VITIATING FACTORS

Vitiating Factors of a Contract

Introduction3

Discussion3

Types of Vitiating Factors3

Elements of Misrepresentation4

Effect of Misrepresentation on Contracts4

Different Types of Mistake5

Effect of Mistake on Contracts6

Meaning of Duress7

Effect of Duress and Undue Influence on Contracts8

Conclusion9

References10

Vitiating Factors of a Contract

Introduction

Vitiating factors are those that bring about the cancellation of a contract. There are a variety of reasons for this, some of which are mistakes and some of which are deliberate. Hence, the cause and effect of void and voidable contracts including mistake, misrepresentation and duress and undue influence must be understood along with the fact that contracts are sometimes made in the harsh reality of commercial pressures and there may be an incentive for one side or the other to take advantage. On top of this there are many opportunities for either party or their loyal representatives to make genuine errors on judgment or procedure that may lead to problems later on (Willmott, Christensen, Butler & Dixon, 2013, 25-45).

Discussion

Types of Vitiating Factors

Where a contract satisfies the requirements of offer, acceptance, consideration etc, it may still not be binding if, at the time the contract was made, certain factors were present which meant there was no genuine consent by one/all of the parties. These are known as vitiating factors and are (Paterson, Robertson & Duke, 2013, 250-280):

Misrepresentation.

Mistake.

Duress.

Undue influence.

Elements of Misrepresentation

Effect of Misrepresentation on Contracts

Misrepresentation is a false/untrue statement of fact made by one party (the representor) to another (the representee), which induces the representee to enter into a contract. Misrepresentation makes a contract voidable. For there to be an actionable misrepresentation: There must be a statement of fact, not opinion or sales talk as per Bisset v Wilkinson (1927) and Esso Petroleum v Mardon (1976). The statement must be important and one of the reasons (but need not be the only reason) the representee entered into the contract as demonstrated in Attwood v Small (1838) (Beatson, 2010, 55-88).

Where the representee knows the statement is false, there is no actionable misrepresentation. However, it is not a defence that the representee had the opportunity to discover the statement was untrue and did not take it Redgrave v Hurd (1881). Silence or non disclosure will not usually amount to a misrepresentation except in the following circumstances: Contracts requiring the utmost good faith e.g. contracts of insurance, where there is a fiduciary relationship e.g. contracts between solicitor and client, where there is a partial revelation as in Dimmock v Hallett (1886). Where there is a failure to disclose a change in circumstances as per Spice Girls Ltd v Aprilia World Service (2000) (Butler, Christensen, Dixon & Willmott, 2013, 100-198).

Where an Act of Parliament requires disclosure e.g. The Financial Services and Markets Act 2000 requires a prospectus or advertisement to give information an investor would need in order to decide whether to purchase shares.

There are 3 types of misrepresentation. The category the misrepresentation falls into depends on the state of mind of the representor (Phang, 1998, 1):

Fraudulent misrepresentation - C can rescind the contract ...