I don't know SPM, but a factorial design is one where all the cells are empty (and in some implementations requires equal n per cell). It looks likely you have one or more empty cells in the design.

For example:

a 2x2 design with two factors (A and B each with two levels designed A1, A2, B1, B2 etc.) All combinations of levels (i.e., all 4 cells need to contain data at a minimum). So most likely you have some cells that are empty.

There are ways of running such designs (fractional factorial designs) but ideally they should designed to be fractional so you know which effects can be estimated (usually dropping higher order effects) and to estimate them with minimal bias.

Of course this error could also arise because of errors loading data or setting up the model (e.g., treating a continuous variable as a factor will often cause this type of error).

Thank you very much Thom Baguley ! I will try out to check if the uneven number of images is the main problem.

Thanks for the heads up!

Perhaps it is quite simple:

"Found characters the default encoding is unable to represent." - This is the error message, you could verify, that you aren't using strange characters in the "Name" or other fields. SPM is a bit old-fashioned when it comes to character encoding, I'm not certain that it can use characters beyond ASCII.

Martin Domin thank you very much, I think that can be one of the issues