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QUESTION;
“A contract is an agreement giving rise to obligations which are
enforced or recognized by Law. Both parties enter into a
contract freely and willingly according to the doctrine of
freedom of contract. This proposition remains generally true
despite the fact that a contract is subject to a number of
qualifications.

Discuss this statement in particular reference to vitiating factors

of a contract.

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A contract is an agreement made with the free consent of the parties with capacity to contract, for
a lawful consideration and with a lawful object with the intention to be legally bound.1In the case
of Kampala city council V Green Boat Limited, it was held that all these elements must be in
existence for a contract to qualify as a valid contract. The doctrine of freedom of contract is a
concept in contract law that does not limit or restrict the terms on which people should contract.
It presumes that there was free consent of the parties and no coercion, undue influence, fraud,
misrepresentation or mistake at the time of contracting.2 This was upheld in the case of printing
and numerical registering Co V Sampson3 in which MR Sir George Jessel noted that “if there
is one thing more than the other which public policy requires, it is that men of full age and
competent understanding shall have the at most liberty in contracting and that their contract
when entered into freely and voluntarily shall be held sacred and shall be enforced by the courts
of justice.” It is true that this remains the general proposition of the law despite the fact that a
contract is subject to other qualifications. These are known as vitiating factors and they render an
otherwise valid contract void or voidable. They include mistake, duress and undue influence,
illegality, misrepresentation and frustration.

A valid contract can become invalid where there is a MISTAKE. Mistake is a situation in which
either the parties to a contract did not mean the same thing, or at least one party had a belief that
did not correspond to the facts or law.4 Section 17(1) of the contract act 2010 states that where
both parties to an agreement are under a mistake as to a matter of fact which is essential to the
agreement , consent is obtained by mistake of fact and the agreement is void. Section 18 further
states that where a mistake is entered into by a mistake in respect of any law in force in Uganda,
the contract is void. There are three types of mistake namely; Common mistake. In this case,
both parties are making the same mistake. For example, where the subject matter does not exist
or as it is commonly known, res extincta. In the case of Couturier V Hastie5, it was held that at
the time of contracting, the corn had been sold to another party and thus no contract existed.
Where a contract is concluded under a common mistake, it is rendered void. Mutual mistake. It
occurs where the parties are at cross purposes with one another. This renders a contract void

1
Contract act 2010 section 10
2
Contract act 2010 section 13
3
1875 LR 19 EQ 462 @ pg 465
4
Black’s law dictionary 9th edition
5
1852 8 Exch. 40.

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because in actual sense, no contract existed at all. In the case of Raffles V Wichelhaus,6 the
parties bought and sold cargo on board the peerless in Bombay harbor. There were however two
ships of the same name in that harbor, one party was thinking of one ship while the other
intended the other ship. The court declared that there was no contract. Unilateral Mistake. In
this case, only one party is mistaken about the fundamental fact in the contract and the other
party is aware of it or ought to know of it. In the case of Cundy V Lindsay7, the house of lords
held that the contract between Lindsay and Blenkarn was void for mistake of identity and thus,
the fraud never gained title to the goods thus he could not pass good ownership to Cundy. The
victim must prove to the court that he signed the document mistakenly and that it was not his
deed (non est factum). It must be proven that the mistake was about the character or nature of
the document not merely as to some aspect of its contents. Thus in Saunders V Anglia Building
Society8, the widow could not successfully sue as she was only mistaken about the contents and
not to the character or nature of the entire document. The effect of a unilateral mistake is that the
contract is rendered void. It is important to note that the mistake must be of fact and not of law.
In the case of SHARP BROTHERS & KNIGHT V CHANT9, it was held that the tenant had
paid the extra rent under a mistake of Law and could not sue for its return.

DURESS. Under duress, one party to the contract is forced to assent to the contract through
threats of violence or actual violence. This eliminates the element of free consent of the parties
as described in the contract act 201010. In the case of Barton V Armstrong11, the contract was
set aside because the plaintiff only signed it after the defendant had threatened to kill him if he
did not buy his shares. It is important to note that the threat must be illegal and must be a threat
against life not property. Economic duress does not suffice. So, in the case of Skeate V Beale,12
a tenant was sued by his landlord for failure to pay a debt as had been initially agreed. The tenant
disputed this claim stating that the contract was signed under a threat to sell the property. It was
held by the learned judge that the land lord was entitled to the balance as per the agreement
which was not affected by duress since the threat was to sell the tenant’s goods. The effect of

6
1864 2 H and C 906
7
1876 QBD 348
8
1971 A.C 1004
9
KB 1 1917 771
10
Section 13 contract act 2010
11
12
1841 11 A &E 983

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duress in the law is that it renders a valid contract void or voidable so that it may be rescinded.
Thus the parties can choose to enforce the contract or the other party may opt out of it.

UNDUE INFLUENCE. A contract is induced by undue influence where the relationship

subsisting between the parties to a contract is such that one of the parties is in a position to
dominate the will of the other party and uses that position to obtain an unfair advantage over the
other party13. A party is taken to be in a position to dominate the will of another party, where the
party holds a real or apparent authority over the other, where the party stands in a fiduciary
relationship to the other party, or where the mental capacity of the other party is temporarily or
permanently affected by reason of age, illness, mental or bodily distress14. Undue influence
renders a contract merely voidable and not void. Therefore it is upon the parties to enforce the
contract or rescind it. If the victim does not bring a suit to avoid the contract, it is in the eyes of
the law seen to be a valid contract. In the case of Ottoman Bank V Mawani15, Mawani placed
his father’s company as a further guarantee to a loan from a bank. Upon failure to clear it, the
bank sued the defendant and he claimed undue influence as a defence. The court held that the
contract was void after it was shown that the son, despite being of mature age, was still leaving
with his parents. He had no direct source of income nor did he have a house or family he cared
for. He was completely submerged under his parents and thus it was clearly impossible for him
to have taken out the loan without the parent-child influence interplaying.

MISREPRESENTATION. This refers to the act of making a false or misleading assertion

about something.16 The statement must be one of fact and not of opinion. There are three kinds
of misrepresentation namely; FRAUDULENT misrepresentation; This is a false statement that
is known to be false or is made recklessly without knowing or caring whether it is true or false
and that is intended to induce a party to detrimentally rely on it.17 In Bartholomew Nyanabo V
Petronida Ndyamukama18, X sold land to Y describing it as 40X60 paces yet it was 40X60
feet. The court held that this was fraudulent misrepresentation as X knew that the area was less
than what was stated. Fraudulent misrepresentation renders a contract voidable, thus the

13
Section 14 of the contract act 2010
14
Section 14(2) of the contract act 2010
15
1965 E.A 464
16 th
Black’s law dictionary 9 edition
17 th
Black’s law dictionary 9 edition
18
Civ. App. 112-M-68 (Tanzania)

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aggrieved party may enforce it or rescind it and sue for damages. NEGLIGENT
misrepresentation; This refers to a careless or inadvertent false statement in circumstances where
care should have been taken19. For negligent misrepresentation to suffice, the person must be of
superior knowledge and owe a duty of care to the other party. In the case of Esso Petroleum Co.
Ltd V Mardon20, a tenant was forced to take lease of a petrol station by a statement of an
inexperienced salesman implying high future turn over. It was held that a duty of care was owed
therefore the salesman was liable for misrepresenting to the other party. “Where the person with
exclusive knowledge or skill, in the course of a contract advises the other party or informs him,
the representer is under a duty of care to make sure his information is reliable.” Under negligent
misrepresentation, the contract is voidable thus the aggrieved party can rescind the contract or
sue for damages. INNOCENT misrepresentation; This is a false statement that the speaker or
writer does not know is false21. The misrepresenter is not at fault because the statement was
made with an honest belief in its truth. In the case of Oscar Chess Ltd V Williams,22 a dealer
innocently sold a car to a customer quoting the wrong model of the car. Court held that the dealer
was only liable for innocent misrepresentation. However, unlike the other types, under innocent
misrepresentation, damages are not awarded because the courts’ feelings are more with the
plaintiff. The aggrieved can only avoid the contract by rescinding it.

ILLEGALITY. An illegal contract is one that is not authorised by law.23 Contracts are made
illegal under statutory provisions and at common law. A consideration or an object of an
agreement is lawful, except where the consideration or object is forbidden by law, is of such
nature that, if permitted would defeat the provisions of any law, is fraudulent, involves or implies
injury to a person or the property of another person, or is declared immoral or against public
policy by a court.24 The general rule is an illegal contract is void and no suit can be brought for
recovery of any money paid under the agreement.25 So, in Parkinson V College of
Ambulance26, the secretary of a charitable society told the plaintiff that he was in a position to

19 th
Black’s law dictionary 9 edition
20
1976 2 ALLER 5
21 th
Black’s law dictionary 9 edition
22
1557 ALLER 325
23 th
Black’s law dictionary. 9 edition
24
Section 19(1) of the contract act 2010
25
Section 19(2) of the contract act 2010
26
(1925) 2 KB 1

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procure a knighthood for him if he would make a contribution to the society. He did so but was
never knighted. Court held that the substance of the agreement was illegal thus Parkinson could
not successfully sue. However the court may help the aggrieved party where he was not in pari
delicto. In Hughes V Liverpool Victoria Friendly Society27, a person was induced by fraud to
take over some insurance policies on a life in which she had no insurable interest. Such a
contract was illegal. It was held that he was entitled to recover the premiums he paid under the
illegal contract as the parties were not at equal fault.

A contract can also be FRUSTRATED. Under the doctrine of frustration, a contract may be
discharged if, subsequent to its formation, a change of circumstances renders the contract legally
or physically impossible of performance. Contracts can be frustrated by war, death,
disappearance of the subject matter, non-occurrence of an event, government intervention or they
can be self induced. However, where there is self induced frustration, it cannot be successfully
pleaded. Where a contract becomes impossible of performance and where a party cannot show
that the other party assumed the risk of impossibility, the parties to the contract shall be
discharged from the further performance of the contract28. So in Taylor V Caldwell29, court held
that the defendant was not liable to pay for “the contract is not to be construed as a positive
contract, but as subject to an implied condition that the parties shall be excused in case, before
the breach, performance becomes impossible from the perishing of the thing without the default
of the contractor.” However, any sum paid or payable to a party under a contract before the time
the parties are discharged shall, in the case of the sum paid, be recoverable from the party as
money received by that party for his or her use and in the case of any sum payable, cease to be
payable.30

In a nutshell, both parties enter into a contract freely and willingly according to the doctrine of
freedom of contract and this proposition remains generally true despite the fact that a contract is
subject to a number of qualifications.

27
(1916) 2 KB
28
Section 66(1) contract act 2010
29
(1863) 3 B&S 826
30
Section 66(2) contract act 2010

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Kaddu Benjamin research work j12b11/327 [email protected]

BIBLIOGRAPHY

CONTRACT ACT 2010

BLACK’S LAW DICTIONARY

CASE LAW

CHESHIRE, FIFOOT AND FURNSTON’S LAW OF CONTRACT (12TH EDITION,

BUTTERWORTHS, 1991)

HODGIN: THE LAW OF CONTRACT IN EAST AFRICA (E.A.L.B., NAIROBI 1991)

D. BAKIBINGA THE LAW OF CONTRACT IN UGANDA.

KOBUSINGYE KILONSI CLASS NOTES.

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