Vitiating factors in the law of contract

In English law, a vitiating factor in the common law of contract is a factor that can affect the validity of a contract. The concept has been adopted in other common law jurisdictions, including the USA.

A vitiating factor is one which spoils the contract, rendering it imperfect. The standard remedy is rescission, but damages may also be available. (By contrast, the standard remedy for breach of contract is damages, with repudiation available for serious breach only).[1][2]

Vitiating factors

The main vitiating factors in the law of contract are: misrepresentation, mistake, undue influence, duress, incapacity, illegality, frustration and unconscionability.

A misrepresentation is an untrue or misleading[3] statement of fact which induces a person into a contract.[4] The misled party may normally rescind the contract, and may be awarded damages as well (or instead of rescission). There are three categories of misrepresentation: fraudulent, negligent and innocent.
A mistake is an erroneous belief (at the time of contracting) that certain facts are true. If raised successfully, an allegation of mistake may lead to the contract being declared void ab initio or voidable; but to be effective the mistake must be "operative".[5] There are three types of contractual mistake: 'unilateral mistake', 'mutual mistake' and 'common mistake'.
Undue influence is an equitable doctrine whereby a person takes advantage of a position of power over another person. This inequality in bargaining power may vitiate the weaker party's consent.[6]
Duress in contract law[7] involves illegitimate threats or violence of a physical nature used to compel someone to do something . Where the threat is a contributing reason for entering into an agreement, even if not the main reason, the agreement may be voided.[8]
Natural persons (people) or juridical persons (such as corporations) should have full capacity if they are to be bound. " Sober sane adults" have full capacity, but minors, persons with a mental disability and intoxicated persons have reduced capacity.[9] With corporations, the general rule is that anything not within the corporation's capacityis ultra vires[10] and so may be unenforceable by the corporation, but the rights and interests of innocent third parties dealing with the corporations are usually protected.
An agreement must be lawful in both form and content. An agreement to commit a crime is not a lawful contract. An agreement required to be by deed (such as a transfer of land, or most leases) that is only simple (merely oral or in writing) may be unenforceable. Wagers are usually lawful, but rarely enforceable.
Frustration[11] occurs where a contract becomes impossible to perform, or where performance would be pointless or substantially different from that anticipated.[12] Unlike some other vitiating factors, the contract here is valid up until the "frustrating event". The consequences of frustration are addressed by Fibrosa v Fairbain 1943 and the Law Reform (Frustrated Contracts) Act 1943.

See also

Notes
  1. Hong Kong Fir Shipping v Kawasaki Kisen Kaisha 1961] EWCA Civ 7
  2. The Mihalis Angelos
  3. R v Kylsant [1931]
  4. Curtis v Chemical Cleaning and Dyeing Co [1951]1 KB 805
  5. Leaf v International Galleries [1950] 2 KB 86
  6. Johnson v Buttress [1936] HCA 41, (1936) 56 CLR 113 (17 August 1936), High Court (Australia).
  7. Duress arises also in English criminal law and English trusts law.
  8. Barton v Armstrong [1973] UKPC 2, [1976] AC 104
  9. Sale of Goods Act 1979
  10. ultra vires means "beyond the power" of the corporation
  11. ... including the subcategory, Frustration of purpose; Krell v Henry
  12. Taylor v Caldwell
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