Vitiating Factors of a Contract
Despite the fact that all the essential elements of the valid contract i.e. offer, acceptance, consideration, intention to create legal relations and capacity have been satisfied by the parties under certain circumstances, vitiating factors may be proved so as to render such contracts unenforceable.
Vitiating factors are factors that operate to invalidate a
contract that was otherwise formed validly.
As a general rule where the Vitiating factors operate, the contract is not illegal per say but simply unenforceable by Courts of Law.
Such vitiating factors include;
- Mistake
- Illegality
- Misrepresentation
- Undue influence
MISTAKE
Mistake is a vitiating factor that operates to vitiate consent or ”consensus ad idem” of the parties.
A contract formed on the basis of a mistake vitiates consensus ad idem hence rendering the contract incomplete.
The effect of a mistake on the contract will entirely depend on whether the mistake is operative or fundamental to the agreement.
What is an operative mistake?
Where the mistake is operative the contract will be rendered void at common law while if the mistake is not operative or not fundamental to the contract it will have no effect on the contract at least in the common law.
Under the Law of Contract, mistake can be categorized into;
- Mutual mistake
- Common mistake
- Unilateral mistake
- Doctrine of Non Est Factum
Mutual Mistake
What is a Mutual/bilateral Mistake?
Although the subject matter exists the parties may be mistaken or misunderstand each other as to the real identity or nature of the transaction.
One party intends to deal on one set of terms and the other on a different set of terms.
The guiding test in such cases is that of a reasonable man as to whether he would infer a binding contract notwithstanding them is the apprehension of the parties.
In the case of Raffles v Wichelhaus 159 ER 375.
The defendant agreed to buy and the Plaintiff agreed to sell a consignment of cotton, which was to arrive by a named ship from Bombay. It so happened that there were two ships with the same name but which were due to arrive on separate days, one in October and the other in December. The cotton was shipped on the December ship and the defendant refused to accept it on the ground that he intended to buy the cotton shipped in October.
It was held that there was a mutual mistake on the part of the parties which negated the consensus ad idem and therefore the defendant was entitled to have the contract set aside.
Common Mistake
Under this, both parties make the same mistake.
Each party knows the intention of the other party and accepts it but they are both mistaken about a fundamental fact, which is essential for the performance of their contract.
Such fundamental facts may relate to either;
- The existence of the subject matter or
- The possibility of performing the contract or
- The quality of the subject matter
- The quantity of the subject matter
Mistake as to the Existence of the Subject Matter of the Contract.
In the case of Couturier v Hastie (1852) 8EXC.40.
This case concerned the sale of a cargo of corn aboard a ship from India.
Before the contract was made, the cargo unknown to both parties had become overheated and sold at Tunis so as to prevent further deterioration. The plaintiff as a seller sued for the price.
The House of Lords held that the purchaser was not liable to pay for the corn. The contract contemplated the sale of existing goods.
It is important to note that a contract would be void in as much as it plainly imparts that there was something to be sold at the time whereas the object of the sale had seized to exist.
Mistake as to the Quality of Subject Matter
The general rule is that unless quality forms part of the contractual description of the subject matter.
The fact that such subject matter lacks some quality, which it is believed to have does not make the contract void for mistake.
In Harrison Jones v Bunten & Lancaster,
A contract was made for the sale of Sree brand "Calcuta Kapok"
It was held that the contract was valid even if both parties believed such Kapok was to be pure when in fact it was impure and therefore of no use to the buyer.
However, under certain circumstances, a mistake as to the quality of the subject matter may render such contracts void.
The House of Lords in Bell V Lever Bros[1932]AC161, while recognizing this fact, however, pointed out that a mistake as to the quality will not affect the validity of the contract unless it is a mistake of both parties and such mistake is to the existence of some quality which makes the subject matter without that quality basically different from the subject matter as it was believed to be.
The principal has however limited application.
See Leaf V International Galleries (1950)KB.
Mistake as to the Quantity of Subject Matter
A mistake made by both parties as to the quantity of subject matter will render such contract void for mistake e.g.
In Barro, Lane & Ballard Ltd. v Philips Co. Ltd. (1929)1KB 574.
The contract for the sale of an indivisible parcel of 700 bags of groundnuts was held to be void because unknown to both parties only 591 bags were in existence.
Unilateral Mistake
Under this aspect, only one party is labouring under a mistake of which the other party is fully aware but says nothing and in fact, takes advantage of the mistake.
The most common instance when this type of mistake becomes operative is in relation to the identity of contracting parties.
The general rule of the Law of Contract is that despite such a mistake, the contract must never the less stand unless such identity was fundamental to the contract.
In order to have the contract set aside on this ground, the aggrieved party must satisfy the court that;
- He intended to deal with some other person other than the one he dealt with.
- That the latter was aware of such intentions.
- At the time of contracting the aggrieved party regarded identity as a very important factor.
- Took reasonable steps to ascertain the identity of the other party.
Furthermore, as it was held in Lewis'case (Lewis v Averay [1972] 1QB 198)
When the parties have come to a purported contract the fact that one of the parties was in mistake as to the identities of the other does not mean that there was no contractor that the contract is null and void.
It only means that the contract is void and liable to be set aside so long as no third parties have in good faith acquired rights under such contracts.
The Issue of Identity V Attributes
Although in Lewis' case doubt was expressed as to whether there should be a distinction between the effect of mistaken identity and mistaken attributes of one of the parties to the contract.
It appears that a mistake as to the identity of a contracting party will negate the consent of the other party and hence the contract is liable to be set aside but as a general rule a mistake by one party as to attributes of the other will not negate such consent and the resulting contract will be held valid.
In Cundy v Lindsay (1878) 3AC 459,
The respondents received an order for goods from one Blankan, who gave his address as 37 Wood Street Cheap Side.
He initiated the signature of a reputable firm named Blenkiron &Co. who was known by reputation to the respondents and who carried on business at 123 Wood Street.
The respondents were thus fraudulently induced to send the goods to Blenkarn's address, which good she afterward sold to innocent purchasers, the appellants.
The respondents sued the appellants for the return of those goods.
The House of Lords held that the respondents were entitled to succeed against (Blenkarn) they knew nothing of him and with him, they never intended to deal.
Their mind never even for an instant time rested upon him and between him and them, therefore was no consensus of mind which could any agreement or any contract be entered whatsoever as between him and them.
There was merely one side to a contract where in order to produce a contract two sides would be required.
What is the effect of Mistake in Equity Contract Law?
In Solle V Butcher [1950], Lord Denning asserted that for the innocent party to get relief in equity, the party must not be "at fault" and the mistake must be fundamental to the contract.
NON-EST FACTUM
In Le'Strange v Gracoub (1934) KB 394,
It was held that when a document containing contractual terms is signed, then in absence of fraud or misrepresentation, the party signing it is bound whether or not the editor reading it might have misunderstood its contents.
However, under certain circumstances, a party who has signed a contractual document may escape liability created by that document if he or she can successfully plead the doctrine of Non-Est Factum i.e.This is not my deed.
In the case of Saunders v Anglia Building Society (1971) AC 1004,
The appellant 78 years had made a will leaving her house to a nephew. The respondent, a friend, of the nephew, was heavily indebted.
He discussed with the nephew how money might be raised on the house.
In the presence of the nephew, the respondent put before the appellant a document, which was, a deed of gift of the house to the nephew, the appellant did not read the document because she had broken her spectacles.
The document was in fact of sale of the house to the respondent for £3000 (Three thousand pounds).
The recipient of which the appellant acknowledged in the deed but didn't in fact receive it. Using the deed the respondent mortgaged the house to a building society and borrowed £2000.
He defaulted on the payment and the building society sought to recover possession of the house from the appellant.
The appellant sued for a declaration that the deed was void on the basis of Non-Est Factum.
Their Lordships held that the document, which she had executed, was not of a fundamentally different nature from the document that she believed she was signing.
The building society could thus enforce the mortgage or that even if the document signed is essentially different from that which the person signing it intended to sign as against a 3rd party he will not be entitled to disown his signature unless he proves that he exercised reasonable care ( i.e. what is reasonable care will depend on the circumstances of the case) and the nature of the document being signed.
NB: The effect of a successful plea of Non-Est Factum is that the transaction contained in the document is not merely voidable against the person who procured its execution, but is entirely void into whosoever hands the documents may come.
In the case of Kenya Airways Ltd vs Ronald Katumba Civil Appeal No.43 of 2005,
The court of appeal held it is well settled that the fact that the party could not read would not exonerate him from his obligation under the contract.
Once he is handed the ticket and has accepted it, he is bound by it.
Kenya Airways (KQ) made the offer by tendering the ticket to the respondent which he duly accepted fully, thus undertaking to be bound by its terms.
Also in Mc Cutheon v David Mac Brayne Ltd (1964) 1ALLER 437. (1964)1 WLR134
It is stated: “…when a party assents to a document forming the whole or part of his contract, he is bound by the terms of the document, read or unread, signed or unsigned, simply because they are in the contract…”
See also Thompson v London Midland and Scottish Railway Company, (1930) 1KB41
Principles Governing the Doctrine of Non-Est Factum
- For the doctrine of Non-Est Factum to succeed, clear and positive evidence must be adduced to show that the party being made liable never intended to sign the document in question.
- It must be shown that the difference in the document signed and what was intended to be signed go to the substance of the whole consideration or to the route of matter.
- The defense of Non-Est Factum will not succeed when the party seeking to benefit from it did not take care before signing the document.
- While the difference in the Legal character will support the defense difference in contents of the document does not.
- The plea of Non-Est Factum is open to the illiterates, blind or senile persons who cannot read or apprehend a legal document or those who have been tricked into putting their signatures on a document that has legal consequences that differ from what they intended.
However, such people must have acted responsibly.
- A document will be held void and not voidable if the element of consent is completely lacking i.e.when the transaction, which the document purports to effect is substantially different from the transaction intended.
- The party seeking to benefit from the Doctrine of Non-Est Factum must also prove that the mistake was brought about by the action of the other party.
In Jinah Co.Ltd. v Owino (1967) 3ALR COMM 355
It was pointed out that a party can plead the doctrine where for example he has been coerced into signing the document in question.
Notes Curated By Lecturer Amir Mubiru. amirmubiru2@gmail.com