CONSENT OF PARTIES TO THE CONTRACT

CONSENT OF PARTIES TO THE CONTRACT

Vitiating factors:

·         Sometimes human will make a contract under false impressions. Some contracts contain of factors which adversely affect the consent of the parties to the agreement. It is called as vitiating factors. Contracts Act 1950 provides inter alia that all agreements are contracts if they are made by the free consent of parties.

Why a valid contract can be set aside:

1.      Mistake.

                                            i.            Mistake occurs during contract formation, the court may declare the contract void   because contains mistake.
                              Three categories of mistakes are:

Ø  Common mistake = Cases usually related to non-existence of the subject matter.

Ø  Mutual mistake = Occurs when the parties are at “cross-purpose.

Ø  Unilateral mistake = One sided mistake and one party is mistaken, and the other party knows that he is mistake.

CASE STUDY : McRae v Commonwealth Disposals Commission (1950) 84 CLR 377

The defendants sold an oil tanker described as lying on Jourmand Reef off Papua. The plaintiffs incurred considerable expenditure in sending a salvage expedition to look for the tanker. There was in fact no oil tanker, nor any place known as Jourmand Reef. The plaintiffs brought an action for (1) breach of contract, (2) deceit, and (3) negligence. The trial judge gave judgment for the plaintiffs in the action for deceit. He held that Couturier v Hastie obliged him to hold that the contract of sale was void and the claim for breach of contract failed. Both parties appealed. The High Court of Australia stated that it was not decided in Couturier v Hastie that the contract in that case was void. The question whether it was void or not did not arise. If it had arisen, as in an action by the purchaser for damages, it would have turned on the ulterior question whether the contract was subject to an implied condition precedent. In the present case, there was a contract, and the Commission contracted that a tanker existed in the position specified. Since there was no such tanker, there had been a breach of contract, and the plaintiffs were entitled to damages for that breach.

2.      Misrepresentation.

                                           I.            When a false statement cannot be proved to be a term, the misrepresentation possibility must be explored. False statement occurs when negotiations, that induces person hearing it to enter into the contract. 
                              Types of misrepresentation:

Ø  Innocent:
    Easy to prove, requiring only proof of a false statement which includes in contract.

Ø  Fraudulent:
     Difficult to prove, it requires the additional component that the person knew that the statement was false or he couldn’t care less whether its true or false.

Ø  Negligent: 
     Breach of a duty of care. A case where the duty is owed and breached.

3.      Duress.

i.                    Use of violence, or the threat of violence to a person, his good or his assets in order of force him into a contract. The contract can set aside because of the duress.

ii.                  Historically, physical violence or threats to harm the person or immediate family was required. Threats of economic damage will suffice.

4.      Undue Influence.

i.                    The free will of a party is compromised by a person in a dominant situation.

ii.                  Involves a special relationship between two parties. Example, the court presume that the stronger party has unduly influenced the weaker. Dominant party to prove that the weaker party was not unduly influenced. If he fails contract is voidable at the option  of victim.

5.      Unconscionable Conduct.

i.                    Conduct that offends good conscience. 
           There is usually an inequality of bargaining power and the weaker is disadvantages.

ii.    Some inequality can result from ignorance, illness, pressing need, financial desperation.

BONA FIDE PURCHASER.

* INNOCENT BUYER

* A genuine buyer, paying fair value for the goods, and being unaware of any defect in the tittle.

CASE STUDY:

Narayan Chand Shaha v. Dipali Mukherji In the instant case the son transferred the property still in the name of father. This fact was known to the transferee. Father died and son became co-owner of that property. The court had held that there was no evidence on record to show that the son made statement that the property belongs to him. There was no representation regarding the authority to sell. As such buying, such property is a collusive conduct. There are no estoppels when the truth was known to transferee. Hence the transferee’s right is not protected since he was not bona fide. Rajapakse v Fernando the Privy Council applied rule of estoppels as Where a grantor has purported to grant an interest in land which he did not, at the time, possess, but subsequently acquires, the benefit of his subsequent acquisition goes automatically to the earlier grantee, or as it is usually expressed, feeds the estoppels.

CASE STUDY:

In Luchman v Kallicharan, A held out his wife as the owner of the property by taking the sale deed in her name with a recital that the purchase money was paid out- of her stridhan. After the death of A, his wife sold the property to the defendant that purchased it Bonafide and for value. As son, as his heir sued to recover possession of the property from the defendants. It was held, that he could not recover possession. The court observed that there was misrepresentation by the father in allowing the property to be taken by the wife under a deed of sale, representing that the purchase money was her stridhan and in all his acts both public and private during his life-time representing that it was his wife’s property. After such representation his heirs were no more entitled to recover, than the father would have been in his life time. Ramcoomar Koondoo v. John and Maria McQueen The Privy council observed that the principle of the natural equity must be universally applicable that, where one man allows another to hold himself out as owner of an estate, and a third person purchases it, for value from the apparent owner, in the belief that he is the real owner, the man who so allows the other to hold himself out shall be not permitted to recover his secret title, unless he can overthrow that of the purchaser by showing either that he had no bona fide intention to purchase the property or even after knowing about the real title he doesn’t made inquiry.