however, fraud does not, of itself, undermine agreement; it simply gives rise to the equitable remedy of rescission (cf p 256) which, when viewed from the position of the common law, means that the contract is ‘voidable’. In addition, damages may be available in tort. Of course, as Goff LJ points out, fraud may result in a court holding that there never was a contract, because the fraud prevented effective offer and acceptance, an essential requirement for most contracts. In this situation, one talks of a ‘void’ contract, even although this is actually a contradiction in terms. However, the courts are usually reluctant to hold that a contract for the sale of goods is void rather than voidable. Why? 3 In addition to offer and acceptance, there must also be consideration and intention to create legal relations in order that a valid contract be constituted. The sub-sections that follow examine some of these requirements, and additional sections look at the main factors that can vitiate a contract. One question that should be borne in mind while reading the materials in this chapter (indeed, in all the chapters on contractual and non-contractual obligations) is the extent to which the cases can be reduced to actual rules. We have already seen from Lord Simon in Lupton (p 183) that no case is an authority outside of its ‘material facts’. To what extent, then, is a subject like contract determined by the kind of transactional disputes that find themselves before the courts? And what factors, in addition to the strict ‘principles’ of the law of contract, might be relevant in determining the actual decision?
Lord Diplock:… To the formation of the contract of abandonment, the
ordinary principles of the English law of contract apply. To create a contract
by exchange of promises between two parties where the promise of each
party constitutes the consideration for the promise of the other, what is
necessary is that the intention of each as it has been communicated to and
understood by the other (even though that which has been communicated
does not represent the actual state of mind of the communicator) should
coincide. That is what English lawyers mean when they resort to the Latin
phrase consensus ad idem and the words that I have italicised are essential to
the concept of consensus ad idem, the lack of which prevents the formation of
a binding contract in English law.