Firstly, we consider the distinction between a contract which is void ab initio meaning that there was no contract from the start and a voidable contract which means the consequences of the contract may be avoided.
In terms of South African Law, a contract may be void due to:
- Misrepresentation which can be either innocent, negligent or fraudulent;
- Duress; or
- Undue Influence
- Misrepresentation
“Where the misrepresentation results in a fundamental mistake the contract is void ab initio.”[1] Accordingly there is no contract concluded between the parties.
In other instances where there is no fundamental mistake the contract is voidable at the election of the innocent party. Meaning the innocent party can avoid the consequences of the contract.
(1)(a) Fraudulent Misrepresentation
A party wishing to avoid the consequences of a contract based on a fraudulent misrepresentation would have to allege the following:
- a false representation by the other party to the contract or his or her agent;
- the innocent party acted based on the false representation.
The innocent party may claim damages in respect of this type of misrepresentation.
(1)(b) Innocent Misrepresentation
A party wishing to avoid the consequences of a contract based on an innocent misrepresentation would have to allege the following:
- a material false representation by the other party to the contract or its agent;
- the material false representation was made to induce the innocent party to conclude the contract;
- the innocent party entered into the contract based upon the material false representation.
The innocent party may not claim damages based on an innocent misrepresentation.
(1)(c) Negligent Misrepresentation
A party wishing to avoid the consequences of a contract based on a negligent misrepresentation would have to allege the following:
- a false material representation made by the other party to the contract or its agent;
- it was foreseeable that the false material representation would and did induce a party to enter into the contract;
An innocent party may claim damages in respect of this type of misrepresentation.
(2) Duress
In the circumstances that a party utilised absolute force to make the innocent party enter into the contract, the contract is void ab initio as there was no consent by the innocent party in the first place.
In other instances the contract is voidable at the instance of the innocent party.
A party wishing to avoid the consequences of a contract based on a duress would have to allege the following:
- an unlawful or against good morals threat of considerable wrongfulness/sinfulness to the innocent person;
- the fear induced by the threat was impending;
- the innocent party entered into the contract based on the aforesaid threat.
(3) Undue Influence
Where undue influence results in a fundamental mistake, as with misrepresentation, there was no contract from the outset (void ab initio). In other instances, the contract is voidable at the instance of the innocent party.
A party wishing to raise undue influence as a defence and to avoid a contract would have to allege the following:
- the other party stood in a position to influence the innocent party;
- this influence placed pressure on the innocent party and as a result the other party could influence the behavior of the innocent party to enter into a contract which was not favourable;
- in the absence of good faith the other party to the contract utilised the pressure to have the innocent party agree to the contract;
- in the absence of the influential relationship, the innocent party would not have entered into the contract.
Article by Lisa Boogaard
Boogaard Attorneys
5/10/2022
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[1] Brink vs Humpries and Jewell (Pty) Ltd 2005(2)All SA 343