Defects in Consent

Consent is the meeting of mind between contracting parties. Consent is said to

be gained when contracting parties agree over the same thing I the same
manner.
 

If the consent expressed in the form of offer and acceptance does not indicate
what the offeree or the offeror really intended then there exists defect in
consent. The cause of defect in consent is either wrong information (mistake,
false statement, fraud) or threat (duress, reverential fear, threat to exercise
rights) or lesion. Defect in consent may be a cause for invalidation of contract
(Art 1696). However, the existence of defect in consent does not necessarily
lead to the invalidation of contract. Firstly defect in consent can invalidate a
contract only if a party who agreed to be bound because of information or
threat demands invalidation (Art 1808). Secondly in some cases the party
whose consent was defective may not be entitled to claim invalidation (1708,
1709, and 1710).
 Mistake (Art 1996- 1703)

Mistake is an erroneous belief that a party makes

misunderstanding on the content of the contract or on the identity
of the other contracting party. The person might have committed
such misunderstanding either because of his own poor inference
from given facts or false statement or deceitful practice of others
person. One can invalidate or avoid his obligation on the basis of
mistake if the following two conditions are cumulatively fulfilled (Art
1997, 1998).
•A/ mistake must be fundamental (Art 1998) – A mistake is
fundamental when a person misunderstands the object of the
contract or the person with whom he has entered into the contract.
Art 1698 defines “fundamental mistake”
The mistake must be decisive:
The mistake is decisive when the mistaken party proves that a rational
person in his position would not have entered into such contract.
Good Faith of Mistaken Party (Art.1702) The party mistaken must be
ready to be bound by the contract if the other party agrees to be
bound as per the intention of the mistaken party. He should not use
his mistake as a pretext to be out of the contract.
• 

Reparation (Art.1703) a mistaken party is not without liability. He is

accountable for any damage that may be caused to the other party
(Art 1703). So invalidation of contract on ground of mistake entails
payment of damages. A mistaken party can escape such liability only
if he proves that the others party knew or should have known such
mistake (Art. 1703) contract had it not been for the mistake (Art 1697).
Mistake may be mistake of fact or mistake of person whom one may
contracted with.
Fraud (Art 1704)
• Fraud is an intentional act of preparing false information or changing or
modifying the content of the subject matter of the contract in a manner that
cannot be noticeable by ordinary observation. Fraud does not mean telling
untruth or for bearing from telling the truth it rather mean making things or
document to give wrong information. Such act is done in order to obtain
consent of a person to a contract. In order to establish fraud the following
requirements should be met.
 the fraud led him to commit decisive error
 the fraud was committed by the party to the contract or he knew or should have
known the fraud or derived undue benefit.
 False statement (Art 1705)
 May be committed by misrepresenting or non disclosure
 It should be commited by contracting party only.
Defect in Consent due to Threat (Art.1706-1709)

A person may be threatened physically or psychologically to make an offer

or to accept an offer made to him. In such case the person is declaring his
intention to be bound as an alternative means of avoiding the effect of the
threat. In principle parties enter into a contract for purpose of deriving
economic benefit but in case of threat, both or at least one of the party is
entering into a contract to avoid a possible risk that has been directed
against him, his relative, his property interest. So had it not been for the
threat, the person would not have declared to be bound i.e. intention to be
bound is lacking.
Duress (Art.1706 1707) Duress is warning the party that unless he enters
into a certain contract certain harm will be done to him. One can raise
duress as a cause of invalidation of contract if the following conditions are
cumulatively fulfilled. N.B. Duress may be commiyted by third party to
contract.
Elements of Duress
• There is a threat or warning to cause harm.
• The harm is on the person himself, spouses or his ascendant or
descendants.
• The harm is on person, life, property, and honor.
• The party believes that the harm will happen if he does not consent to the
contract.
• The threat should be serious:
• The harm is imminent
• The threat must impress a reasonable perso
Reverential fear (Art 1709):- this is a psychological threat. The threatening
person is playing against the psychological (mental) feeling of the
threatened person. It is a psychological intimidation that if the person does
not give his consent to be bound by the contract he will be belittled by
some one or the public in general. It is in short the fear of opinions.
Reverential fear is also called undue influence (see Art. 868 civil code).
OBJECT OF CONTRACT (1711-1718)
Object of a contract is what parties have actually agreed to undertake. It is the obligation of
both parties to the contract. The obligation may be
to do something or
to refrain from doing something or
to give something to someone.

So, object of a contract is the agreement of the parties to act, not to act, or to give. The object of
employment contract, for example, is the employers’ agreement to pay wage and employees’
agreement to do certain thing. In contract of sale of house; the obligation of the seller is to transfer
ownership and possession to the buyer and the obligation of the buyer is to pay price. Object of
contract differs from subject matter of contract. For example, in the above case, the work and the
house are subjects of the contract. Moreover; object of contract differs from penalty causes of
contract. Penalty causes provide a remedy or solution if a party fails to carry out his obligation (see
Art. 1886-1895 of civil code). A combination of object and penalty causes gives us content of the
contract.
Freedom of Contract
•  

As stated under Art 1679, parties are the ones who define the content
of their contract. They are free to determine what each party is
bound to perform, where and when to perform and may also specify
penalty for nonperformance. They are free to enter into any type of
obligation, obligation to do “not to do” or “to give” (Art 1712(1).
Obligation “to give” or “not to do” is clear enough; one can clearly
know what the other party gives or retrains from doing.
Limitations to Freedom of Contract However, parties’ freedom of
contract is not absolute (Art 1711). The reaons are : -
• Social protection
• Consumer protection
• Public order or morality
Under Ethiopian Law : -
• 

•Clarity of objects (Art 1714) as stated in our earlier

discussion; the object of a contract should be sufficiently clear;
otherwise the court concludes as though parties did not exercise
freedom of contract.
•Possibility of object (Art 1715). Parties’ freedom does not
allow them to bind themselves to perform humanly impossible
things.
•Legality of the object (Art 1716(1) no person can be bound
by contract to violate any law of the country since such is
contradiction in ter
•Morality of Object (Art.1716 (1) Society wants to perpetuate
itself. For the society to perpetuate, individual members of the
society have to have certain standard of conduct generally known
as morality.
• Motives of the Parties. Parties are expected to know content
of their contract only (Art 1679). A party is not bound by
restriction or reservation of the other party. If a party cannot be
bound by restrictions and reservations of another party, equally
he should not benefit from such restrictions and reservations.
• Therefore motivate of the parties are irrelevant to determine
the legality or morality of the object (Art 1717).
FORM OF CONTRACTS (Art 1719 – 1730)
• It is the way in which the content of the contract exists or
appears to others. It answers the question as to how third
parties such as court could know the agreement of parties.
Therefore, contract may exist either in written form or oral form.
CONTRACTS MADE IN WRITTEN FORM (ART 1721 – 1726)
A/ contracts required by the law to be made in writing
•Contract relating to immovable: -
-Contract of guarantee (Art 1725 (a)
-Contract of insurance (Art 1725 (b)
-Contract of marriage
-Partnership contract
-Pledge for a loan exceeding 500 birr (Art 2828 (2)
-Sale and mortgage of business (Art 152, 177 (2) comm. code)
-Promise of sale and preemptions (Art 1412)
-Agreement prohibiting assignment or attachment of a certain this (Art
1430)
B/ contracts required to be made in writing by the parties
C. Preliminary contract (Art 1721)
D/ Variation of contract made in writing (Art 1722)
Law of Agency (Special Contract)
‘’ YOU MAY BE LEGALLY RESPONSIBLE FOR THE ACTS OF SOMEONE ELSE DOES’’

Definition
The law of agency could be defined as the juridical relation which results from the
manifestation of consent by one person to another that the other shall act on his
behalf and subject to his control, and consent by the other so as to act. (Black’s Law
Dictionary, 1991).
Why we need Agency?
Agency reduces the cost of contracting.
The need to overcome time and space limitation:
The need to overcome limitations of knowledge and skill:
The need to represent legal person’s
The Need to overcome incapacities
Sources of Agency
Authority derived from a contract: -
Internal Contract [Subordinate Contract
 External Contract [Main Contract]
 Authority by Judicial Act
 Authority Derived from the Law.

Scope Of Authority
General Agency:-
Special Agency:-

Authorities Of An Agent
1. ActualAuthority: (a) Expressed (b) Implied
2. Apparent Authority (Ostensible Authority)
(a)Failure to receive Power of Attorney
(b)Failure to communicate partial or full revocation of power of attorney to third parties
(c)where any statement or conduct of principal lead third parties to believe that there is agency
relationship.
MODES OF REPRESENTATION: -
Disclosed Agency (when the name and the identity of the principal is disclosed to
third party then the agent entered in to a contract in the name of the principal)
Partially Disclosed Agency: (the name and the identity of the principal is disclosed to
third party but the agent entered in to a contract in his own name)
Undisclosed Agency (the name and the identity of the principal is not disclosed
to third party and the agent entered in to a contract in his own name)
THE OBLIGATIONS OF PARTIES TO AGENCY RELATIONS
Duties of the Agent
•Performance:
•Duty to Protect the Rights of the Principal from Conflicting Interests:
•Contract with third Parties :
•Contracting with oneself:
• Good Faith required from the Agent:
• Diligence Required from an Agent:
• Duty to Account:
• Duty of Non- delegation
• When the principal authorizes the agent to appoint a sub agent
• Authorized by law:
Duties of the Principal
• Remuneration:
• Duty to Advance Money:
• Duty to reimburse outlays and Experts: -
• Duty to release the Agent from Liabilities and Damages: