1. Introduction to English Law of Obligations (2014/2015) dr Jan Halberda

2. The Mistake (and other vitating factors) in Contract 24 March 2015

3. Defective contracts Null and Void / Invalidity / Nullity / to nullify Voidable / To avoid Unenforceable / Unenforceablity Valid and enforceable

4. Matters which Affect the Validity of Contract Mistake Misrepresentation Duress Undue influence Incapabilitity

5. Mistake in Common Law Rule: does not affect the validity of contract Smith v Hughes (1871) Smith v Hughes

6. Mistake in Common Law Exceptions that render the contact void: 1. Fundamental mistake concerning subject matter of the contract 2. Mistaken signing of written document 3. Mistake as to the identity of the party Fundamentals of Anglo-American and Polish Legal Systems © Jan Halberda(UJ)

7. Mistake in Common Law Mistake of law and mistake of fact Unilateral Mistake Common Mistake Mutual Mistake

8. 1. Fundamental mistake concerning subject matter of the contract A mutual mistake as to the identity of subject matter (always void): – Raffles v Wichelhaus (1864) „The Peerless case” Raffles v Wichelhaus

9. 1. Fundamental mistake concerning subject matter of the contract A fundamental common mistake about the subject matter (exceptionally void ): – Couturier v. Hastie (1856), – Galloway v. Galloway (1914).

10. 1. Fundamental mistake concerning subject matter of the contract Who bears the risk? McRae v Commonwealth Disposals Commission (1951) McRae v Commonwealth Disposals Commission Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd

11. 2.-3. Other exceptions that render the contact void 2. Mistaken signing of written document (exceptionally void); non est factum defence; a. fraudulently induced, b. fundamental mistake, c. signer non negligent; 3. Mistake as to the identity of the party (sometimes void)

12. Mistake in Equity Law - Rescission Mistake as to subject matter of the contract Mistake not so fundamental Mistaken party not at fault Equitable right of rescission Cooper v. Phibbs (1867)

13. Misrepresentation False representation of fact Made by one party to the other Before concluding the contract Indended to induce to enter into contract (indended to to be acted upon) Actually acted upon

14. Misrepresentation False representation of fact Fact: - not of law Fact: - not opinon False: including half-truth Sometimes: also a promise incorporated into the contract Silence: excluded (but…)

15. Duty to disclose 1. If circumstances change during negotiations. 2. In contracts of utmost good faith: a) insurance b) sale of land c) shares subscription d) family arrangements

16. Remedies to misrepresentation Damages - if innocent -> not available - if fraudulent -> also damages in tort of deceit Rescission - the contract is voidable even if misrep. is innocent - when the right to rescind is lost?

17. Remedies to misrepresentation Rescission - when the right to rescind is lost? If restoration impossible, If too much time lapses, If party affirms contract.

18. Duress If force or threat of force induces to enter into the contract. Voidable contract. Also economic duress/coercion - Universe Tankships Inc. V. ITF (1982) - D&C Builders v. Rees (1966) - Pao On v. Lau Yiu Long (1979) [Fu Chip Ltd ]

19. Undue influence Only in confidential or professional relationship Voidable contract Presumptions: - doctor and patient, lawyer and client, priest and disciple, parent and child

20. Lack of capacity to contract Minor (under 18) may avoid contract, may recover damages, can sue but cannot be sued Exceptions: Minor must pay for necessaries, Court may call for restoration, Money lent cannot be recovered. Minor can ratify the contract after 18.

21. Lack of capacity to contract Insane person – contract void Temporarily insane person or intoxicated person – contract voidable (if was uncapable of understanding; if other party was aware; in reasonable time).