The Law of Contract

Vitiating Factors

Lecturer: Shirley-Ann Eaton

Vitiating Factors

There are factors that may affect the
validity of a contract.
• Mistake
• Misrepresentation
• Duress/Undue Influence
• Illegality
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Mistake
Where the elements required to form a contract are
all present, the parties are entitled to assume that
the expectations reasonable raised by their conduct
will be sanctioned by the court.There are
circumstances in which this assumption may be
defeated by the presence of other factors such as
by mistake, which at common law may make the
contract ‘void’ or by misrepresentation, which
may make it ‘voidable’.
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In equity the rules have a wider scope. 4 . Mistake It is generally in the interest of business that contracts be enforced. for example as to the quality of a product will not affect the validity of a contract. render the contract void. The common law rules on mistake. but their effect is less drastic. if applicable. but these rules are exercised within narrow limits. Thus most mistakes.

5 . • The distinction is of little importance to the parties themselves since the goods or money can be recovered from the other party to the contract if they are still in his possession. Mistake • It is important to distinguish a contract which is void for mistake from one which is voidable for misrepresentation.

A can recover the car from C because no title passes under a void contract. 6 . if the contract between A and B is void for mistake. • For example. Mistake • The distinction is of significance if the goods have been sold to a third party. C will be able to sue B for breach of the implied condition that he had a right to sell and pass title. if A sells his car to B and B resells it to C.

then provided the sale to C took place before A avoided the contract. C will obtain a good title. since viodable means valid until avoided. A would then have to seek remedy for misrepresentation against B 7 . Mistake • However in a similar situation if the contract between A and B is only voidable for misrepresentation.

Mistake as to the identity of the subject matter 4. Mistake as to the terms of the contract of which the other party is aware 8 . Mistake as to the identity of the other party 5. Mistake as to the existence of the subject matter 2. Mistake Common Law The following types of mistake render a contract void. 1. Mistake as to the possibility of performing the contract 3. provided the mistake actually induces the contract.

9 . In fact they were not married because. at the time of their marriage ceremony the man’s wife was still alive. Mistake Common Law 1. believing they were married. The separation agreement was held to be void for mistake because the marriage which was the basis for the agreement was void. unknown to them. Mistake as to the existence of the subject matter In Galloway v Galloway a man and a woman made a separation agreement.

The contract was held to be void because the land was not capable of producing 50 tons per month. Mistake as to the possibility of performing the contract. 10 . Mistake Common Law 2. The contract provided for an average delivery of 50 tons of sisal per month. In Sheik Bros v Ochsner a contract was made for the exploitation of sisal grown on a specific plot of land.

g. It was held that there was no contract. one in October and one in December. A intended to buy product X. but B intended to sell product Y. Mistake as to the identity of the subject matter. Mistake Common Law 3.e. There happened to be two ships called Peerless sailing from Bombay. In Raffles v Wichelhaus the plaintiff agreed to sell to the defendant a consignment of cotton which was to arrive ‘ex Peerless Bombay’. 11 . The plaintiff was thinking of one ship and the defendant of the other.

and thinking that they were old oats he bought them. but not to such an extent that there was no agreement at all. Mistake Common Law It is important to be able to distinguish a mistake made as to identity from a mistake as to quality. 12 . They were in fact new oats. It was held that his mistake did not invalidate the contract. In Smith v Hughes the plaintiff was shown a sample of oats by the defendant. The parties were at cross-purposes. and he refused to accept them.

Mistake Common Law The mistake was only one of quality. • A mistake as to quality will only invalidate the contract if it is a mistake as to the fundamental quality by which the thing is identified. and as such does not operate to render the contract void. but not if it is a mistake as to one of the various other qualities of the product 13 .

) and not his identity. Mistake as to the identity of the other party. In such a situation a person can only make a mistake as to the attributes (i.e. Mistake Common Law 4. the quality of the other party. A mistake as to identity cannot be made when the parties deal face to face. 14 .

but with a different person Z. and • this fact was known to Y. • he did not intend to contract with Y. Mistake Common Law An agreement made between X and Y will be void if X can prove that: • at the time of the agreement he regarded the identity of the other party as of importance. 15 .

and he signed his letter in such a way that his name appeared to be ‘Blenkiron & Co’. but in fact its entrance was from an adjoining street.. Cheapside’. The latter was a respectable firm carrying on business at 123 Wood St. 16 . writing from ’37 Wood St. offered to buy handkerchiefs from the plaintiffs who manufactured handkerchiefs. Blenkarn occupied a room which he called 37 Wood St. Mistake Common Law In Cundy v Lindsay a fraudulent person named Blenkarn.

37 Wood St. 17 .. purported to accept the offer and despatched the goods to ‘Messrs. Blenkiron & Co.. who were aware of the high reputation of Blenkiron and Co. Cheapside’. and he in turn sold them to the defendants. though they neither knew nor troubled to ascertain the number of the street where they did business. Mistake Common Law The plaintiffs. The plaintiffs sued the defendants for conversion. These were received by the rogue Blenkarn. who took them in all good faith.

and so he could not pass title to the defendants. Thus the title to the handerkerchiefs did not pass to Blenkarn. 18 . The defendants therefore had to return the handkerchiefs to the plaintiffs. since the plaintiffs intended to deal with someone else. Mistake Common Law It was held that there was no contract between the plaintiffs and Blenkarn.

by way of showing that he was Richard Greene. called upon the plaintiff and offered to buy his car which was advertised for sale at £450. 19 . a rogue posing as Richard Greene the well-known film actor. The plaintiff accepted the offer.A. Afraid that the cheque might be worthless. Greene for £450. produced a special pass of admission to Pinewood Studios bearing an official stamp. and was given a cheque. Mistake Common Law But in Lewis v Averay. signed R. he resisted a proposal that the car should be removed at once. The rogue.

the plaintiff had concluded a contract with the rogue. Mistake Common Law Satisfied with this. sold the car to the defendant and handed over the log book to him. The Court of Appeal held that despite his mistake. The cheque had been stolen and was worthless. The action of conversion by the plaintiff for the recovery of the car or its value failed. now passing as Lewis. 20 . the plaintiff handed over the log book and allowed the car to be taken away. The rogue.

and the rogue was able to pass title to the defendant. Voidable means valid until avoided and the plaintiff had not avoided by the time the rogue sold the car to the defendant. but it could not be avoided now that the car had come into the hands of an innocent purchaser for value. The contract was no doubt voidable for fraud. 21 . Mistake Common Law He had failed to rebut the prima facie presumption that he had made a contract with a rogue when he allowed the car to be taken away. The contract was therefore valid.

The letterhead depicted a large factory and described Hallam and Co. 22 .’. on credit. Mistake Common Law In King Norton Metal v Eldridge Merrett the plaintiff received an order for wire from ‘Hallam and Co’. being merely an alias for a crook named Wallis. Wallis took possession of them and re-sold them to the defendant. as a substantial firm. In fact Hallam and Co. The plaintiff sent the goods to ‘Hallam and Co. did not exist.

the plaintiff had not made a mistake as to identity.’. Mistake Common Law It was held that as Wallis and ‘Hallam and Co. were the same person. Thus the contract was only voidable for fraud. and since Wallis sold to the defendant before the plaintiff avoided the contract the defendant obtained title to the goods. but had intended to contract with the writer of the letters. 23 .

there being about three pieces to the pound. Mistake Common Law 5. The buyer. knowing of the mistake. His action failed since he knew that the seller did not intend to contract on the terms stated. and later sued the seller for non-delivery. Mistake as to the terms of the contract of which the other party is aware. In Hartog v Colin and Shields a seller of hare skins mistakenly offered them at a price ‘per pound’ instead of ‘per piece’. accepted the offer. 24 .

• Unilateral mistake – this occurs when one of the parties is mistaken about some fundamental fact and the other party knows or should know this. Mistake Terminology Different terminology is often used to describe the various types of mistake.g. e. Cundy v Lindsay 25 .

g.g.this occurs when both parties make the same mistake.this occurs when the two parties mean different things. Mistake Terminology • Bilateral ( or common) mistake . e. Galloway v Galloway • Mutual mistake . It will normally be a mistake as to identity of the subject matter of the contract. Usually this will be a mistake as to the existence of the subject matter. Raffles v Wichelhaus 26 . e.

set aside the contract on such terms as are just whether it is void at common law or not i. the court interferes in two respects. if it thinks fit.e. rectification 27 . • Secondly.e. it will. it rectifies a written contract or deed that does not accurately record the agreement made by the parties i. rescission. Mistake Equity Equity will in limited situations relieve a party from the effects of his mistake where the common law would hold him to the contract. • First. In fulfilment of the principles of equity.

and provided justice can be done to the other party by imposing conditions. In general it will only be granted if the party seeking to rescind was not at fault. Mistake Equitable Remedies Rescission The circumstances when this remedy will be granted have never been precisely defined. 28 .

In an action for specific performance brought by the plaintiff. In fact.250. 29 . but the purchase price was fixed at £850 since both parties believed that the tenancy was protected by the Rents Act. the tenant left without claiming protection. with the condition imposed that the vendor should give the purchaser first option to buy the house at the correct market price. It was held that. though the mistake did not suffice to nullify the contract at law. Mistake Equitable Remedies Rescission In Grist v Bailey. The value of the house with vacant possession was about £2. it was material enough to attract the intervention of equity. the plaintiff agreed to buy the defendant’s house subject to an existing tenancy. This belief was wrong. the defendant counterclaimed that the contract be set aside on the ground of common mistake. The contract for sale of £850 was rescinded in equity.

Owing to a mistake the later formal and written instrument includes the yard as part of the property to be sold. 30 . equity will rectify the written document so that it coincides with the true agreement of the parties. and. to B. Mistake Equitable Remedies Rectification Where there has been a mistake. exclusive of its adjoining yard. not in the actual agreement. what is worse. Suppose that A orally agrees to sell a house. the subsequent conveyance actually conveys the yard to B. but in its reduction to writing.

31 . but also to order specific performance of it as rectified. the court has jurisdiction. not only to rectify the written agreement. Mistake Equitable Remedies Rectification In a case of this type where it is proved that owing to a mistake the written contract does not does not substantially represent the real intention of the parties.

The terms were clearly agreed between the parties 2. Rectification will be allowed provided: 1. and 3. not the contract itself which is rectified. but the incorrect manner in which the common intention of the parties have been expressed in a later document. however. 32 . The writing fails to express the agreement of the parties. The agreement continued unchanged up to the time it was put in writing. Mistake Equitable Remedies Rectification It is.

It was held that the plaintiff was entitled to rectification of the contract and the transfer. 33 . the plaintiff orally agreed with the defendant to sell him a farmhouse and some land. The error was not noticed and the land was transferred to the defendant who became the registered owner. Mistake Equitable Remedies Rectification In Weeds v Blaney. The plaintiff’s solicitor in error prepared a contract which included further land owned by the plaintiff.

Documents mistakenly signed Non Est Factum (It is not my act) The general rule concerning signed documents is that a person is bound even if he does not read or understand the document: L’Estrange v Graucob. Three conditions must be satisfied: 34 . However an apparent signed contract will be regarded as void if a party can successfully plead the defence non est factum.

Non Est Factum (It is not my act) • The signature must have been induced by fraud • The document must be fundamentally different from that thought to be signed. A mistake as to the contents is not sufficient to allow non est factum to be raised. • The party seeking to avoid the liability must prove that he acted with reasonable care. 35 .

the defendant was induced to sign two promissory notes by the fraudulent misrepresentation that his signature was required as a witness. the defendant being told that the documents were of a private nature. The rest of the document apart from the space for the signature was covered by blotting paper. Non Est Factum (It is not my act) In Lewis v Clay. 36 . It was held that the defence of non est factum applied even though the defendant could not say precisely what type of document he thought he was signing.

An assignment was prepared under which the lease of the house was transferred to Lee for £3.000 (a reasonable price was included in the assignment so as not to subsequently arouse the Building Society’s suspicions). and then give the money to him. He therefore arranged that his friend. Lee then raised money by mortgaging the property to The Anglia Building Society. Before Lee could mortgage the house it had to be transferred to him. Lee. to raise money on the security of her leasehold house. should raise the money on a mortgage of Gallie’s house. 37 . provided she could continue to live there rent free for the rest of her life. the original plaintiff (a Mrs. Parkin. When Gallie was asked to sign the assignment she did not read it because her glasses were broken. nor did he pay the £3. Non Est Factum (It is not my act) However in Saunders v Anglia Building Society. but he did not pay any money to Parkin. but Lee told her it was a deed of gift to Parkin (who witnessed the document). Parkin did not want to raise the loan or become owner of the house himself as he feared this would enable his wife (from whom he was separated) to enforce a claim for maintenance against him. Gallie who died before 1970) wanted to help her nephew.000 to Gallie.

She believed the document would enable Parkin to raise money on the security of the house. Non Est Factum (It is not my act) It was held that non est factum did not apply to Gallie’s signature of the assignment. It was also stated that Mrs. though by a different method than that contemplated by Gallie. and the document was designed to achieve this aim. since her mistake was not sufficiently serious. Gallie’s carelessness prevented her from relying on non est factum 38 .