Consent of Parties to
the contract
Vitiating Factors
-Some
contracts contain factors (circumstances) which adversely affects the consent
of the parties to the agreement.
Contracts
Act 1950 provides inter alia that all agreements are contracts if they are made
by the free consent of parties. Consent is said to be free when it is not
caused by one or more of the following.
Mistake
-Contract
Act 1950 provides for cases where there is a mistake of fact.
-The
basis for rendering agreements void that there has been no free consent between
the parties.
-If
a mistake occurs during contract formation, the court may declare the
“contract” void for (because of the) mistake.
-There
was never a contract at all, since the parties never reached agreement in the
first place.
-Mistake
is not easily proved, since it allows a convenient escape route from a
contract. Mistake can be categories into three :
1.
Common
mistake
-Cases
usually relate to non-existence of the subject matter.
-But
if one party effectively guarantees the existence of the subject matter, he
cannot argue mistake.
2.
Mutual
mistake
-This
occurs when the parties are at “cross-purposes”, as where A owns cars 1 and 2.
B
offers to buy car 1 from A, whereas A thinks that B is offering to buy car 2.
3.
Unilateral
mistake
-This
is “one-sided” mistake. One party is mistaken, and the other knows (or ought
reasonably to know) that he is mistaken.
-Usually
unilateral mistake applies to the subject-matter of the contract, or the
identity of the other party.
Misrepresentation
-The
basis difference between misrepresentation and fraud is that in fraud person
making the representation does not himself believe in its truth whereas, in cases
of misrepresentation, he may believe the representation to be true.
-As
in the case of fraud, silence in certain situations where there is a duty imposed to disclose, may amount to a
misrepresentation.
-High
standard of proof is required in cases where fraud is alleged, it is common
practice for a party who attempts to set aside a contract on the grounds of
misrepresentation to plead both fraudulent and innocent misrepresentation.
-If
a false statement cannot be proved to be a term, the misrepresentation
possibility should be explored.
-This
is a false statement made during negotiations, that induces the person hearing
it to enter into the contract.
-The
essentials are fact and inducement.
-There
are three distinct categories of misrepresentation, namely
·
Innocent (unintended deception)
-An innocent
misrepresentation is relatively easy to prove, requiring only proof of a false
statement that induced the contract.
·
Fraudulent (intended deception)
-More difficult to
prove, this requires the additional component that the person knew that the
statement was false, or that he couldn’t care less whether it was true or
false.
·
Negligent (breach of a duty of care)
-Negligence is “breach of a duty of
care”. There must therefore be a case where the duty is owed and breached.
-The
remedies vary for the different types.
Duress
-Duress
is the use of violence, or the threat of violence to a person, his goods or his
assets in order to force him into a contract.
-The victim of such contract can – at his option – have the contract set aside (avoided) because of the duress.
-The
physical violence or threats to harm the person or immediate family was
required.
Undue Influence
-Is
a development of equity to cover cases of particular relations and is sometimes
used as a comprehensive phrase to include cases of coercion or pressure within
or without those special relations.
-A
plea of undue influence can only be raised by a party to the contract and not
by a third party.
Unconscionable conduct
-This
means conduct that offends good conscience. Relatively unknown under the common
law, due to the “freedom of contract” doctrine, it is now a recognized reason
to have a contract set aside.
-There
is usually an inequality of bargaining power, and the weaker is disadvantaged.
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