Factors which can taint or prevent conclusion of a valid contract

1. Factors which can taint or prevent conclusion of a valid contract Importance of consensus ad idem Situations where genuine agreement is either absent or flawed: - where one of the parties is mistaken about the true facts on which the contract is based (mistake) - one of the parties misleads the other about the true facts (misrepresentation) - one of the parties forces the other to contract (duress) - one of the parties undermines the other�s will & ability to make independent decisions and unduly persuades the other party to contract

2. Factors which can taint or prevent conclusion of a valid contract The legal consequences: contract void or voidable Void contract: - invalid contract which never came into existence - not capable of enforcement, rectification & ratification - performance only recoverable through unjustified enrichment Voidable contract: - valid & binding - BUT innocent party entitled to cancel - innocent party also entitled to recover her performance but must be willing to restore what she received (exceptions)

3. Factors which can taint or prevent conclusion of a valid contract Voidable contract (CNTND): - restitution integrum - innocent party not obliged to repudiate - election to be made only once - damages may be recovered even where contract is not repudiated (financial losses) Mistake: void Misrep, duress & undue influence: contract voidable NB: Existence of any of the above may not be enough to render contract void or voidable

4. Mistake Arises when one or both parties are mistaken about the true facts on which the contract is based Types of mistake: Common, unilateral or mutual Common mistake - exists in the minds of both parties Unilateral mistake - only one party is mistaken Mutual mistakes - both parties mistaken but on different facts

5. Mistake Common mistake renders contract void only if material Unilateral & mutual mistakes - mistaken belief must both be material & reasonable - mistake reasonable if non-mistaken party knew or should have known the mistaken party was mistaken or if mistake was induced by misrep Absence of requirements Materiality test - mistake material if mistaken party would have chosen not to contract at all had he/she had known of the true state

6. Mistake Definite material mistakes: Nature of the contract (error in negotio) Subject-matter of the contract (error in corpore) Identity of the other party in contracts in which identity matters Instances definitely considered not to be material: Quality or characteristics of the subject matter Party�s motives for entering into a contract Identity of the other party in contracts in which identity is not relevant

7. Mistake Most material common mistakes (true terms of contract) Mistakes not covered in the known categories Recorded contracts v. reasonable mistake Caveat subscriptor rule (let the signatory beware) Practical effect of the rule: - other party�s reliance on assent reasonable - mistaken party�s reliance on mistake unreasonable Some exceptions to the application of the rule: - document not clearly a contract e.g invoice or receipt - document a contract but contains terms which one would not expect to find in that contract - written contract not accurately reflecting parties� own pre-contractual negotiations

8. Mistake Cases NB Dlovo v Brian Porter Ltd: job-card case (1994) p 66-67 - misleading other party as to the nature/content of document NB Spindrifter (Pty) Ltd v Lester Donovan (Pty) Ltd (1986) p 67-68 - failure to point out crucial terms of the contract (iustus error)

9. Misrepresentation Meaning: A false statement of fact made by one party to another before or at the time the contract is entered into Misrep entitles innocent party to repudiate contract and or claim damages in delict Misrep distinguishable from the following: Warranties - a type of term in which one party guarantees the truth of a particular statement made - false warranties

10. Misrepresentation (ii) Statement of opinion - where someone says that he/she believes a particular state of affairs to exist without stating that it does - maker of statement must genuinely believe what he/she is saying (iii) Puffs - exaggerated statements usually made by a sales person or a seller False statement may be express or implied from conduct of the representor Misrep only implied where there is a duty to speak

11. Misrepresentation Situations where a duty to speak has been established: - sale of property with peculiar characteristics which the seller knows will disincline most people from buying the property - where statement was true the time it was made but no longer true the time the contract is entered into Forms of misrepresentation Causal misrep - one which induces a contract

12. Misrepresentation Forms of misrepresentation (CNTND) (ii) Incidental misrep - incidental if innocent party would still have entered into the contract albeit on different terms (iii) Fraudulent misrep - when the misrepresenter knows the falsity of representation or knowing that it might be false (iv) Negligent misrep - mirepresentor genuinely believes representation to be true but in situation where a reasonable person would first have taken steps to verify accuracy

13. Misrepresentation (v) Innocent misrep - misrepresentor genuinely believes representation to be true but in situation where a reasonable person would NOT first have taken steps to verify accuracy Remedies for misrepresentation Incidental & innocent misrep: contract not voidable Other situations: contract voidable (innocent party) - election to rescind or ratify - election to rescind: restitution integrum - permission to make good the difference in money - damages for financial losses: fraudulent & negligent misrep

14. Misrepresentation Relationship between mistake & misrepresentation Every misrep gives right to a mistake in the mind of the innocent party (belief important) ? misrep may give rise to a void contract by reason of mistake Whether the contract is void by reason of mistake or voidable by reason of misrep depends on the materiality of mistake arising from misrep Immaterial mistake: remedies?