What is a vitigating factor?
A vitiating factor may make a contract voidable.
What options does the claimant have is a contract is deemed voidable?
If a contract is voidable the claimant has the option of:
- Asking the court to have the contract declared void (cancelled). This is done through the remedy of rescission which sets the contract aside. If a contract is void it is declared to have never had a legal effect. The parties are put back into the position that they would have been in if the contract had not been made in the first place.
- Continuing with the contract. If the claimant does not exercise the right to make the contract void the contract remains valid.
What are the two vitigating factors?
Two vitiating factors are misrepresentation and economic duress.
What could statements made during the course of negotaions amount to?
Statements made during the course of negotiations could amount to a contractual term or a representation. It is important to know whether a particular statement is a contractual term or if it is a representation as this will determine the appropriate cause of action and remedy available.
What is the difference between a contractual term and representation?
If the statement amounts to a term of the contract which is not carried out, the claimant may sue for breach of contract.
If the statement is merely a representation which turns out to be untrue, the claimant may bring an action for misrepresentation.
What is a representation?
Representations are statements before the contract is made that influence the decision on whether or not to make the contract. These are not usually intended to become terms of the contract.
What is a misrepresentation?
A misrepresentation is an untrue statement of fact made by a party to the contract that induces the other party to enter the contract.
For example, in Smith v Land and House Property, a statement was made by a seller of a house that a tenant living in the property was a “desirable tenant”. In fact, the tenant could not afford to pay rent. This was a misrepresentation.
What is an untrue statement?
a) The untrue statement can made be through words, written or spoken or by conduct.
Spice Girls Ltd v Aprilia World Service
All five members of the Spice Girls took part in the filming of a promotion for Aprilia which was to form part of an advert for Aprilia scooters, but one member of the group left, making the promotion worthless.
Held: As the group knew when making the promotion that one member would be leaving, the conduct of appearing together for the filming was a misrepresentation that the band were all still together.
What cannot be a misrepresentation?
(b) Silence cannot be a misrepresentation
Fletcher v Krell
A woman applied for a job of governess. She was not asked about her marital status and did not of her own choice state that she was divorced. In Victorian times this would mean she would not be offered the job.
Held: There was no misrepresentation as she was under no duty to disclose her marital status, and she had not been asked about it.
Can a true statement become a misrepresentation?
However, once a statement has been made, even if true when it was made, it can become a misrepresentation if it becomes untrue before the contract is made, for example due to a change of circumstances.
With v O’Flanagan
A doctor accurately stated the profits of his medical practice as he wanted to induce someone to buy it.
However, between the statement being made and the contract being made, the doctor fell ill and many of the patients left the practice. This made the original statement about his profits inaccurate.
Held: His silence about the change of circumstances made the statement in to a misrepresentation and he had a duty to correct this.
Explain positive act and misrepresentation.
Where a positive act is done to conceal a defect this will be a misrepresentation.
Schneider v Heath
A boat was deliberately submerged to conceal a defect.
Held: This was a misrepresentation.
Explain a greater duty to disclose facts and misrepresentation.
Where one party is in a position of responsibility over the other there is a greater duty to disclose facts.
Hedley Byrne v Heller
H, bankers, gave assurances over the credit-worthiness of a third party to HB. The third party could not repay their loan to HB.
Held: As the bank were the only ones aware of this fact, they were in a position of trust so when the 3rd party could not repay their loan, HB would, obiter, have been able to claim misrepresentation was it not for an exclusion clause in the contract.
What does the untrue statement have to be?
There needs to be an untrue statement of fact.
What statement is classed as insufficient to be an untrue statement of fact?
A statement of opinion which is honestly believed is insufficient.
Bissett v Wilkinson
During the negotiations a farmer told the purchaser of his land that he thought the land would graze 2,000 sheep, which proved to be inaccurate.
Held: As the farmer had never grazed sheep on the land and the purchaser knew this, the statement was one of opinion and so could not be a misrepresentation.
A statement of law is not held to be fact as no one is expected to be any more knowledgeable about the law than the next person.
What statements are classed as sufficient to be an untrue statement of fact?
A statement of intention (a promise to do something in the future) that the defendant does not intend to carry out is sufficient.
Edgington v Fitzmaurice
A company issued a prospectus, to encourage investment in the business, stating the money invested would be used in a particular way (which the company never intended to do).
Held: This statement of intention was a untrue statement of fact and therefore a misrepresentation.
There are exceptions to this for a lawyer who is expert in that area and for a misrepresentation of the law where there is no belief in the statement.
Pankhania v Hackney LBC
A commercial property was purchased for £4 million. An incorrect statement was made concerning whether the property was legally subject to a license or a tenancy.
Held: There can now be liability for misrepresentation of the law.
What must the untrue statement of fact do?
Induces the other party to enter the contract
What does it mean to induce a party into entering a contract?
This means that the statement must lead the other party into making the contract and must be a critical part of the decision. The statement must have been important to the claimant and they must have relied upon it rather than their own judgment.
Attwood v Small
The seller of a mine made an untrue statement to the buyer about the profits from the mine. The buyer instructed a surveyor to confirm this statement, which he did (incorrectly). The purchaser bought the mine and then discovered the statement to be untrue.
Held: There was no misrepresentation as the purchaser relied on the survey report and not the seller’s statement.
Barton v County NatWest
Held: There is a rebuttable presumption that C relied on an inducing statement if a reasonable person would have done so.
What are the types of misrepresentation?
Fraudulent Misrepresentation
Negligent Misrepresentation
Innocent Misrepresentation
What is Fraudulent Misrepresentation?
The defendant makes a statement but does not believe it is true. This is because the defendant knows it is untrue or is reckless as to whether or not it is true. (Derry v Peek).
How must Fraudulent Misrepresentation be proved?
Fraudulent Misrepresentation must be proved on the balance of probabilities but as fraud is a grave allegation, this must be weighed in balance. (ticket2final v Wigan Athletics)
What are the remedies available for fraudulent misrepresentation?
Rescission - the contract is set aside so both parties return to their pre-contractual positions. Each party recovers from the other anything that has been handed over.
Damages can also be awarded in the tort of deceit.
What is negligent misrepresentation?
This is an untrue statement made by a person who believed the statement was true, but who did not take reasonable care to ensure that it is. (Howard Marine v Ogden)
What does s2(1) of the Misrepresentation Act 1967 tell us?
Under s2(1) of the Misrepresentation Act 1967 all that is needed is for there to be a misrepresentation which results in the contract where the victim suffered loss.
What happens when the victim has proved that there is a misrepresentation?
Once the victim has proved that there was a misrepresentation, the burden of proof reverses. This means that the defendant who made the statement has to show that there were reasonable grounds for believing it was true, and he did believe it was true.
This is a heavy burden for D to discharge.
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Offer24
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Acceptance20
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Consideration23
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Intention to Create Legal Relations10
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Express and Implied Terms18
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Sales of Goods and Services Act - Terms Implied by Statute in non-consumer contracts4
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Consumer Rights Act 2015 - Terms Implied by Statute in Consumer Contracts19
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Conditions, Warranties and Innominate Terms6
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Misrepresentations28
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Economic Duress10
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Performance8
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Frustration13
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Breach of Contract4
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Exclusion Clauses14
