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4 Vitiating Factors
Party intends to be bound but the intention was…
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Duties of Disclosure
France: Art. 1104
- Contracts must be negotiated/performed under good faith
- good faith may rise duty of disclosure
- Art. 1112-2
- Party who has knowledge of essential information, he must disclose during negotiation
Art.4:107(3)PECL
- Determining if there is duty to disclose
- Special expertise
- costs of acquire information
- party could have reasonably acquired information himself
- apparent importance of information
England
- no general duty to disclosure
- Smith v Hughes 1871
- all provided Information must be true, otherwise misrepresentation
- CAVEAT EMPTOR each party is responsible for protecting its own interest
- Exceptions
- Contracts uberimae fidei (utmost good faith: insurance: Marine Insurance Act 1906 s18 (2))
- Fiduciary Relationship (relationship of trust)
- SoGA 1979 s.14
- CRA 2015 s.9(1)
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Prohibited Contracts
Statutory illegality
- means used to perform contract illegal
- contracts purpose illegal
France
- Art. 6
- Party Agreements cannot differ or break with statutes relating to public or moral matters
- Art 1162
- contract may not derogate from public order by terms or its purpose
Germany
- §134
- Legal transaction that violates statutory provision is void
- §138(1)
- legal transactions that violate good morals are void
Netherlands
- Art.3:40
- (1) Legal act that through its content or purpose is against good morals/public order is void
- (2) Violation of mandatory legislative provision makes legal act void
England
- Holman v Johnson 1775
- Courts will not enforce immoral contracts
- Patel v Mirza 2016
- courts generally do not enforce illegal contracts
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Effect of prohibited contract
Art.3:40 (2)
- violation of statutory provisions then contract is void
- if provision just protects one of the parties, only voidable: contract can still be enforceable if party wants so
If Contract was already performed?
Germany
-§817
- reflects IN PARI DELICTO
- if parties willingly concluded illegal contract, none can recover damages
- but if one is innocent, exception can be made
England
- generally no restitution for illegal contracts
- some exceptions
- Saunders v Edwards 1987
- law needs to balance between freedom of with whom and about what to contract and recognizing societies objection to certain types of contracts & innocence of one party
Art.15:102 (3) PECL
- take into consideration
- purpose of rule
- category of persons that rule should protect
- sanctions that can be imposed
- seriousness of infringement
- if infringement was intentional
- causal link between infringement and contract
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