Vitiating Factors Of A Contract In Law: An Essay.

The case scenarios relate to the law of contract. A contract is an agreement between two or more persons made in a commercial context with intention to bind. A valid contract can however be void or voidable. Elements that can lead to a contract to be void or voidable are known as vitiating factors of a contract.

Scenario 1

Brief facts of the case are that Batman has been arrested for assault on a Joker. He is desperate to be bailed out. The only person available to bail him is his girlfriend, Batgirl. The amount required is a cash bail of $ 10,000 and other additional sureties. Batgirl has given conditions for bailing Batman including; buying a diamond ring, fund weekly messages and payment of her leather central.

Issues

The main issue in this case scenario is whether Batman is bound by the contract between him and his girl friend Batgirl.

Law

A contract binds the parties to it when it complies with all the essential elements required for its formation so as to have a binding effect. Contract formation normally follows prescribed formalities for them to acquire their binding nature or enforceability. At inception, a contract begins with an offer, which is intimation by a party of his or her intention to enter into an agreement. The offer has to be accepted by the other party for an agreement to exist. Other elements such as intention, capacity and consideration should also exist.

In the case of Batman, there is an offer, acceptance and consideration. However, a valid contract can be voidable where it is established that certain vitiating factors existed at formation that are likely to frustrate the complete performance of the terms of the contract making the contract to be discharged. The vitiating factors in a contract include misrepresentation, mistake, duress, undue influence or illegality.

In this scenario, we are going to discuss undue influence as a vitiating factor of a contract. Undue influence occurs in circumstances where a person is induced into acting contrary to their free will and without regard to consequences of their actions. Where it is established that a contract was entered into by undue influence, it can be rescinded and set aside. In Bank of Credit & Commerce International v Aboody the court set out the classes of undue influence to include actual and presumed undue influence. The disadvantage occasioned by the transaction should be weighed against the benefits.

Scenario 2

Application

Batman is in dire need to be bailed out of custody. The only person who is capable to do that is his girl friend Batgirl. Batgirl however uses that opportunity to influence Batman into entering into a contract that wholly benefits her. She gives the following conditions for her to bail him; that Batman buys her a diamond ring, fund her weekly messages and pay off her leather central credit card. Batman signed the contract without considering the consequences of the transaction on his financial status.

Conclusion

In conclusion therefore, the contract between Batman and Batgirl is not enforceable. The contract can be rescinded on grounds that Batgirl being in a close relation was able to use that relation to unduly influence Batman to enter into a contract for her own benefit. A presumption of undue influence exists and therefore, Batman is not bound by the terms of the contract.

Brief facts of this case are that Wonder woman owns a popular restaurant. Riddler walks into her restaurant with an envelope and insists that wonder woman reads it. The envelope’s contents were to the effect that Wonder woman should buy every month bottles of wine from a green masked man or her restaurant may be overran. Wonder women fearing for her safety agrees to buy the bottles.

Issue

The main issue for determination is whether Wonder woman would be bound by the contract.

Law

The law of contract respects the autonomy of parties to a contract as well as privity of contract. That a party to a contractual relationship ought to negotiate contractual terms freely without interference by third parties. The contract should be entered into willfully without either internal or external pressure. A question on the enforceability of a contract may arise in circumstances where it is established that either party yielded to pressure or duress from the other when making the contract.

Duress can take different forms and have different effect on a party. Threats of physical violence or pressure all amount to duress. Where duress is established, the contract is rendered voidable and the innocent party has the right to rescind the contract unless such duress has been withdrawn or lifted. In Barton v Armstrong, the court held that where duress had been directed to the person, the contract could be set aside because it is likely that were it not for the threats of death or physical violence, he could not have entered into the contract. The threat must relate to something that is unlawful for duress to be a condition to set aside a contract. This was the finding by the court in the case of Dimskal Shipping v International Transport Workers Federation (The Evia Luck).

Scenario 3

Application

Wonder woman is the owner of Lasso restaurant. A riddler walks into her restaurant and hands her an envelope. The cryptic message in the envelope presented to wonder woman stated inter alia that Wonder woman should buy the bottles of wine or have her restaurant overran or a pretty man or woman may lose her head. In addition there was a DVD left on the counter which Riddler said to wonder woman to watch. Fearing for her life, wonder woman proceeded to buy the bottles every month even when her stock was still full.

Conclusion

Wonder woman would not be bound by the contract. The contract was entered into by duress as there was a direct threat of violence, death or unknown consequences were Wonder woman refuse to buy the bottles of wine from Riddler. The threat used to make wonder woman agree to buy wine at an inflated price was the fear for her life or any of her workers. Taking peoples’ lives is unlawful amounts to duress which would make a contract voidable. The contract is voidable and wonder woman cannot be bound.

The case scenarios discussed herein depict elements of misrepresentation in the law of contract. Misrepresentation refers to a false statement of law or fact which induces one to conclude a contract. A statement has to be made during the formation of the contract and it has to be untrue for it to be termed as misrepresentation. There are three types of misrepresentation; innocent, negligent and fraudulent misrepresentation.

Part A

Brief facts of this case are that Spider man who has wanted to buy a radio transmitter which picks both AM and FM frequencies. The Penguin assures him that the transmitter picks both AM and FM frequencies. The transmitter however only picked FM frequencies.

Issue

The issue in this scenario is whether Spider man is bound by this contract and if so, what are the remedies available to him?

Law

An innocent misrepresentation occurs where the person making such representation is capable of demonstrating reasonable grounds for believing that the statement so made is true and that the person making such representation has no intention to deceive. The remedy available for innocent misrepresentation is rescission or an action for damages in lieu of rescission.

Application

Spider man was in need of a radio transmitter which picks both AM and FM frequencies. The Penguin assures him that the transmitter picks both AM and FM frequencies. The transmitter however only picked FM frequencies. Assurance by Penguin was however based on his belief that no new transmitters had been brought in while he was in leave which is however not the case.

Conclusion

There were new transmitters that had been brought into the store while Penguin was on leave. He made such representation with the belief that the store still contained radio transmitters that picked both AM and FM frequencies only. His representation is innocent and therefore Spider-Man is not bound and can rescind the contract or claim for payment of damages.

Brief facts of this case are that Iron Man comes across a 1,000 piece jig-saw puzzle which he has for a long time wanted to buy. He takes it to the register and Bane informs him that all the 1000 pieces are there since the box is sealed and has never been opened. Iron Man later discovers that three pieces are missing from the box and three double-up pieces were mistakenly added.

Issues

The issue in this scenario is whether Iron Man is bound by the contract and if not, what are the remedies available to him?

Law

Negligent misrepresentation occurs where the person making such representation makes it without reasonable grounds for believing that the statement so made is true. It is on the person making such representation to prove that they had reasonable grounds to believe that the statement was true.  In Howard Marine v Ogden, where an action brought against the defendants for negligent misrepresentation was held that the burden of proving that the defendant had reasonable grounds to believe that the statement made had been true had not been discharged. The court found the defendant to have made a negligent statement and was liable. The remedy available for negligent misrepresentation just like in a case for innocent misrepresentation is rescission or a claim for dames but not both. This was the holding in the case of Royscott Trust v Rogerson.

Application

Iron Man comes across a 1,000 piece jig-saw puzzle which he has for a long time wanted to buy. He takes it to the register and Bane informs him that all the 1000 pieces are there since the box is sealed and has never been opened. Iron Man later discovers that three pieces are missing from the box and three double-up pieces were mistakenly added. The puzzle is therefore unable to be completed due to the three missing pieces.

Conclusion

This is a case of negligent misrepresentation and Iron Man is therefore not bound by the contract. The remedy available for him is rescission or an action for damages in lieu of rescission. The burden of proving that the statement made by Penguin was true and that Penguin had reasonable grounds to believe in its truth lies with Penguin.

Facts of this case scenario is that Hulk comes across a large calculator which he finds suitable for adding up all the damage he has caused through his Hulk smashes. He takes it to the register where Catwoman assures him that there are no problems with the calculator but at the back of her mind, she knows that the buttons for 3 and 7 digits are not working and that the calculator was not new. Hulk discovers the faulty in the calculator after purchasing it.

Issues

The main issue in this case is whether Hulk is bound by the contract and if not, a determination on the remedies available to him regarding the transaction.

Law

A claim for misrepresentation should involve a false statement of either law or fact and not future events or opinion. In the case of Bisset v Wilkinson, the plaintiff had purchased a farm for use in rearing sheep. He inquired from the seller on the approximate number of sheep that the land could comfortably hold which the farmer estimated at 2,000. The estimate turned out to be wrong. In an action for misrepresentation, the court held that it was a statement of opinion which was not actionable as misrepresentation. Misrepresentation has to be a statement of fact.

Fraudulent misrepresentation was defined in the case of Derry v Peek by Lord Herschell to include a statement made and the maker knows it to be false, he or she does not believe it to be true and it is made in a manner that is careless and reckless as to it being true or false. Where there is an action for fraudulent misrepresentation, the claimant has to prove that the maker of the statement knew that his or her statement was false. The remedies available for the innocent party where a claim for fraudulent misrepresentation has been established is a right to rescind the contract and claim for payment of damages as well.

Application

Hulk comes across a large calculator which he finds suitable for adding up all the damage he has caused through his Hulk smashes. He takes it to the register where Catwoman assures him that there are no problems with the calculator but at the back of her mind, she knows that the buttons for 3 and 7 digits are not working and that the calculator was not new. In fact, it was a faulty calculator which had been returned by a customer, she repackaged it for sale. She knows all these defects on the calculator but goes ahead to sell it to Hulk without any disclosure. Hulk discovers the faulty in the calculator after purchasing it.

Conclusion

The statements made by Catwoman about the calculator were false statements of fact. Hulk relied on the statements only to discover that the calculator was not new and the buttons for 3 and 7 digits were not working. Catwoman however knew of all these defects. Hulk is therefore not bound by this contract and he is entitled to rescind the contract and claim for damages as well.

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