Vitiating Factors - Commercial Law

We took almost 2 weeks to complete this part of the course. Vitiating factors are important issues. These rules allow a party to "exit" from the contract due to a variety of reasons. Many of theses reasons concern the capacity of the contracting party - either because the party is too young or he was forced into the contract or was under a mistaken belief as to the existence of certain facts. These are the vitiating factors in contract and in chapters 6 we looked at 7 factors.

Illegality - the courts do not recognize agreements which are either illegal or immoral or purely because of certain public policies refuse to recognize and enforce such agreements. On the purely criminal sense - the court will refuse to recognize criminal contracts such as a contract to kill someone or to traffic drugs or to assist in the financing of a illegal brothel or even gaming contracts. On the policy rationale, the court will not enforce restraint of trade clauses which tends to inhibit competition which tends to be contrary to public policy to encourage open and free competition.

Minority - in this respect the angel is that the law feel that minors may not be able to make sensible commercial decisions and hence a protection is offered to them who make unnecessary purchases. The definition you find in the Sale of Goods Act and in Nash v Inman are of interesting insight into how the law regulates minor contract.

Misrepresentation - is all about people entering into contracts on false representations made either fraudulently, negligently or innocently. The rules on misrepresentations are fairly clear.

Mistake - one of the more complicated set of rules concern the issue of mistake. The rules makes it clear that Common Mistake and Mutual Mistakes will vitiate a contract. the problem area is in unilateral contract where our focus was on the following:

Mistake on the identity : see Shogun Finance
Mistake on document : Non Est Factum : See Saunders v Anglia BS
Unilateral mistake : where the innocent party is aware the mistaken party had made an error : See the Digiland Mall case.

The final leg of vitiating factors saw us looking at some factors which tend to have an effect on the freewill of the party either because he was forced into the agreement physically (duress), economically or by influence. And finallyw e looked at circumstances when the courts will champion parties to a contract who had been taken advantaged off.

It is interesting to see what circumstances the courts will allow or acknowledge as reasons the law will allow as excuses to withdraw from a contractual bargain.

SK