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V. Vitiating Factors PDF

Vitiating factors are elements that can render a contract void or voidable, including duress, mistake, and misrepresentation. These factors undermine the validity of a contract by affecting the parties' consent and can lead to legal consequences if proven. The document discusses various types of misrepresentation and mistakes, along with relevant case law illustrating these concepts in practice.

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Naercio Gamboa
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4 views

V. Vitiating Factors PDF

Vitiating factors are elements that can render a contract void or voidable, including duress, mistake, and misrepresentation. These factors undermine the validity of a contract by affecting the parties' consent and can lead to legal consequences if proven. The document discusses various types of misrepresentation and mistakes, along with relevant case law illustrating these concepts in practice.

Uploaded by

Naercio Gamboa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Vitiating Factors

Orquídea Massarongo-Jona
• A fact that renders the contract/agreement nullity, void (to
impair)
• Elements of duress, mistake, misrepresentation,
• essential element of contract validity. It is recognized in common
law that a party might have been coerced, or pressed into a
contract.
• the resulting contract cannot be regarded as a true agreement
between the parties.
• Makes the fact or contract with no legal force, incapable of
being ratified.
• Is based on autonomy principle
• Can you think on examples based on the concepts
presented earlier?
• Can you try to find an equivalent figure or institute in
our jurisdiction?
• Examples from Civil Code
• duress,
• mistake,
• misrepresentation
• An operative misrepresentation is one where there is
• misstatement of fact which is material
• inducement
A. Misstatement of fact must be of fact not law, must be of fact as
opposed to promise of future action
BUT a representation of intention may amount to a representation of
fact.

• TYPES OF MISREPRENTATION
• fraudulent
• negligent – at common law - Misrepresentation Act 1967
• innocent
A. Company issued prospectus in which stated that money raised by the loan
they hoped to obtain from public would be spent on improvement of
buildings and extension of business. Intention of the directors from the
beginning was to use money raised to pay off existing liabilities.
Held: prospectus was a fraudulent misrepresentation of fact.
Misstatement of fact must be distinguished from an honest opinion.
B. Vendor described property he was selling as being subject to lease of
Fred Fleck “a most desirable tenant.” In fact Fred Fleck could not be called
this by any stretch of the imagination. Last ¼ year’s rent was unpaid and
previous ¼ year’s rent had been paid under protest and by instalments.
Held: description of tenant was a representation of fact.
NB. Distinguish from advertising “puff”
Silence does not generally result in legal consequences - but see non-
disclosure below.

Inducement - If false statement had no effect upon the mind of the person to
whom made (representee) he will have no remedy.
• Mistake is a vitiating factor that makes the contract void (i.e. never
existed) at common law and voidable (existed until one party chose
to avoid it) in equity.
Courts are reluctant to find mistake because: -
i) Mistake is often alleged in commercial contracts where the contract
is freely entered into by businessmen who should draft their contracts
in such a way as to allow for factors that might only come to light
after the contract is entered into.
•
ii) The effect of mistake at common law on innocent third parties.
The mistake must be an operative one and must relate to a
fundamental underlying fact that existed at the moment the contract
was entered into.
• Amalgamated Investment and Property v John Walker (1976)
A contract was made for the sale of a warehouse for £1.7 million,
with the sellers knowing the purchasers wanted to re-develop it. The
day after the contract was signed, the building became listed for
historical interest. Now due to the restriction the land was worth £210
000 and could not be developed. Held contract was valid, as neither
part knew the building was going to be listed so there was operative
mistake.
The mistake can also be a mistake as to law.
Kleinwort Benson v Lincoln County Council (1998)
A bank paid money to a local authority under a financial transaction,
which was thought to legal however it was not so the local authority
had to return the money.
The test for mistake is an objective one i.e. what would an onlooker
(reasonable person) have thought the parties were agreeing to. The
court does not look at what the parties themselves believed they
were agreeing to
· Common mistake – both parties make the same mistake (only
as to the existence of contract subject matter)

· Mutual mistake – the parties are at cross purposes with each


other

· Unilateral Mistake – one party makes a mistake and the other


party knows of it. (Element of fraud) same as fraudulent
misrepresentation.
• Common law: threat to vitiate the consent of the other party
• Case Cumming –v- Ince [1847]
• Private mental asylum inmate coerced in to signing away title to all of her
property with the threat that her committal order would never be lifted
• Threat can be violence or even death
• Barton –v- Armstrong [1975]
• Former chairman threatened current managing director with death if he did
not pay over a large sum of money for the former chairman’s shares.
Economic Duress
• Contract can be set aside where extreme coercion has rendered the
agreement otherwise commercially unviable.
• DC Builders –v- Rees [1965]
• R forced small firm to take £300 in full satisfaction rather than £462. They
had no choice but to accept in the circumstances. This was economic duress.
Types: Actual and Presumed undue influence
• Bank of Credit and Commerce –v- Aboody [1990]
• Wife avoided liability over surety transaction which her husband induced her to enter
• Class 1 – actual: no special relationship so party alleging undue influence has to prove it
• Class 2 – presumed: special relationship so undue influence automatically presumed unless
evidence to the contrary
• Barclays Bank –v- O’Brien [1993]
• Bank granted £135,000 to failing business on surety of jointly owned home. Bank failed to
follow instructions to allow both to receive independent legal advice. Mrs O’Brien not liable.
• Actual Undue Influence
• Williams –v- Bayley [1866]
• Threats to son amounted to undue influence – Denning felt it should apply where there is
inequality of bargaining strength.
• Lloyds Bank –v- Bundy [1979]
• L was the bank to farmer and his son and his son’s company. Bank manager and son
persuaded farmer to make his farm security for son’s loan to company. Bank sought
repossession but failed – conflict of interest.
• Presumed undue influence
• Party alleging undue influence need only prove special relationship – a defence to undue
influence is that the party had full legal and independent advice.
• Lancashire Loans –v- Black [1933]
• There are 4 types: By Performance, By Agreement, By
Frustration & By Breach

• Exercise:
• Do a Research on Google and find the legal definition and
examples of each of the forms of discharging contract
• Identity similar examples in Mozambican jurisdiction
• NOTE: Submit your answer in word format on goggle
classroom Platform. Deadline: before 04 de Maio de 2020.
THANK YOU

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