (no legal effect from outset)

Question 2

Bars to recission

Answer 2

1. Delay
2. Affirmation
3. Restitution impossible (cannot return parties to original position (e.g. decreased in value / subject changed)
4. 3rd party acquires rights (transferred to bona fide purchaser before given notice of recission)

Question 3

Measure of damages in tort of deceit

Answer 3

Put parties in position had misrepresentation not have been made

Question 4

Is misrepresentation actionable?

Answer 4

Untrue statement of fact which induced C to enter contract
Untrue statement
- oral, writing, conduct NOT silence unless fiduciary, insurance, half-truth, failure to disclose change in circumstances
Fact
- NOT intention unless never held intention
- NOT opinion unless no reasonable grounds for opinion or D is an expert in comparison to C
Made by a contracting party
Otherwise, maybe negligent misstatement
Induced C to enter contract
- Rep must have been material -or- C must prove they were subjectively induced
- Unlikely to be a misrep if appointed an expert or correct position set out in contract

Question 6

Remedy for mispresentation

Answer 6

Remedy depends on D’s culpability:

Fraudulent (i.e. D lied): Recission + damages in tort of deceit
Negligent: Recission + damages in tort of deceit
Innocent (D had reasonable grounds to beleive statement was true): Recisssion only

Question 7

Common Mistake

Answer 7

Both parties made same fundamental mistake (must render contract impossible or radically different)
* Includes: mistake over existence of subject matter (e.g. destroyed in fire)
* Excludes: mistakes over quality of subject matter (e.g. both parties think painting is famous)

Question 8

Cross-Purpose / Mutual Mistake

Answer 8

Both parties are mistaken, but they are msitaken about different things (i.e. negotiated at cross purposes)
* A offers one thing whilst B accepts another (A selling black horse but B thinks grey horse)

But, if a reasonable person would infer contract exists, contract binding despite material mistake

Question 9

Unilateral mistake

Answer 9

One party is mistaken and the other knows this

• buyer knows seller has made a mistake on price = void
• C signs a doc not knowing its nature = void
• Mistake as to identity (not face to face) and identity is of vital importance (not creditworthiness) = void

Question 11

Illegality - what, types and effect

Answer 11

Formation, purpose or performance involves in the commission of a legal wrong
Formation / purpose: commit crime / restraint of trade unless protects legitimate business interest and reasonable in area, scope and duration.
Performance
- void if both parties know illegal
- voidable if innocent party does not about illegal performance

Effect
- court will consider whether allowing recovery woudl harm the integrity of the legal system / whether denial woudl be a proportionate response to the illegality

Question 12

Duress - definition

Answer 12

Threat of violence or threat to breach contract (economic duress)

Question 13

Types of duress and when each type will voidable contract

Answer 13

Duress to person: contract voidable if threat one reason entered / agreed to variation
- note: presumed unless D can prove otherwise

Duress to property: contract voidable if threat sole reason entered / agreed to variation

Economic duress: contract voidable if:
1. Lack of practical choice (i.e. avoid breaching another contract / damage to economic interest / unable to get goods elsewhere)
2. Illegitimate pressure
(a) Threat to breach contract
(b) D acted in bad faith (e.g. extortion, costs increasing NOT genuine belief entitled to money)
(c) V protested at time; and
(d) V did not affirm or seek to rely on contract (takes immediate action once pressure has ceased)
3. Illegitimate pressure is a significant / decisive reason (no other factors induced C)

Question 14

Undue influence definition

Answer 14

Influence goes beyond what is regarded as acceptable
or
D takes advantage of a position of influence

Question 15

Types of undue influence

Answer 15

Actual undue influence: D acquired influence over C’s mind so as to preclude free will

Presumed undue influence:
1. Relationship of trust and confidence Automatic if: fiduciary / parent child
Must prove if: spouse / employer
2. Transaction calls for an explanation (not for V’s benefit or exposes V to risk)

Question 16

When can a lender enforce security? (i.e. sue wife if husband defaults)

Answer 16

Lender cannot enforce security if they actual or constructive notice of D’s undue influence

A lender will have constructive notice if:
1. L ought to have been put on inquiry (non-commercial relationship + not for joint benefit)
2.L did not take reasonable steps to ensure wife aware of implications (either private meeting with wife + advise takes ILA -or- wife received ILA)