Vitiating Factors.docx

1.0 INTRODUCTION OF FREE CONSENT A contract is an agreement between 2 or more parties which is enforceable at law which has a format of verbal or writing. It is a basic and important step of all the commercial activities. Essential components of a contract: 

Offer



Acceptance



Consideration



Intention to create legal relationship

Free consent is one of the basic components of legitimate contract. Gatherings to an agreement may concur upon a similar thing in a similar sense, and alongside the equivalent; assent got must be free from any impulse or weight. Absence of free consent would render the agreement voidable at the choice of the gathering not to blame. To make an agreement legal, not only consent is important also it must be free. In law of contract consent is said to be free if it is not caused by any of the following. 

Fraud



Misrepresentation



Mistake



Coercion



Undue influence

Vitiating a contract means to spoil a contract in English law. There could be multiple reasons of contract vitiation. Below we are going to discuss those factors under Malaysian contract act. Under Malaysian contract act all the agreements are contract which are made of free consent of the parties and consent is free if it is not cause by fraud, coercion, mistake, misrepresentation and undue influence.

2.0 VITIATING FACTORS 2.1 MISTAKE Mistake is one of the vitiating factors in which the contract is voided by the court under specific circumstances depending on the situation. In our whole life we make many mistakes but the one made in any agreement or contract cannot be let go without circumstances. Mistake could be of any type, sometimes it’s a misunderstanding of the agreed terms, sometimes the parties are mistaken of a different product to buy/sell. Most of the time it is hard to tell who did the mistake so both the parties begin to rescind in the first place which complicates the case. The doctrine of mistakes only involves the mistake done unintentionally from either of the party and also that the court supports the mistake only which are acceptable under law.

Mistake is further divided into 3 types; 1. Common mistakes 2. Mutual mistakes 3. Unilateral mistakes

2.1.1 Common Mistake: In this type of misstep the two gatherings commit a similar error. For instance the two gatherings may be unconscious that the topic of the agreement has been devastated. They have a gathering of brains, an "agreement promotion idem", however the two personalities have been deluded in a similar way about a similar thing. In Copper v Phibbs, 1 B there was a contract for rent of fishery by A but instead it was mistaken as the sale of the property which was not possible to transfer the rights of the property to B since the was -held void. However, it is difficult to figure out a fundamental mistake for example a duplicate painting was sold this will not be considered as a fundamental mistake since the contract only included the sale of the painting but not of its authenticity.

2.1.2 Mutual Mistake: Mutual mistake occurs when different type of mistake is done by both sides of the contract. For example, understanding the terms and conditions of the contract differently or mistaken information of a different product or property. In any case the agreement will only be not void if both the parties come to mutual understanding and have a mutually compromising decision for both sides. Any result failing in to do so will result in a failure of the contract and the contract will be considered void.

Case study: In Scriven Bros v Hindley, 38. One of the companies offered to sell tow but was mistakenly thought to sell hemps after the mishap was found the court labelled it as a mutual mistake since both parties were misunderstanding different things. In the conclusion no agreement took place and resulted in void of the contract.

2.1.3 Unilateral Mistake

Unilateral Mistake happens when only single party of the contract is mistaken. The party could be mistake of the quality of the product/property, misunderstanding in terms and conditions of the contract or mistaken with the identification of the second party. The party which is mistaken will only be helped in a way where they can prove that the other party was aware of the mistake, came on a mutual agreement and had strong grounds for suspecting the mistake. For example a buyer buys an old classical car thinking that it still in running condition but in reality it is just for showcasing purposes. In this situation the unless the buyer is aware of or addresses the mistake there is no valid reason to void the contract since it is the buyers personal mistake which falls under the term ‘buyer beware’. In such cases it is very difficult to apply doctrine of mistake since the best thing to do is to fully aware of the terms of the contract and also reconfirm with the seller of any doubts occur before signing of the contract.

Typically 3 parties are included: 1.

The blameless gathering that mixed up.

2.

The maverick

3.

The guiltless gathering that was being mixed up.

Also, 2 circumstances: a.

Contracts made by correspondence

b.

Contracts made up close and personal

In Roberts v Leicestershire County Council, 51 the accused party got a contract of work in school which was to be done under 78 weeks as per the contract on the other side the party thought the agreement was for 30 months and gave the price of their work with respect to the time of the contract. The accused party did not state the change in time schedule to the opposition party. Eventually the court held that the time stated in the understanding could be altered.

2.2 UNDUE INFLUENCE If a party to the contract entered into the contract under the undue influence of another, the contract can be set aside. A few components which are applicable in demonstrating that there is undue influence include, regardless of whether there is a relationship of trust and certainty between the gatherings, for example, that one gathering was depending on the other, whether the gathering depending on the other comprehended the idea of the exchange, given his experience, whether the gathering depending on the other endured a show burden, whether the gathering who is claimed to have practiced undue impact gotten an uncalled for preferred standpoint, and whether the gathering depending on the other got free legitimate prompt which made it obvious to him the impact of what he was doing. There are two types of undue influence: Actual Undue Influence: The individual attesting undue impact needs to demonstrate it. It must be demonstrated that the one gathering impacted over the other and this built an influence, which would not for the most part have been made. Example: The situation between investor and customer for the most part there is no assumption of undue impact in the connection among broker and customer. In like manner the customer charging this should demonstrate it. Williams' v Bayley.64 Where it tends to be demonstrated that the bank has gone too far from ordinary financial practice into the territory of secrecy, and after that the court needs to look at the actualities to check whether the obligation owed by the bank has been broken.  Presumed Undue Influence: These are circumstances where there is an uncommon association between the social affairs and undue effect is expected. The transcendent party by then has the heaviness of objecting this. In instances of assumed undue impact the burden is on the overwhelming individual to set up that no maltreatment of his position occurred and this weight is best settled by demonstrating that the compliant partner took independent economic guidance. A bank might probably appoint duty to others associated with a case for

example specialist, Massey v Midland Bank.72 In Bank Melli v Samadi Rad,73 this view was tested and the judge expressed that the specialist ought to be a free one. Undue impact is a vital idea which has been created as of late. It has been utilized in household situations where one gathering has affected the desire of another, however it creates the impression that the courts are hesitant to broaden it further right now and have restricted its utilization to underwriters of a credit.

2.2.3 Summary of Undue Influence  Actual Undue Influence: The opposition party must prove that the agreement took place due to an influence for better understanding follow up case study BCCI V ABOODY  Presumed Undue Influence: Familiar relations Class 2A: these are such cases in which the accuser has to provide with the proper proof that there was no undue influence on the other party which could include (paternities, government or health care personal).  Undue Influence & Third Parties: This ought to be managed by the tenet of notice. 74 If a surety has been influenced by undue impact (or deception) by an outsider for example the spouse's better half, the loan boss might be influenced on the off chance that the person had genuine or helpful notice. The leaser will be secured by instructing the surety concerning the dangers included and the need to take free counsel. The loan boss is qualified for expect a specialist will give legitimate advice.75. A similar guideline of notice applies to real undue impact by an outsider.

2.3 DURESS If the person is forced to indulge in any contract with external force or pressure which includes violence or threats of violence there may be coercion and the agreement may be unenforceable. Barton v Armstrong [1975] 2 All ER 465: previous director took steps to slaughter the MD except if organization repurchased his offers – co did as such – held: voidable. Justification: no free decision; nullify assent -> no certifiable aim to contract. Financial coercion is obvious assent is actuated by illconceived monetary weight from the other party. This is featured in Barton v Armstrong (1967). Economic pressure can be characterized as illegitimate or unlawful direct that makes dread of financial hardship, which keeps the activity of unrestrained choice in taking part in a business exchange. It is hard to state if economic coercion or business weight is real or ill-conceived. In Pao On v Lau Yiu Long (1980), the court held that a few elements which were applicable in deciding if the weight applied was ill-conceived included whether the honest party had an elective course open to him or was left with no decision however to consent to the terms, regardless of whether the guiltless consented to the terms under dissent and whether the honest party consented to the terms under procedure and whether the blameless party got free legitimate guidance. Moreover, it would pursue from Sharon Global Solutions Pte Ltd v LG International (Singapore) Pte Ltd (2001) that whether the gathering who is asserted to have practiced pressure was misusing the circumstance (or trying to pull a fast one) could likewise be an applicable factor.

2.4 MISREPRESENTATION A misrepresentation is a bogus proclamation which convinces somebody to go into an agreement. The agreement is then voidable. Deception has 3 sections:1. An announcement; 2. The announcement is about a reality which can be checked. 3. The announcement makes the gathering go into the agreement.

Representation must be on:

a. On existing raw numbers. b. c. d. e.

On false existing substances. On false material existing substances. Induce the guiltless contracting get-together to go into the agreement. The honest gathering has endured misfortune because of such actuation.

There are three kinds of misrepresentation fraudulent, innocent, and negligent.  Fraudulent: A bogus proclamation made by an individual with deceptive ("extortion") goal. Extortion is demonstrated if the distortion is made by the creator: 1. Intentionally. 2. Without faith in its reality, or 3. Neglectfully (couldn't care less in the event that it is valid or not)

A legit conviction at the material time is a decent barrier:  Derry v Peek (1889) 14 App Cas 337: DIR rep that the organization could run cable cars by steam or mechanical power – reality: it couldn't do as such DIR held a legit conviction and - Held great resistance.  Smith New Court Securities Ltd v Scrimgeour Vickers (1992): D said that there were invested individuals to purchase the offers and drove P to buy them – reality: no intrigued purchaser and D realized that at the season of making rep - Held: misrepresentation.

 Innocent: Believing false statements to be true and have reasonable reasons to believe the contract.  Negligent 1. An obligation on the representor to cease from owning a bogus expression; 2. The representor is in break of this obligation.

2.5 FRAUD Fraud is any deceptive demonstration and conduct by which one individual gains or expects to pick up favourable position over someone else. Extortion makes misfortune the injured individual legitimately or by implication. Fraud implies and incorporates any of the demonstrations by involved with an agreement or with his conspiracy or by his specialists with the aim to delude another gathering or his operator or to instigate him to enter in to an agreement. Extortion can be viewed as the deliberate distortion, disguise, or exclusion of reality with the end goal of double dealing or control to the money related drawback of an individual or an association, (for example, a bank) which additionally incorporates misappropriation, robbery or any endeavour to take or unlawfully acquire, abuse or damage the benefit of anybody. Fraud and its administration have been the primary factor. In the misery of banks and organizations and as much as different measures have been taken to limit the rate of extortion, despite everything it ascends continuously on the grounds that fraudsters dependably gadget key methods for fraud.

Case study: Malaysia KL, September 29. Four heads of the authority of Patimas Computers were found involved in corruption of RM.5.1 million from the huge association six years ago. When the case was taken to the court it was found out that they were given that amount of money for improving the programming of the company but instead they stole the money secretively. The court charged them with section 317 and act 671 which made it to 10 years of imprisonment and a huge fine of 10 million ringgit.

3.0 REMEDIES An agreement is voidable for deception. An honest gathering can in this way guarantee two cures: (i). Rescission (ii). Damages

(i)

Rescission.

The impact of deception is to render the agreement: Voidable however not void and subsequently the agreement is as yet substantial and subsisting until the representer chooses to set it aside (revoke the agreement). Rescission works to SET ASIDE the agreement contingent on common reclamation of any advantages got under it. Consequently the point is to re-establish the gatherings to pre-contract position. Or (ii)

To claim the damages from the accused party.

Islington LBC v UCKAC [2006] EWCA civ 340 = a voidable contract exists 'until and with the exception of on the off chance that it is set aside by a solicitation of rescission made by the court at the instance of a social event attempting to end it or completion it' − open to all vitiating segments and comparatively imperative, available for vitiating factors −contract said to be repudiated set aside, parties return to pre-definitive condition (any money been paid out-paid back, no money ought to be paid out on contract if not adequately paid out) - Contract can get revoked is voidable. 

Fraud: There must be some writing in type of either an update or note adequate marked by the gathering to be charged therewith, or some other individual thereunto by him legitimately approved. Certain agreements must be confirm recorded as a hard copy, with reference to England's Statute of Frauds, an Act go in 1677. Rule of Frauds stipulates that an agreement won't be implemented except if there is a composed understanding that is marked by the people bound by the agreement's terms or their approved staff. These could incorporate any composed notes or notices to a loan boss of another to pay that person's obligations when they are expected, a marriage contract, a land

contract, property exchange and an agreement that can't be performed inside a time of its arrangement and has not been totally performed by any one side. In certain wards, under the agreements of Sale, it is obligatory for contracts of certification to be seen by composing or potentially sometimes, for instance the agreements available to be purchased of merchandise for $20 or more are being secured by this enactment. Rule of Frauds necessities are constraints on what kind of agreements are lawfully enforceable, the entire thought is to secure people in general and decrease extortion brought about by imperative contracts delivered without paper trail. 

Undue influence: • Section 16 • Section 20

Fair precept concerning gets that have been following inappropriate pressure and the blameless party can maintain a strategic distance from the agreement. 

Mistake • Section 21 • Section 22 • Section 23

Contracts Act 1950 Segment 19(1) states that "When agree to an understanding is brought about by coercion, misrepresentation, or fraud, the understanding is an agreement voidable at the choice of the gathering whose assent was so caused.

4.0 CONCLUSION

In this assignment I discussed thoroughly the main vitiating factors under Malaysian contract act. I explained and understood the definition of all the main factors and the importance of contracts and its laws moreover I also mentioned case studies and remedies for the cases studied and in conclusion I would say that thanks to the laws we have in our jurisdiction which helps the innocent people which are caught into such distress. Also I understood that these laws apply everywhere you go. It is important that people should have the knowledge of these laws and vitiating factors which can keep them safe and people around them safer.

5.0 APA REFERENCES