Contracts 3 - carlprosper4nugs

Vitiating Factors
• To vitiate means
– To make something ineffective
– to destroy or drastically reduce the effectiveness
of something
– or make it invalid
• Factors that affect the validity of a contract
• Means all the 5 elements are present and all
formalities observed yet it is still not valid
because of a vitiating factor
• Effect is that the consent of one of the parties is
not a true consent
• There was a defect present at the time the
contract was entered into – so there was no
consensus id idem between the parties
• Contract will therefore be void or voidable
• Void means the courts will treat it as not
existing in law and will therefore not enforce it
• Voidable means it exists in law and is valid but
can be set aside by one of the parties.
Undue influence
Illegality or public policy
• A situation where one party is misled into
entering into a contract on the basis of
statements made by the other party
• Note: a representation is a statement of past,
present or existing facts. It is not a statement of
intention or opinion
• Misrepresentation therefore is a false statement
of fact made by one party to the other which
induces the other to enter into a contract
• Effect of it is to render the contract voidable
• Material if it would have induced or affected
the reasonable man to enter into a
contractual agreement on the basis of
information which is not true
• Not material where the person affected knew
it to be false, was ignorant of the statement
or did not allow it to influence him
• It must induce the other party to enter into the
• It must be addressed to or intended for the
person affected. E.g. A says to B, there is a sales
promo at shoprite this weekend. C acts on that
information. The statement turns out to be false.
Neither B nor C can sue A.
• The person to whom the statement is made is
under no obligation to enquire as to whether the
statement is true or not. It is sufficient if he relies
on it in deciding to enter into the contract.
• If the person the statement was made to
knew it was false, he could not have been
induced by it
• Defence for the person who made the
statement is to show that he believed or had
reasonable grounds for believing the
statement was true
What it is not
• Opinions
• Intention
• Silence
– A party is under no obligation to disclose information.
However in certain contracts such as insurance, there
may be an obligation to disclose information.
• Statements by sales persons may or may not be
– E.g. Omo washes as white as snow – called “mere
– the car can do 200 km per gallon may be because it is
a verifiable fact
3 Types of Misrepresentation
• Innocent - false statement made by someone who had
reasonable grounds to believe it was true. Victim may not
perform his obligations, rescind contract but not entitled to
• Negligent – false statement made by someone who had no
reasonable grounds for believing it to be true. A victim may
sue for damages if he has suffered loss. He may also rescind
and not perform his obligations under the contract.
• Fraudulent – false statement by a person knowing or
believing it to be false. Has an element of dishonesty or
fraud. Victim may refuse to perform his obligations under
the contract, rescind it, sue for damages if he suffers any
• Unlawful and illegitimate pressure exerted on
a person through actual or threatened
violence against him/his property or persons
he is responsible for, for the purpose of
coercing him to enter into a contract
• Mere commercial power or exercise of
legitimate market power is insufficient
• Renders the contract voidable
• Hemans v. Coffie: Coffie was detained by the police for 8
weeks as part of a debt collection exercise. Earlier police
had detained his son for 4 days because they could not
locate him. Police said they would only release him if he
sold his house and paid off the debt. Coffie agreed and the
police found a buyer, Ms. Hemans. After selling the house,
Coffie brought an action to set aside the sale. Held:
contract was procured under influence of police and there
was a show of unlawful force and pressure. Acquah JSC:
“the present position therefore is that to be capable of
giving rise to duress, the threat must be illegitimate either
because what is threatened is a legal wrong or because the
treat itself is wrongful or because it is contrary to public
Undue Influence
• Where a person uses the influence which he
has over another to persuade him to enter
into a contract or transfer property on terms
that are disadvantageous to the influenced
• Renders a contract voidable
• An equitable remedy
• Defined in Mercer v. Brempong: Edusei J: “…
means any influence by which the exercise of free
and deliberate judgment is excluded at a time
when some interest or benefit is given to another
by someone over whom such influence was
• Exploitation can arise where there is an abuse of
a particular confidence placed on a party or
where that party is in a position of dominance.
• It may be presumed or actual
• Certain relationships automatically presuppose the
existence of undue influence
Trustee and beneficiary
Solicitor and client
Doctor and patient
Religious leader and disciples
• Secondly, where there is no special relationship but the
victim can prove the existence of a relationship in
which he has placed his trust and confidence.
• It has to be proved that when the victim entered into
the transaction, there was a relationship of trust and
confidence. E.g. husband and wife, banker and client
• Lloyds Bank v. Bundy: B, was an elderly farmer whose only
asset, a farm house, was used as security for his son’s company’s
indebtedness to the Bank. B, his son and son’s company were all
customers of the bank. When the company run into further
difficulties, the new bank manager went to see B at home with
completed forms for further guarantees. He told B the bank
could only support the son if further guarantees were executed.
B then extended the guarantee and with it the charge over his
property. Eventually the son’s company failed and the bank
sought to enforce the security. Held: B had placed confidence in
the bank for financial advice. The bank being interested in the
transaction should have advised him to seek independent advice
and could not rebut the presumption of undue influence.
• Where there is evidence that the decision of
the victim has been so expressly influenced by
another person in a way that shows that the
decision cannot be his free and independent
• Victim must show that the terms of the
transaction are disadvantageous to him
• He took the decision on the advice of the person
who wields a dominating influence over him.
The other party in defence must prove that:
• Full disclosure of all material facts was made to
the party claiming undue influence
• Consideration given by him was adequate and fair
• The other party was in receipt of independent
and legal advice