Vitiating Factors

VITIATING FACTORS

Vitiating Factors

• Factors that prevent a contract from being enforceable or vitiate a contract by depriving it of its efficacy
• These factors refer to:

1. Incapacity
2. Illegality
3. Misrepresentation
4. Mistake
5. Duress
6. Undue Influence

1. INCAPACITY

• Refers to the lack of capacity which may characterise a contracting party to form a valid contract
• The Law views certain persons as not having the capacity to enter a contract:

1. Minors

• Persons who have not reached the age of the majority – the stage at which a person reaches adulthood and is considered responsible for his/her actions

• Singapore Common Law age of majority: 21 years old
• Case Reference: Rai Bahadur Singh & Anor v Bank of India (1993)

• Minors do not have the sufficient understanding or experience to make binding agreements
• The Law is concerned to protect minors from entering into contracts while also ensuring that the other party, who has full capacity, does not suffer unnecessary hardship after fairly contacting with a minor

• Three (3) Classes of Contracts with Minors:

1. Valid

• Binds both the minor and other party
• Two (2) Beneficial Contracts:

1. Necessaries

• Goods and services deemed by the Law required for a minor
• Case Reference: Nash v Inman (1908), Peters v Fleming (1840)

1. Employment

• The contract as a whole must benefit the minor
• Case Reference: De Francesco v Barnum (1980), Chaplin v Leslie Frewin (Publishers) Ltd (1966)

1. Voidable

• Contract is valid upon the other party, but the minor is entitled to repudiate the contract
• Case Reference: Davies v Benyon-Harris (1931)

1. Ratifiable

• When the contract does not fall within the two previous classes
• Only becomes enforceable against the minor until he ratifies it after he/she attains the age of the majority

1. Mentally Unsound and Intoxicated Persons

• Previously called “insane persons” or “lunatics”
• The contract is valid unless it can be proven that at the time the contract was made, it can be proven that he/she was incapable of understanding the nature of the contract, and the other party knew or ought to have known of his incapacity

1. ILLEGALITY

• Referring to all things illegal
• Contracts formed under illegalities are treated as if they had not existed in the first place
• Four (4) Illegal Contracts:

1. Gaming and Wagering

• Wagering: a bet between two (2) parties upon an uncertain event
• Gaming Contract: two or more parties contract to play a game where the stakes are money or of value
• Exceptions: betting on horse-racing

1. Contracts Contrary to Public Policy

• In infringement with Common Law or Statute
• Examples:

1. Contracts to commit a crime, tort or fraud

• Case Reference: Apthorp v Neville & Co (1907)

1. Contracts that promote sexual immorality

• Case Reference: Ahvena Ravena Mana Aroogmoogum Chitty v Lim Ah Han, Ah Ghee and Chop Lee Watt (1894)

1. Contracts that benefit foreign enemies or undermine relationships with a friendly country

• Case Reference: Regazzoni v KC Sethia (1944) Ltd (1958)

1. Contracts inimical to the administration of justice

• Case Reference: R v Andrews (1973)

1. Contracts to oust the jurisdiction of the courts

• Case Reference: Baker v Jones (1954)

1. Contracts Illegal in Performance

• With reference to conduct that is deemed prohibited by Statute
• Case Reference: Sinnathamby Rajespathy & Another v Lim Chong Seng & Another (2002)

1. Contracts in Restraint of Trade

• Contracts in which persons agrees to refrain from undertaking certain types of trade or employment

• Case Reference: Barang Barang Pte Ltd v Boey Ng San & Others (2002)

• In essence, it is a contract that seeks to minimize competition

• In order to be valid, it must:

1. Protect the legitimate interest of the person benefiting from the restraint

• Case Reference: Herbert Morris Ltd v Saxelby (1916), Buckman Laboratories (Asia) Pte Ltd v Lee

1. Be reasonable in scope

• Case Reference: Mason v Provident Clothing & Supply Co Ltd (1913), British Reinforced Concrete Engineering Co Ltd v Schelff (1921)

1. Not be contrary to the public interest

• Case Reference: Asia Polyurethane Mfg Pte Ltd v Woon Sow Liong (1990), Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd (1968)

1. MISREPRESENTATION

• An untrue statement that induces a party to enter into a contract
• Rescission: to terminate/void a contract; ab initio – to treat the contract as if it never existed
• Case Reference: Edgington v Fitzmaurice (1885)
• Three (3) Categories of Misrepresentation:

1. Fradulent

• aka Tort of Deceit
• False statements made by one party knowing that it is untrue
• Case Reference: Derry v Peek (1889), Lim Geok Hian v LimGuan Chin (1994), Panatron Pte Ltd v Lee Cheow Lee & Another (2001)

1. Negligent

• A false statement that is made without due care
• Case Reference: Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964), Howard Marine & Dredging Co Ltd v A Ogden & Sons (Excavations) Ltd (1978)

1. Innocent

• A false statement made by believing and having reasonable grounds to do so
• Case Reference: Redgrave v Hurd (1881)

1. MISTAKE

• In reference to the misunderstanding of facts prior/leading to the contract
• Four (4) Categories of Mistakes that can be vitiated:

1. Common

• Both parties make the same fundamental mistake of fact
• Case Reference: Couturier v Hastie (1852)

1. Mutual

• Both parties misunderstand each other, are at cross-purposes and are unaware of each other’s mistaken

1. Unilateral

• Only one party is mistaken, while the other party ought to know the first party’s mistake
• Case Reference: Ho Seng Lee Construction Pte Ltd v Nian Chuan Construction Pte Ltd (2001)

1. Non est factum

• “It is not my deed.”
• Arises when a person signs a document that is fundamentally different in character from that which is contemplated
• Case Reference: Lee Siew Chun v Sourgrapes Packaging Products Pte Ltd (1993)

1. DURESS

• An agreement entered under the constraint of a threat of harm
• Economic Duress: the notion of inequality of bargaining power

• Case Reference: Llyods Bank Pte Ltd v Bundy (1974), Atlas Express v Kafco (1989), Sharon Global Solutions Pte Ltd v LG Internation (Singapore) Pte Ltd (2001)

1. UNDUE INFLUENCE

• The unconscientious use of one’s power or authority
• Case Reference: Mooka Pillai Rajagopal v Kushvinder Singh Chopra (1996), Lim Geok Han v Lim Guan Chin (1994), Pelican Engineering Pte Ltd v Lim Wee Chuan (2001), Tan Teck Khong & Another v Tan Pian Meng (2002)