Commercial Law - Vitiating Factors

Vitiating factors
In an agreement, there could be many factors that would affect the validity of the contract
These factors are referred to as Vitiating Factors

Vitiating Factors
Illegality
Minority
Misrepresentation
Mistake
Duress
Undue Influence
Unconscionable Bargain

Illegality
Gaming Contracts
Contracts contrary to public policy
Contracts illegal in performance
Contracts for the Restraint of Trade

Minority
Minors are person below 21
Contracts for necessity are valid
Contracts for non necessities are voidable
Nash v Inman (1908)

Misrepresentation
Requires prove of 3 elements
False Representation
Factual Representation (Bisset v Wilkinson)
Inducement to enter contract (Smith v Chadwick)

Categories of Misrepresentation
Fraudulent (Derry v Peek)
Negligent
Innocent
Rescission / Damages

Mistake
Common Mistake – mistake made by both parties
Mutual Mistake – cross purpose
Unilateral Mistake –
Non Est factum

Duress
Physical Duress
Economic Duress (Llloyd Bank v Bundy)
Atlas Express v Kafco (1989)

Undue Influence
Capacity to influence
Influence was exercised
Exercise was undue
Exercise brought about the transaction

Unconscionable Bargain
Inequality of Bargaining power
Unconscionable conduct

Effect of Vitiating Factors
The presence of a vitiating factor allows the “innocent” party to avoid the contractual obligation

The effect is to render some contract void and some contract voidable

Conclusion- Vitiating Factors
The presence of vitiating factors may mean that the contract is not enforceable

Important that you know when and how these factors become operative