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The Law & You: The Vitiating Elements of Contract

                     

A contract can be defined as:

A promise or set of promises which the law will enforce.

The agreement/contract, creates rights and obligations that may be enforced principally through the instrumentality of the courts, however there are situations where the parties have reached an agreement but the questions arises whether the existence or non-existence of some facts, or the occurrence or the non-occurrence of some event, destroy the basis upon which that agreement is discharged or in some other way vitiated.

A ‘vitiating element of contract’ is the technical term for the things which make a contract void/voidable or unenforceable or nonexistent.  Vitiating elements of contract such as mistake, duress, misrepresentation, undue influence and illegality, are determinants of the validity of a contract. They are the various factors which can affect the validity of a contract once it has been formed. The implication of which is that the validity of a contract is normally unquestioned when vitiating elements are absent. Let’s briefly look at some of the examples.

Mistake

Mistakes can be split into those mistakes which nullify the agreement (common mistake) and those which negate the agreement (mutual mistake)

Common mistake:  Common mistake occurs when both parties make the same mistake. If this happens the court is likely to hold that the contract void from its inception and thereby rescind the contract. However, the court must be satisfied that the mistake was sufficiently fundamental to the contract in order to render it void at common law.  Therefore, if the mistake is only a minor one then the contract will still be enforceable as this would not have affected the contract per se. As such, in order for a party to establish that there has been a mistake they must be satisfied that the mistake was fundamental to them, entering into the contractual relations with the other party.

Mutual mistake: Mutual mistake occurs when the parties misunderstood each other. In such circumstances the contract would be rendered void at common law. However, if the mistake does not relate to an important part of the contract the court may be willing to disregard the mistaken term and uphold the remainder of the contract. Accordingly, where this type of mistake occurs the parties must be able to show that they were both mistaken in relation to the particular fact or law, and that it was an integral part of the contract, which again induced them to enter into it.

 Unilateral mistake: as the name implies only one party is mistaken while the other party knows of or deemed to know of the mistake.  The mistake must be related to the terms of the contract and the court will adopt a subjective approach when deciding whether or not to set aside the contract.  It is for the innocent party to show the effect of the mistake upon his mind with a view to avoiding the obligations he has taken on under the contract.

  Duress

Clearly, a person cannot be said to have consented to a proposal if such consent was obtained by threats or undue persuasion. Duress at common law is confined to cases of actual violence or threat of violence to the person. Hence if a party is pushed into agreement by threat of physical assault on his person, or on his spouse or near relatives, the agreement becomes voidable. Duress renders a contract voidable as opposed to void and the party subject to the duress can rescind the contract unless there has been some affirmation of the contract after the duress has been lifted.

Overall, there are certain factors that will render a contract void or voidable based upon the circumstances of the case. If a contract is void then it cannot be enforced by either of the parties, whereas if a contract is rendered voidable then although it is a valid contract, it can, in fact, be cancelled. Essentially, whilst a void contract cannot be performed, a voidable contract can be until either of the parties decides to cancel it. If there has been a misrepresentation or a mistake the contract may be rendered void and therefore be rescinded. If duress or undue influence has occurred, then the contract may be rendered voidable and thereby capable of being cancelled.

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Foluke Akinmoladun

Foluke Akinmoladun is the Managing Solicitor of Trizon Law Chambers. She has been a legal practitioner for 13 years and has experience in a wide range of commercial matters. She is a certified mediator, a member of the Chartered Institute of Arbitrators(UK), holds an Advanced Diploma in Accounting from the Association of Chartered Certified Accountants (UK) and is also a tax consultant. She is a dispute resolution expert, handling commercial disputes from negotiations all the way to litigation (if need be).

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