Vitiating elements or factors

CPA-Business-Law-Section-1 BLOCK RELEASE

A contract supported consideration, in which there is an intention to enter into legal effect where if is affected a vitiating factor. A vitiating factor (or element)is one which tends to affect the validity of the contract. The vitiating elements consist of:-

a. Mistake
b. Misrepresentation
c. Duress (or Coercion)
d. Undue Influence
e. Illegality

These are explained below

Mistake
Mistake may be defined as an erroneous belief concerning something. It may be of two kinds:

(i) Mistake of law
(ii) Mistake of fact

Mistake of law
Mistake of law may be further classified as;

i. Mistake of general law of the country,
ii. Mistake of foreign law
iii. Mistake of private rights of a party relating to property and goods.

A mistake of law can never be pleaded as a defence. But mistake of foreign law and mistake of private rights may be treated as mistake of fact.

Mistake of fact
A mistake of fact is also known as an operative mistake. Under common law an operative mistake renders a contract void ab initio, ie. where an operative mistake is proved the legal position is that the parties are in the same position as if the contract was never entered into; the contract was void, right from the beginning
The traditional approach is to divide mistakes into three distinct categories: common mistake, mutual, and unilateral mistake.

These are explained below:-

i) Common Mistake
A common mistake is made where both parties assume a particular state of affairs, whereas the reality is the other way round. Both parties therefore make exactly the same mistake. A contract entered into as a result of common mistake is a nullity (or null and void) at common law:

Conturier V. Hastie (1853)
A contract was entered into for the sale of goods which at the time of the contract were supposed to be in transit aboard a certain ship. None of the parties knew that the goods had deteriorated and that the time of the contract they had in fact been disposed of already the master of the ship.
Held: Both parties had contemplated that the goods were in existence at the time of the contract; ad since the goods were not actually in existence at that time, the contract was void and the buyer was not liable to pay the price.

ii) Mutual Mistake
Mutual to a particular matter, one party may assume a totally different thing, so that the other party assumes a totally different thing, so that they both misunderstand one another. They are then said to have made a mutual mistake. The mistake is different for each party, exactly the same mistake. A contract made under mutual mistake may not be a nullity, depending on the circumstance of the case (compare common mistake where the contract is automatically nullity):

Scott V. Littledole (1858)
In a contract of sale of goods sample, the plaintiff bought from the defendants 100 chests of tea, which were then lying in a specified place. The plaintiff thought he was buying the tea contained in the 100 chests, but the defendants thought they were selling to the plaintiff only tea of the same quality as the samples. The tea in the chests turned out to be of a higher quality than the samples submitted to the defendants and the defendant refused to deliver it to the plaintiff.
Held: There was a valid contract between the plaintiff and defendant, and the defendant was liable to deliver the 100 chests.
Note: The above case is sometimes cited as authority for saying that mistake as to quality is not an operative mistake.

iii) Unilateral Mistake
If one of the parties to a contract, and the other parties aware of this fact, there is said to e a unilateral mistake (compare mutual mistake where one party’s mistake is not known to the party). Instances of unilateral mistake is not common in fraud cases where one party misrepresents his identity to the other, thereinducing the other party into contracting with him in the false belief that he is contracting the person whose identity has been given.

Misrepresentation
At representation means a statement of fact made one party to the other, either before or at the time of contract, relating to some matter essential to the formation of the contract, with an intention to induce the other party to enter into contract, with an intention to induce the other party to enter into the contract. It may be expressed spoken or written or implied from the acts
or conducts of the parties) e.g. non-disclosure of a fact).

A representation when wrongly made, either innocently or intentionally, is termed as a misrepresentation. To put in differently, misrepresentation may be either innocent or intentional or deliberate with intent to deceive the other party. In law, for the former kind, the term
‘Misrepresentation’ and for the latter the term “fraud” is used.

Types of Misrepresentation

There are three types of misrepresentation. These are:-

i) Fraudulent Misrepresentation
A fraudulent misrepresentation is a statement made without honest belief in its truth or recklessly without caring whether it is true or not. This type of misrepresentation therefore requires proof of fraud or dishonest; and once proved it is actionable at common law.

ii) Negligent Misrepresentation
An innocent is one made honestly or without fault on the part of the representor. This type if misrepresentation is not actionable at common law, and the representee has no remedy at all.

Remedies for Misrepresentation
Misrepresentation renders a contract voidable at the instance of the representee (the innocent party). Consequently, the remedy of rescission is available to him. Besides, he is also entitled to damages for loss that may have been suffered him as result of the misrepresentation.

Duress
Duress refers to actual violence or threats violence calculated to produce fear in the mind of the person threatened. The requirement of agreement in the establishment of a contractual relationship presupposes that each of the parties is free contracting agent. But the freedom of the party subjected to duress (or coercion) is obviously restricted. Duress as such, is a vitiating factor which is actionable at common law (and is sometimes referred to as legal duress).
For a threat to amount to duress, it must be a threat to the person, not to goods. It must also relate to an unlawful thing; a threat to do a lawful thing is immaterial, subject only to the requirements of public policy. Also, the threat must have induced the threatened party to enter into the contract.
The dominant view is that contract entered into under duress (or coercion) is voidable at the instance of the party coerced.

Undue Influence
“A contract is said to be induced be undue influence where, (i) the relations subsisting between the parties are such that one of the parties is in a position dominate the will of the other, and ii) he uses the position to obtain an unfair advantage over the other”.
Undue influence is another factor which tends to restrict the freedom of a party in entering into a particular contract. It is based on the equitable principle that no person may take an unfair advantage of the inequalities between him and another party so as to force an agreement on the other party.
A person who seeks to rely on undue influence as a defence must prove that the other party has in fact influence over him and that he would not otherwise have entered into the contract. But where a confidential (or fiduciary) relationship exists between the parties, undue influence is presumed, and the burden is shifted on to the other party to prove that there has been no undue influence on his part.
The following are relations in which undue influence is presumed:-
1. Parent and Child
2. Doctor and Patient
3. Trustee and Beneficiary
4. Advocate and Client
5. Guardian and Ward
6. Religious Adviser and Disciple

It should be noted that Husband/Wife relationships do not raise the presumption of undue influence; undue influence must in this case be specifically proved the party seeking to rely on it.

Where undue influence is sufficiently proved to have existed at the time of the contract, the contract is voidable at the instance of the party unduly influenced and may on this ground be set aside.

Williams V. Bayley (1866)
Like any other voidable contract, a contract entered into under undue influence cannot be set aside where its subject-matter has come into hands of a bona fide purchaser, where it has been subsequently affirmed, if there has been undue delay on the party entitled to avoid the contract.

Illegality

An illegality contract is one which is prohibited law e.g. making a contract to break into a house to steel goods is an illegal contract.

Besides statute, there are certain contracts which are prohibited by, and therefore illegal at common law. These are contracts which offend against public policy, i.e. those which are prejudicial to public morality and public well-being.

They are as follows:-

1. Contracts to commit a crime, tort or fraud;
2. Contracts that are prejudicial to the administration of justice;
3. Contracts liable to corrupt public life;
4. Contracts that are prejudicial to public safety;
5. Contracts to defraud the revenue;
6. Contracts that are sexually immoral;
7. Contracts that are prejudicial to the country’s foreign relations.

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