Elements in a Contract 31

A contract is void when it is no longer possible to comply with the terms of the contract. Property belonging to mentally disable persons for example are brought under the jurisdiction of the courts and contracts entered into by anyone suffering from a mental disability is normally rendered void.

The law seeks to protect their rights and interests by making any contracts that they may have entered into without fully understanding or comprehending the nature and the terms of the contract by declaring such contracts void (Mental Health Act 1983).

A contract may also be declared void if the contract is beyond or exceeds the authority of a company or is made ultra vires (beyond the scope of one’s legal authority). In Ashbury Railway Carriage and Iron Company Ltd. v Riche (1875) the company gave the plaintiff a loan to build a railway in Belgium. Subsequently the company refused the loan and the plaintiff sued. The company, in its defense pleaded that it was beyond its powers to grant the loan. The courts held that if a company pursues objectives that are beyond its articles of association than such contracts are void.

The presence of vitiating factors also renders a contract void. Vitiating factors that render a contract void are as follow: -

1.     Mistake

2.     Duress or coercion

3.     Undue influence

4.     Illegality

In Scott v Coulson (1903) the plaintiff and the defendant entered into a contract to insure the life of a third party, that at the time the contract was entered into, they believed was alive, but as it turned out the third party in question was deceased. The court held that the contract was void.

In Couturier v Hastie (1856) a cargo of corn was on board a ship sailing from the Mediterranean to London. During the journey, due to extensive heat, the crew discovered that the cargo was going bad and sold the corn at the nearest port. In the meantime, the seller and buyer who were not aware of the fact that the corn had been sold, entered into a contract under the assumption that the corn was still on board the ship. It was held that the contract was void because the subject of the contract did not exist.

In Hartog v Colin and Shields (1939) the defendants were in possession of hare skins which they intended to sell at a price per piece as dictated by custom but instead quoted the price as per pound. When the defendants realized their mistake, they tried to stop the sale and the plaintiffs sued. The court held that the contract was void.

A mistake however will only render a contract void if it is a shared mistake and the mistake goes to the core or the root of the contract.

In McRae v Commonwealth Disposals Commission (1951) (Australia) for example, the defendant sold the plaintiff a wrecked tanker that did not exist. The plaintiff only became aware of the fact that the tanker did not exist after he’d spent a great deal of time and money looking for it. The plaintiff sued and the defendant argued that the contract was void. The court rejected the defendant’s argument and held that the sale of the wreck included an implied warranty that the wreck did indeed exist and therefore the defendant was liable and was ordered to pay damages.

A contract is also rendered void when an innocent party is coerced or compelled into entering into a contract. In Walter v Morgan (1861) the defendant had acquired some land and the plaintiff compelled the defendant to sign a lease allowing the plaintiff to mine on the land. The defendant once he’d discovered the true value of the land refused to allow the plaintiff to mine on the land and the plaintiff brought an action against the defendant. The court rejected the plaintiff’s argument and found in favor of the defendant.

Contracts that are against the law or contravene the law are also rendered void. In Anderson Ltd. v Daniel (1924) the seller sold the buyer artificial fertilizer. According to the law any invoice for the sale of artificial fertilizers must include details of the chemicals that were used in the manufacturing process. Because the seller had not complied with the legal requirements, the buyer refused to pay and the court found in favor of the buyer.

Copyright © 2019 by Dyarne Ward and Kathiresan Ramachanderam