Law of Contract: Genuine Consent
Although the contract may have the essentials of a valid offer, acceptance, legal intentions and consideration, its validity or enforceability may be affected by a number of factors. The agreement may be wanting in genuine consent between the parties. That is, although the parties may appear to have reached an agreement, it may not have been genuinely achieved because of misconduct, pressure, unfairness, or fear by those involved.
As separate issues to genuine consent, the law allows minors and others lacking legal capacity to be relieved of contractual obligations in certain circumstances; additionally, the validity of the contract is affected if the subject matter of the contract is illegal at law, or the contract is not in the required form under a particular statute.
For the purposes of this course, we focus on the topic of ‘absence of genuine consent’ and specifically the issues of misrepresentation (both innocent and fraudulent), undue influence, duress and unconscionable conduct. In such circumstances, the parties have not entered into the contract voluntarily or with real agreement, although on the face of it, the rules for offer and acceptance may appear satisfied. Here, the law allows the innocent party to ‘avoid’ the contract, involving the return of the parties to the pre-contractual position. Such a remedy is known as rescission. Please note that the issue of ‘mistake’, which is also falls under the category of ‘genuine consent’ or ‘lack of true agreement’, is not part of this course.
On successful completion of this lecture, you should (within the scope of the course) be able to:
explain the significance of ‘an absence of genuine consent’ in relation to a simple contract define misrepresentation and describe the key elements of misrepresentation distinguish between fraudulent and innocent misrepresentation, and identify the respective remedies for each define duress, describe the key elements of duress and identify the remedy for duress define undue influence, describe both types of undue influence and identify the remedy for undue influence define unconscionability, describe the key elements of unconscionability and identify the remedy for unconscionability
Effect on Contract
Before we begin our discussion, it is important to revisit the notions of void and voidable contracts which were defined at the beginning of the lectures on contract. Void contracts are those which have no legal effect whatsoever and hence cannot be enforced in a court. Voidable contracts, on the other hand, include those which can be rescinded, if possible, at the option of one of the parties on the basis that they did not genuinely consent to the agreement.
Rescission (the noun from the verb rescind) returns the parties to their original pre-contractual positions. In the case of voidable contracts, the innocent party can either expressly or impliedly affirm the contract or otherwise exercise the option to rescind it. The right to rescind might not be available if: it is not exercised within a reasonable time
the parties cannot be restored reasonably close to their original positions third parties acting in good faith and for valuable consideration have acquired intervening rights (such as the goods that were the subject of the contract being later on-sold to a 3rd party) if the contract has been expressly or impliedly affirmed by the innocent party
ABSENCE OF GENUINE CONSENT
The grounds for alleging a lack of genuine consent include:
3. Undue influence
Generally, when contracts are being negotiated, pre-contractual statements are made between the parties in the natural course of discussion, some of which may become part of the contract, and others which may serve only as inducements to one party or the other to enter the contract....