VITIATING FACTORS
Objectives:
1.
Misrepresentation
2.
Mistake
3.
Duress and Undue Influence
4.
Illegal and Void Contracts
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Misrepresentation
1.
A term is part of the contract. A
representation is not.
2.
An untrue representation may amount to
an actionable misrepresentation - if so
party to whom misrepresentation was
made will have legal remedies.
An untrue representation which does
amount to an actionable
misrepresentation will not give rise to
any legal remedy.
3.
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4.
Definition of an actionable
misrepresentation
i.
An untrue statement of fact made by one
party to a contract which induced the
other party to enter into the contract.
ii. Two requirements:
i.
The untrue statement was factual.
ii.
The statement induced the other party
to enter into the contract.
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When is a statement factual?
5.
i.
A statement of mere opinion, given
that it is not capable of being
objectively proved true or false
cannot amount to a
misrepresentation.
ii. Bisset v Wilkinson [1927] AC 177.
iii. NB. What sounds like a mere
statement of opinion may impliedly
contain a statement of fact which is
capable of objectively being proved
either true or false.
iv. Esso Petroleum v Marden [1976] QB
801
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v. Generally a statement of intention
cannot amount to a
misrepresentation because it
cannot amount to a statement of
fact.
vi. NB. When a person makes a
statement of intention knowing
that it is false, then the statement
may be regarded as one of fact.
vii.Edgington v Fitzmaurice [1885] 29
ChD 476.
viii.Statements of law cannot be
actionable misrepresentations.
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ix. Generally remaining silent will not amount to
a misrepresentation, even when the party
who remains silent knows that the other
party would not have made the contract if
aware of all the facts.
x. Fletcher v Krell [1873] 42 QB 55.
xi. Exceptions when silence may constitute a
misrepresentation:
i.
ii.
iii.
iv.
There was a change of circumstances; or
The silence concerned a material fact in a
contract of insurance; or
A fiduciary relationship existed between
the parties; or
The silence made statement misleading.
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6.
The statement induced the other
party to enter into the contract.
i. The statement does not need to be
the sole reason why the claimant
made the contract, but it must at
least be one of the reasons.
ii. If a person makes a contract
without checking the truth of the
statement made to him, this
suggests that the statement did
induce him to make the contract.
iii. Redgrave v Hurd [1881] 20 ChD1.
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iv. If a person does check the truth of a
statement made to him he cannot later
then say that the statement induced
him to make a contract. The fact of his
checking the statement will prove that
he did not rely on it.
v. Attwood v Small [1838] 6 CI & Fin 232.
7.
Different Types of Misrepresentation
i. An actionable misrepresentation can be
classified as either:
i. Fraudulent
ii. Negligent
iii. Innocent
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8.
Fraudulent Misrepresentation
i. Made either knowing that the
statement was false, or without
belief in its truth, or being
recklessly careless as to whether
it was true or false.
ii. Derry v Peek [1889] 14 App Cas
337.
iii. Must have acted dishonestly,
mere carelessness not sufficient.
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9.
Negligent Misrepresentation
i. Following must be established:
i. Injured party must prove that :
i. He has suffered loss because an
actionable misrepresentation was made
to him; and that
ii. This misrepresentation would have
entitled him to damages if it had been
made fraudulently.
ii. Maker of misrepresentation must prove
that statement was not made negligently,
i.e. had reasonable grounds to believe
statement was true up until time contract
was made.
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10.
Innocent Misrepresentation
i. Misrepresentation will be deemed
innocent if person who made
statement can prove that he believed
the misrepresentation was true (with
reasonable grounds for such a belief)
up until the time the contract was
made.
11.
Remedies for Misrepresentation
i. A contract which has been made
because of an actionable
misrepresentation is deemed voidable.
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ii. Rescission
i. All three types of misrepresentation
allow for rescission of the contract,
i.e. the person to whom the
misrepresentation was made has the
OPTION to avoid the contract
(rescind it) within a reasonable time
and parties are restored to their precontract position.
ii.
Right to rescind lost if:
i. Person to whom misrepresentation
was made has affirmed the
contract;or if
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ii.
iii.
iii.
It has become impossible to restore
the parties to their pre-contract
position; or if
A third party has acquired rights to
the subject matter of the contract
before rescission.
Damages
i. Available for:
i. Fraudulent misrepresentation; and
ii. Negligent misrepresentation (S.2(1)
Misrepresentation Act 1967); and
iii. Innocent Misrepresentation but only
if in lieu of rescission (S.2(2)
Misrepresentation Act 1967).
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1.
2.
3.
Mistake
Generally, parties to a contract will not
be able to set aside their agreement
simply because they have made a
mistake.
But in some instances the law deems a
mistake as so serious that it will render
the contract VOID.
Courts will classify a mistake into one
of the following categories:
i. Common Mistake.
ii. Mutual Mistake.
iii. Unilateral Mistake.
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4.
Common Mistake
i.
All parties to contract share same mistake
about for instance:
i.
ii.
iii.
5.
Existence of subject matter.
Ownership of subject matter.
Quality of subject matter.
Mutual Mistake
i.
Occurs when all parties to contract are at
cross purposes, i.e. offer relates to one thing
and it is accepted in the belief that it relates
to a quite different thing.
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ii. Contract will not be void for mutual
mistake if reasonable man could infer that
the view of either party was what was
objectively intended by both parties.
6. Unilateral Mistake
i.
Occurs where only one of the parties
makes a mistake about for instance:
i.
ii.
The identity of the other contracting
party.
The terms of the contract.
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7.
Mistake in respect of Documents
i.
A mistake in a written contract can be
dealt with by employing one of the
following mechanisms.
i.
ii.
Rectification – Where the written
contract fails to state the actual
intention of the parties, it may be
altered.
Non est factum – Where one of the
parties signs a contract whilst under a
complete misapprehension as to its
effect, the party may claim non est
factum, i.e. the contract is not their
deed.
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Duress and Undue Influence
The following is an outline only you must
refer to your textbook and case law for
further detail
1.
Duress
i.
Some element of force, either physical or
economic which is used to override one
party’s freedom to choose whether or not
to enter into contract in question.
ii. In such instances, the contract is
VOIDABLE at the instance of the innocent
party.
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2.
Undue Influence
i. Contract may be set aside where it has been
entered into as a consequence of the undue
influence of the person benefiting from
contract.
ii. In such instances, the contract is VOIDABLE
at the instance of the innocent party.
iii. Where there is a special relationship between
the parties, the presumption is is that the
contract was subject to undue influence.
Burden of proof on person who received
benefit under contract to rebut presumption.
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iv. Where there is no special
relationship between the parties,
burden of proof on party claiming
protection of undue influence
doctrine, i.e innocent party.
Illegal and Void Contracts
1.
A contract may be illegal either at
common law or because a statute
makes it illegal. UNENFORCEABLE.
2.
Certain other contracts whilst not
illegal are void because they
contravene public policy.
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