Vitiating factors: an overview 

A contract may be properly formed and still be attacked because of how the agreement was reached. These are the vitiating factors, and they share a structure worth holding onto: each identifies a defect in consent or conduct, and each carries its own remedy.

This article maps the territory; each factor has its own treatment.

The factors

• Mistake — the parties were mistaken about something fundamental. Narrow at common law; equity is somewhat more flexible.
• Misrepresentation — a false statement of fact induced the contract. Remedies depend on whether it was fraudulent, negligent or innocent.
• Misleading or deceptive conduct — the statutory prohibition, which in practice has largely displaced misrepresentation in Australian commercial disputes because it requires no proof of fault and carries a flexible remedial discretion.
• Duress — illegitimate pressure, whether to the person, to goods, or economic.
• Undue influence — improper use of ascendancy over another's will, which may be actual or presumed from a relationship of trust and confidence.
• Unconscionable conduct — exploitation of a party's special disadvantage, at general law and under statute.

Illegality and incapacity are sometimes grouped here too, though they are better understood as affecting enforceability and formation respectively.

Void, voidable, unenforceable

The vocabulary matters, and students lose marks on it:

• Void — no contract ever existed. Common law mistake, where it applies, has this effect.
• Voidable — a contract exists, and the innocent party may elect to rescind it. Most vitiating factors work this way. The right to rescind can be lost by affirmation, delay, intervention of third-party rights, or an inability to restore the parties substantially to their former positions.¹
• Unenforceable — a valid contract a court will not enforce, typically for want of statutory formality.

Choosing between them

Overlap is common, and a good answer addresses more than one route rather than picking a favourite:

• Statutory misleading conduct is usually the strongest starting point where a false statement is involved: no need to prove intention or negligence, and remedies are discretionary and broad.
• Unconscionability and undue influence often arise on the same facts; the former looks at the stronger party's exploitation of a disadvantage, the latter at the quality of the weaker party's consent.
• Duress requires illegitimate pressure, which is a higher bar than hard bargaining.

Applying this in a problem question

1. Identify the conduct complained of, and who did what to whom.
2. Run the statutory route first where a false or misleading statement is involved.
3. Then the general law factors that fit the facts, in the alternative.
4. State the consequence precisely — void, voidable or unenforceable — and address bars to rescission.

Where the authority sits

A mixture of common law, equity and statute, and the statutory provisions increasingly carry the weight. Where equity and statute both apply, address both.