LLB170 Lecture 8: Week 8 – Vitiating Factors
Week 8 – Vitiating Factors
Misinformation
• Mistake
• Misrepresentation
• Misleading and deceptive conduct
Abuse of power
• Duress
• Undue influence
• Unconscionable dealings
Contract requirements
• Consent is required of a contract
• What happens if consent is based on fraud, mistake, etc.?
• Not having the appropriate consent could taint or vitiate a contract
Conduct/Statements
• Look at the conduct/statements made by the parties surrounding the time of
contract formation
• What was said, what was done?
• Did the parties willingly enter into the contract?
• Was the information given true?
• Was the contract based on misinformation?
• Looking to protect an innocent party
Voidable
If a vitiating factor is found, it will generally render the contract voidable (not void)
• the innocent party has the choice to elect to esid the contract
• right to rescind may be lost e.g. if ioet d pats ights adesel affeted
(Lewis v Averay)
• rescission only available where both parties are able to be substantially restored to
pre-contract positions – need to establish estitutio i itegu is possible Solle v
Butcher
Void
• Only when there is a mistake at common law is a contract deemed void
• The courts treat the contract as having never been created
• No damages, no putting the parties in as good a position as they would have been in
if the contract had been performed
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find more resources at oneclass.com
Mistake
Mistake: Common Law
• A mistake at common law is so fundamental the courts are not satisfied there has
been consent to bargain at all
• Void ab initio – there never was a contract
• Common law requirements for contract formation and performance apply. If they
are not met, contract is void under common law
Mistake as to Subject Matter
Two different theories about whether common law contract doctrines should offer relief
against mistake: the constructionist and the civilian
• Constructionist theory
- No relief against mistake
- Solved by applying the rules of contract law to formation/construction/
interpretation
- See McRae v Commonwealth Disposals Commission
- Preferred in Australia
-
• Civilian approach
- Distinct doctrine of mistake
- Fundamental error destroys the consent and consensus ad idem → essential to
contract
- Finding the contract void can be justified on this basis (Solle v Butcher)
- See Bell v Lever
- Has not been rule out by the High Court → extremely limited application
Equity
• Even if the constructionist theory is used, the contract may be voidable in equity
• Ensures the enforcement of common law rights is not unconscionable
• Treats the contract as voidable rather than void ab initio
• Broad approach, looks at the situation of the parties
• Court might rectify the contract (correct the error)
Remedy: Rescission or Rectification
• A pat ho doest at to e oud the otat ill ague that the contract is
oid at oo la o a e set aside o esided i euit
• Equity can refuse to grant specific performance on the ground of mistake or grant
specific performance on terms
• Remedy of rectification is available in respect of agreements which have been
mistakenly recorded
• Rescission – court sets aside the contract and restores the parties to their original
positions
• Rectification – out aeds the otat to eflet the pats atual ageeet
find more resources at oneclass.com
find more resources at oneclass.com
Types of Mistake
1. Common mistake – both parties make the same mistake
- Reached consensus ad idem but both parties are mistaken about a fundamental
item
- Since both parties are mistaken, not meeting of the minds
Existence of the subject matter:
- When the item has been destroyed or no longer exists unknown to either when
entering the contract
- It is implied that the item must exist for a contract to be formed – a condition
precedent
- Both parties must have equal knowledge for the mistake to be voided
- No item = no contract; no contract = no damages
- See McRae v Cth; Bell v Leaver
Common Law
- A mistake about a fundamental fact – the non existence of which renders the
contract impossible.
- Existence of the subject matter is an implied condition precedent.
- Contract is thereby VOID
- The thing has perished - (Couturier v Hastie discussed in McRae)
- The thing was already his/hers - (Bingham v Bingham; Cooper v Phibbs)
- Two ways of dealing with:
- Constructionist approach (casebook 893) – construes the contract in accordance
with the ordinary principles of contractual interpretation, to determine where
the mistake lies (McRae)
- The contract may be void in certain circumstances (Bell v Lever)
- One of three findings:
1. Court may conclude that it is not possible to determine, based on ordinary
principles of interpretation, which party is correct and which is mistaken →
no contract will have been formed because of lack of certainty (if relates to
an IMPORTANT term)
2. Parties will be relieved from a contract if the contract is found to be subject
to an implied condition that the facts are as understood as the mistaken
party or parties understood them to be at time of formation
3. Court may decide the promises are unconditional, therefore binding
irrespective of the mistake
- Contract is void under common law if:
1. Common assumption as to the state of affairs (beliefs of parties)
2. No warranty as to the state of affairs
3. Absence of the state of the affairs is not fault of either party
4. Absence renders the performance of the contract impossible
Solle v Butcher
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Misinformation: mistake, misrepresentation, misleading and deceptive conduct. Abuse of power: duress, undue influence, unconscionable dealings. Contract requirements: consent is required of a contract, what happens if consent is based on fraud, mistake, etc, not having the appropriate consent could taint or vitiate a contract. If they are not met, contract is void under common law. Two different theories about whether common law contract doctrines should offer relief against mistake: the constructionist and the civilian: constructionist theory. Solved by applying the rules of contract law to formation/construction/ interpretation. Fundamental error destroys the consent and consensus ad idem essential to contract. Finding the contract void can be justified on this basis (solle v butcher) Has not been rule out by the high court extremely limited application. Types of mistake: common mistake both parties make the same mistake. Reached consensus ad idem but both parties are mistaken about a fundamental item. Since both parties are mistaken, not meeting of the minds.
