Business Law Semester 2: Vitiating Factors

Study Notes

Vitiating factors relate to invalidating contracts due to certain circumstances or behaviors.
Key elements under contract law include capacity, agreement, certainty, intention, consideration, and deed.
An agreement can fulfill the formation requirements even in cases of bad conduct.

Certain conduct contrary to good conscience can invalidate a contract.
Innocent parties may escape obligations if and when the contract is entered into under vitiating factors.

Duress: Threats or pressure causing a party to enter a contract involuntarily.
Undue Influence: Exploiting a position of power to influence another party's decisions unfairly.
Unconscionable Dealing: Engaging in behavior that is shockingly unfair and is not consistent with accepted standards of fair dealing.
Mistake: A misunderstanding by one or both parties about a fundamental aspect of the agreement.
Misrepresentation: False statements that induce a party to enter a contract.
Illegality: Contracts that involve illegal activities or are against public policy are void.

Delay in rescinding a contract can result in the loss of the right to do so, termed affirmation.
Example: If a party, who was subjected to unconscionable dealing, chooses to continue with the contract after regaining their normal standing, they lose their right to rescind.

North Ocean Shipping v Hyundai Constructions: Demonstrates the impact of duress in contract formation; despite the duress, the contract was not set aside due to circumstances surrounding consent.

Understanding vitiating factors is essential for recognizing when a contract may be invalidated.
Awareness of implications related to affirmation can protect the rights of parties entering agreements under duress or other vitiating factors.