Contracts/Non est factum: Difference between revisions

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m (By adding an additional reference on the 1st paragraph: "Commercial Bank of Australia v Amadio (1983) 151 CLR 447.")
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{{Contract law}}
{{Contract law}}
'''''Non est factum''''' ([[Latin]] for "it is not [my] deed") is a doctrine in [[contract law]] that allows a signing party to escape performance of the agreement. A claim of ''non est factum'' means that the signature on the contract was signed by mistake, without knowledge of its meaning, but was not done so negligently.<ref>{{Cite web|url = http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/HCA/1983/14.html?stem=0&synonyms=0&query=title(commercial%20bank%20of%20australia%20and%20amadio%20)|title = Commercial Bank of Australia v Amadio (1983) 151 CLR 447.|last =|first =|date =|website =|publisher =|access-date =}}</ref> A successful plea would make the contract void ''[[ab initio]]''.<ref>{{cite web|url=http://www.austlii.edu.au/au/cases/cth/high_ct/1975/24.html |title=Petelin v Cullen [1975] HCA 24}}</ref>
'''''Non est factum''''' ([[Latin]] for "it is not [my] deed") is a defence in [[contract law]] that allows a signing party to escape performance of an agreement "which is fundamentally different from what he or she intended to execute or sign."<ref>{{Cite journal|last=Chew|first=Charles Y C|date=2009|title=The Application of the Defence of Non Est Factum: An Exploration of its Limits and Boundaries|url=http://www.austlii.edu.au/au/journals/UWSLawRw/2009/4.pdf|journal=University of Western Sydney Law Review|volume=13|issue=|page=85|doi=|pmid=|access-date=|via=AUSTLII}}</ref> A claim of ''non est factum'' means that the signature on the contract was signed by mistake, without knowledge of its meaning. A successful plea would make the contract void ''[[ab initio]]''.<ref>{{cite web|url=http://www.austlii.edu.au/au/cases/cth/high_ct/1975/24.html |title=Petelin v Cullen [1975] HCA 24}}</ref>


''Non est factum'' is difficult to claim as it does not allow for negligence on the part of the signatory, i.e. failure to read a contract before signing it will not allow for ''non est factum''. In a successful case, the fundamental basis of the signed contract must be completely different from what was intended. In ''Lloyds Bank v Waterhouse'' (1990) a father acted as a guarantor to his son's debt when purchasing a farm. The father was illiterate and signed the bank document under the belief that he was acting as the guarantor for the farm only, when the contract was actually for all the debt accumulated by the son. As he was illiterate, this was a mistake as to the document signed and the father was successful in claiming ''non est factum''.
According to ''Saunders v Anglia Building Society'' [1971],<ref>AC 1004.</ref> applied in ''Petelin v Cullen'' (1975),<ref>132 CLR 355; [1975] HCA 24.</ref> the strict requirements necessary for a successful plea can are generally that:
# The person pleading ''non est factum'' must belong to "class of persons, who through no fault of their own, are unable to have any understanding of the purpose of the particular document because of blindness, illiteracy or some other disability."<ref>Chew, Charles C Y (2009). [http://www.austlii.edu.au/au/journals/UWSLawRw/2009/4.pdf Non Est Factum]: 85.</ref> The disability must be one requiring the reliance on others for advice as to what they are signing.<ref>Chew, Charles C Y (2009). [http://www.austlii.edu.au/au/journals/UWSLawRw/2009/4.pdf Non Est Factum]: 85; ''Petelin v Cullen (''1975) 132 CLR 355, 359.</ref>
# The "signatory must have have made a fundamental mistake as to the nature of the contents of the document being signed," including its practical effects.<ref>Chew, Charles C Y (2009). [http://www.austlii.edu.au/au/journals/UWSLawRw/2009/4.pdf Non Est Factum]: 85.</ref>
# The document must have been radically different from one intended to be signed.<ref>Chew, Charles C Y (2009). [http://www.austlii.edu.au/au/journals/UWSLawRw/2009/4.pdf Non Est Factum]: 85.</ref>
 
''Non est factum'' is difficult to claim as it does not allow for negligence on the part of the signatory, i.e. failure to read a contract before signing it, or carelessness<ref>''Petelin v Cullen'' (1975) 132 CLR 355, [12].</ref>, will not allow for ''non est factum''. Furthermore, the Court has noted that there is a heavy onus that must be discharged to establish this defence as it as an "exceptional defence."<ref>Chew, Charles C Y (2009). [http://www.austlii.edu.au/au/journals/UWSLawRw/2009/4.pdf Non Est Factum]: 85-86</ref><ref>''Petelin v Cullen'' (1975) 132 CLR 335, 359-60.</ref>
 
== Notable Examples ==
In ''Petelin v Cullen'' (1975), the defendant, Petelin, was illiterate and could speak very little English, but still signed a document he believed to be a receipt for $50 but actually gave Cullen the option to purchase Petelin's land, which he exercised. Petelin refused to sign the contract for sale, alleging he had been deceived, and Cullen sought [[specific performance]]. The court found that because of Petelin's mistaken belief which was not because of his carelessness, his claim of ''non est factum'' was successful. The court noted that even if he had been careless, "Cullen was not an 'innocent person without knowledge or reason to doubt the validity of the appellant's signature'".<ref>''Petelin v Cullen'' (1975) 132 CLR 355, [15].</ref><ref>{{Cite web|url=http://www.australiancontractlaw.com/cases/petelin.html|title=Petelin v Cullen|last=Clarke|first=Julie|date=(2013)|website=Australian Contract Law|publisher=|access-date=}}</ref>
 
In ''Lloyds Bank v Waterhouse'' (1990)<ref>[1993] 2 FLR 97.</ref> a father acted as a guarantor to his son's debt when purchasing a farm. The father was illiterate and signed the bank document under the belief that he was acting as the guarantor for the farm only, when the contract was actually for all the debt accumulated by the son. As he was illiterate, this was a mistake as to the document signed and the father was successful in claiming ''non est factum''.


Another notable case on ''non est factum'' is ''Foster v Mackinnon'' (1869) LR 4 CP 704 where an elderly man signed a [[bill of exchange]] but was only shown the back of it.  He was granted a new trial.<ref>{{cite web|url=http://www.lawteacher.net/Mistake%20Cases.php |title=Mistake Cases &#124; Contract Law |publisher=Law Teacher |date= |accessdate=2013-11-29}}</ref>
Another notable case on ''non est factum'' is ''Foster v Mackinnon'' (1869) LR 4 CP 704 where an elderly man signed a [[bill of exchange]] but was only shown the back of it.  He was granted a new trial.<ref>{{cite web|url=http://www.lawteacher.net/Mistake%20Cases.php |title=Mistake Cases &#124; Contract Law |publisher=Law Teacher |date= |accessdate=2013-11-29}}</ref>
Illustratively, in ''Ford v Perpetual Trustees Victoria Ltd'' [2009],<ref>NSWCA 186; (2009) 257 ALR 658.</ref>,<ref>{{Cite journal|last=Bant|first=Elise|date=2009|title=Incapacity, Non Est Factum and Unjust Enrichment|url=http://www.austlii.edu.au/cgi-bin/sinodisp/au/journals/MelbULawRw/2009/14.html#fnB2|journal=Melbourne University Law Review|volume=33|issue=2|doi=|pmid=|access-date=|via=}}</ref> the son of Mr Ford (Appellant) had arranged a loan from a bank to arrange for the purchase of a cleaning business, by using his father's residential property as security. When he defaulted, the bank sought to enforce its rights under the loan and mortgage agreements.
Because Mr Ford was illiterate (though capable of signing his name), suffered from a "significant congenital intellectual impairment" and had no understanding of the particulars of the agreement or consequences of non-payment, the judge at appeal found that he had been the pawn of his son throughout, and "his mind was a mere channel through which the will of his son operated."<ref>Bant, Elise (2009) Incapacity, [http://www.austlii.edu.au/cgi-bin/sinodisp/au/journals/MelbULawRw/2009/14.html#fn9 Non Est Factum and Unjust Enrichment], Introduction.</ref>
The Court dismissed the argument that the appellant had been careless as that would presume that he was capable of turning his mind to the issue and making judgements.<ref>Bant, Elise (2009) Incapacity, [http://www.austlii.edu.au/cgi-bin/sinodisp/au/journals/MelbULawRw/2009/14.html#fn9 Non Est Factum and Unjust Enrichment], Introduction.</ref> It ruled that Mr Ford lacked the legal capacity, and therefore contract was void for non est factum. While not a binding judgement, this example illustrates an application of ''Petelin v Cullen'' [1975] as it depicts the necessary level of incapacity and level of misunderstanding required to shift the heavy burden of the party raising the defence.


==References==
==References==

Revision as of 03:31, July 30, 2016

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Template:Contract law Non est factum (Latin for "it is not [my] deed") is a defence in contract law that allows a signing party to escape performance of an agreement "which is fundamentally different from what he or she intended to execute or sign."[1] A claim of non est factum means that the signature on the contract was signed by mistake, without knowledge of its meaning. A successful plea would make the contract void ab initio.[2]

According to Saunders v Anglia Building Society [1971],[3] applied in Petelin v Cullen (1975),[4] the strict requirements necessary for a successful plea can are generally that:

  1. The person pleading non est factum must belong to "class of persons, who through no fault of their own, are unable to have any understanding of the purpose of the particular document because of blindness, illiteracy or some other disability."[5] The disability must be one requiring the reliance on others for advice as to what they are signing.[6]
  2. The "signatory must have have made a fundamental mistake as to the nature of the contents of the document being signed," including its practical effects.[7]
  3. The document must have been radically different from one intended to be signed.[8]

Non est factum is difficult to claim as it does not allow for negligence on the part of the signatory, i.e. failure to read a contract before signing it, or carelessness[9], will not allow for non est factum. Furthermore, the Court has noted that there is a heavy onus that must be discharged to establish this defence as it as an "exceptional defence."[10][11]

Notable Examples

In Petelin v Cullen (1975), the defendant, Petelin, was illiterate and could speak very little English, but still signed a document he believed to be a receipt for $50 but actually gave Cullen the option to purchase Petelin's land, which he exercised. Petelin refused to sign the contract for sale, alleging he had been deceived, and Cullen sought specific performance. The court found that because of Petelin's mistaken belief which was not because of his carelessness, his claim of non est factum was successful. The court noted that even if he had been careless, "Cullen was not an 'innocent person without knowledge or reason to doubt the validity of the appellant's signature'".[12][13]

In Lloyds Bank v Waterhouse (1990)[14] a father acted as a guarantor to his son's debt when purchasing a farm. The father was illiterate and signed the bank document under the belief that he was acting as the guarantor for the farm only, when the contract was actually for all the debt accumulated by the son. As he was illiterate, this was a mistake as to the document signed and the father was successful in claiming non est factum.

Another notable case on non est factum is Foster v Mackinnon (1869) LR 4 CP 704 where an elderly man signed a bill of exchange but was only shown the back of it. He was granted a new trial.[15]

Illustratively, in Ford v Perpetual Trustees Victoria Ltd [2009],[16],[17] the son of Mr Ford (Appellant) had arranged a loan from a bank to arrange for the purchase of a cleaning business, by using his father's residential property as security. When he defaulted, the bank sought to enforce its rights under the loan and mortgage agreements.

Because Mr Ford was illiterate (though capable of signing his name), suffered from a "significant congenital intellectual impairment" and had no understanding of the particulars of the agreement or consequences of non-payment, the judge at appeal found that he had been the pawn of his son throughout, and "his mind was a mere channel through which the will of his son operated."[18]

The Court dismissed the argument that the appellant had been careless as that would presume that he was capable of turning his mind to the issue and making judgements.[19] It ruled that Mr Ford lacked the legal capacity, and therefore contract was void for non est factum. While not a binding judgement, this example illustrates an application of Petelin v Cullen [1975] as it depicts the necessary level of incapacity and level of misunderstanding required to shift the heavy burden of the party raising the defence.

References

  1. ↑ Chew, Charles Y C The Application of the Defence of Non Est Factum: An Exploration of its Limits and Boundaries, University of Western Sydney Law Review  (2009)
  2. ↑ Petelin v Cullen [1975 HCA 24],
  3. ↑ AC 1004.
  4. ↑ 132 CLR 355; [1975] HCA 24.
  5. ↑ Chew, Charles C Y (2009). Non Est Factum: 85.
  6. ↑ Chew, Charles C Y (2009). Non Est Factum: 85; Petelin v Cullen (1975) 132 CLR 355, 359.
  7. ↑ Chew, Charles C Y (2009). Non Est Factum: 85.
  8. ↑ Chew, Charles C Y (2009). Non Est Factum: 85.
  9. ↑ Petelin v Cullen (1975) 132 CLR 355, [12].
  10. ↑ Chew, Charles C Y (2009). Non Est Factum: 85-86
  11. ↑ Petelin v Cullen (1975) 132 CLR 335, 359-60.
  12. ↑ Petelin v Cullen (1975) 132 CLR 355, [15].
  13. ↑ Clarke, Julie Petelin v Cullen, ((2013))
  14. ↑ [1993] 2 FLR 97.
  15. ↑ Mistake Cases | Contract Law,
  16. ↑ NSWCA 186; (2009) 257 ALR 658.
  17. ↑ Bant, Elise Incapacity, Non Est Factum and Unjust Enrichment, Melbourne University Law Review  (2009)
  18. ↑ Bant, Elise (2009) Incapacity, Non Est Factum and Unjust Enrichment, Introduction.
  19. ↑ Bant, Elise (2009) Incapacity, Non Est Factum and Unjust Enrichment, Introduction.


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