Lecture 7
Misrepresentation, Mistake and
Duress
Overview of Vitiating Factors
Unconscionability
Undue influence
Mainly equitable
Duress
Common law
Misrepresentation
Statute
Unilateral
Mistake
Mutual
Common
Remedies for Misrepresentation
Type of
Misrepresentation
Innocent
Fraudulent
Negligent
Damages
Rescission
NO
YES
YES – tort of deceit
YES
YES – tort of negligence
YES
Fraudulent Misrepresentation
Derry v Peek (1889) 14 App Cas 337 at 374, per
Lord Herschell:
… fraud is proved when it is shewn that a false
representation has been made (1) knowingly, or
(2) without belief in its truth, or (3) recklessly,
careless whether it be true or false …
To prevent a false statement being fraudulent,
there must, I think, always be an honest belief in
its truth.
Negligent Misrepresentation
Need to show:
1. Duty of care owed by representor to
representee
2. Representation is false
3. Damage is caused by the falsity of the
statement
Common Mistake
Both parties are mistaken; importantly they
are both under the same mistake
Eg McRae v Commonwealth Disposals
Commission
- Both parties thought the oil tanker existed
Mutual Mistake
The parties are at cross purposes, so that
each reasonably believes that the other is
contracting in relation to a different subject
matter or terms – so much so that there is
no contract (no meeting of the minds)
Unilateral Mistake
Only one party is mistaken, as to either:
1. The terms of the contract, or
2. The identity of the other party
In order for a unilateral mistake to warrant the
setting aside of the contract, the other party
must usually have brought about the mistake,
or have know of it and done nothing to correct
it.
Non est Factum
From Galley v Lee, adopted in Petelin v
Cullen:
The elements to be shown when arguing
non est factum are:
• a disability, and
• induced to sign, and
• the document signed is fundamentally different to
what they thought they were signing
Duress
A wrongful threat that is made to induce
entry into a contract.
Three types:
1. Physical threat against a person
2. Physical threat against goods
3. Economic