VITIATING FACTORS

Vitiating factors are those elements which make an agreement either void or voidable, depending on which vitiating factor is present. The vitiating factors are:

• mistake;

• misrepresentation;

• duress;

• undue influence; and

• public policy, rendering contracts void/illegal.

MISTAKE

Generally speaking, the parties to a contract will not be relieved from the burden of their agreement simply because they have made a mistake. If one party makes a bad bargain, that is no reason for setting the contract aside. Very few mistakes will affect the validity of a contract at common law, but where a mistake is operative it will render the contract void. This has the effect that property which is transferred under operative mistake can be recovered, even where it has been transferred to an innocent third party.

            However, in cases where the mistake is not operative, an equitable remedy such as rescission may be available. The grant of such remedies is in the court’s discretion and subject to the principles of equity. In Leaf v International Galleries  there was a contract for the sale of a painting of Salisbury Cathedral, which both parties believed to be by Constable. Five years later, the buyer discovered that the painting was not by Constable but was refused rescission because of the lapse of time since purchase.

            It is also important to appreciate that a mistake cannot affect a contract unless it exists at the time of contracting. In Amalgamated Investment & Property Co Ltd v John Walker & Sons Ltd  a company purchased property for redevelopment. Just after the contract, the property was given listed building status, which would restrict the intended development. The purchaser could not rescind the contract on the basis of a mistake that the property could be redeveloped as intended, because at the time of sale it could have been so developed.

            It is usual to divide mistakes into the following three categories:

• common mistake;

• mutual mistake; and

• unilateral mistake.

Common mistake

This is where both parties to an agreement share the same mistake about the circumstances surrounding the transaction. In order for the mistake to be operative, it must be of a fundamental nature

In Bell v Lever Bros Ltd  Bell had been employed as chairman of the company by Lever Bros. When he became redundant, they paid off the remaining part of his service contract. Only then did they discover that Bell had been guilty of offences which would have permitted them to dismiss him without compensation. They claimed to have the payment set aside on the basis of the common mistake that neither party had considered the possibility of Bell’s dismissal for breach of duty. It was held that the action must fail. The mistake was only as to quality and was not sufficiently fundamental to render the contract void. Similarly, in Leaf v International Galleries the mistake was held to be one of quality; the court found that the contract was for the sale of a painting of Salisbury Cathedral rather than a painting by Constable, and as such the mistake could not render the contract void.