Vitiating Factors

Misrepresentation

Misrepresentation is concerned with not making misleading or false statements during negotiations. It renders the contract voidable and may give the right to claim damages

1. A false statement

2. Of fact

3. Which Induces the other party

False statement

the false statement may be in any form - spoken, written or by conduct. it could be anything that would influence another’s decision to contract, in (Gordon v Selico) painting over dry rot was a fraudulent misrepresentation

Spice girls v Aprilia

agreed to sponsor a band tour. Before the contract was signed they filmed a commercial, knowing that a member of the group was about to leave. The court held that this suggested none intended to leave and amounted to a false statement

Fletcher v Krell

Applicant for governess job wasn’t asked and did not state she was divorced. There was no misrep as she did not have a duty to disclose her marital status, Silence doesn’t usually amount to Misrep

Changing circumstances

If the statement was true when it was made but becomes false by the time the contract is entered, the representors failure to disclose the change of circumstances is a misrepresentation

With v O’Flanagan

D told a prospective buyer that the income of a medical practice was £2k. Subsequently D fell ill and the income fell, but the time the contract was signed there was almost no income.

Half truths

if what is said is true, but misleading, as it fails to present the whole picture, there may be a misrepresentation

Dimmock v Hallett

Land was for sale and the seller said that the land was let to tenants (who both put in notice to quit). Omitting this was a misrepresentation

Insurance contracts

Under the (Consumer insurance act 2012) an applicant for a consumer insurance policy has a statutory duty to take reasonable care not to make a misrepresentation. the consumer must answer honestly and reasonably to questions

Omissions in the consumer context

under the (Consumer protection regulations 2008) a misleading omission occurs where a trader misses out key information that the consumer might need to make an informed decision

A statement of “fact”

the false statement made must be a false statement of material fact, as opposed to a statement of belief or opinion

Bisset v Wilkinson

The owner of land told a buyer that the land should support 2,000 sheep (in his opinion). The statement was no more than an honest opinion so couldn’t be a misrepresentation

Esso v Marden

Where a statement is made by an expert, its generally assumed that they know facts to justify their opinions. An Esso representative made an estimate about the output of a garage being built

Edginton v Fitzmaurice

A statement of future intention can be a Misrepresentation if the maker of the statement has no intent to carry out the act. A company secretly intended to use raised funds to pay off debts

Smith v Land and house property Corporation

if a person making a statement doesn’t honestly believe it, it is regarded as a statement of fact. Seller of a property described the tenant as “desirable” knowing they weren’t

Inducement

The false statement must induce the other party to enter into the contract. This means it must actually be relied upon, though it need not be the only reason

Attwood v Small

A made exaggerated statements about the earning capacity of a mine to S. S didn’t believe A and had their own experts check, who wrongly reported they were correct. S couldn’t claim Mirsrep as they relied on their own experts

Redgrave v Hurd

the court of appeal held that it does not matter if the victim could have discovered the truth by taking reasonable steps or it was unreasonable to rely on the untrue statement

JEB fasteners v Marks Bloom & Co

Claimants proceeded with a takeover in order to obtain the services of two directors. there could be no claim of Misrep regarding negligently prepared accounts, as the purpose of the takeover was different

Roscorla v Thomas

After a deal was stuck for the sale of a horse the seller made a statement that was not true, but there was no Misrep as it occurred after the contract was made

Fraudulent Misrepresentation

The most serious type of Misrep. Made “knowingly, without belief in its truth, or recklessly, without caring whether its true or false” (Derry v Peak). leads to both Rescission and the claiming of Damages in deceit

Smith New Court Securities v Scrimgeour Vickers

C was induced to buy shares as a result of fraudulent Misrepresentation. the court allowed C to recover the difference between the price it paid for the shares and their eventual value, as this was a direct loss

Negligent Misrepresentation

The Misrepresentation Act 1967 s.2(1) created a statutory liability for negligent misrepresentation. All that is needed is a Misrep that results in a contract and the victim suffers a loss. Under the act once the victim proves this, the burden of proof shifts to the defendant. This leads to rescission and damages

Howard Marine v Ogden

D misrepresenting a ships carrying capacity. D had got his information from an official register which was wrong. correct information was on the registration documents, owners were liable to pay damages under s.2(1)

Innocent Misrepresentation

A Misrepresentation made entirely without fault. The remedy is Either rescission or damages. S.2(2) gives the court discretion to award damages as an alternative.

The remedy of Rescission

Rescission sets aside the contract and returns parties to the positions they were beforehand. the courts are often unwilling to award rescission if:

• Third party now has some rights in property

• Affirmation of the contract has happened

• Impossible to restore parties

• Lapse of time has occurred

Long v Lloyd

Lorry was falsely stated to be in good condition. Multiple journeys taken by buyer amounted to an affirmation of the contract so they lost the right to rescind

Vigers v Pike

contract concerned a mine and by the time C asked for rescission it had been “worked out”. it was impossible to restore parties as the mine had been extracted

Leaf v International galleries

C bought a painting of Salisbury cathedral which the seller innocently represented was by the artist constable. When C tried to sell 5 years later he found out he was wrong. The 5 year lapse of time meant no rescission could happen

Economic Duress

Duress exists where there is some illegitimate pressure or threat which induces one party to enter the contract because they have no real practical choice other than to agree

Illegitimate pressure

In a claim for economic duress, there must be pressure or a threat. The pressure or threat must also be illegitimate. Ordinary commercial pressure will not amount to duress (Williams v Roffey)

Atlas v Kafco

Kafco secured a valuable contract to supply its products to Woolworths, and contracted Atlas to transport. Before the Christmas period Atlas increased their prices under threat to stop deliveries.

The court held that the agreement to pay extra was duress, as Kafco had no realistic choice other than to sign

Universal Tankships v ITWF

A trade union threatened to block a ship unless the shipowners made changes to pay conditions and a payment to the union. The court decided that the money was extracted as a result of economic duress

CTN Cash & Carry v Gallagher Ltd

CTN purchased from D. by mistake D had sent a shipment to the wrong warehouse and the parties agreed that D would arrange for transfer of the goods, but a burglary occurred beforehand. CTN paid the invoice for the stolen goods under threats to withdraw. This did not amount to a duress.

Times travel v Pakistan International Airline

TT sold tickets for pakistan airlines, and their business was dependant on selling these tickets. Pakistan Airlines gave notice to end the contract, and persuaded TT to enter a new contract.

There was no illegitimate pressure on TT by Pakistan Airlines where the airline had engaged in hard commercial negotiation

Progress Bulk Carriers v Tube City

C hired a ship from D, who then breached the contract by not being able to supply it. D promised to provide an alternative ship, C relied on that promise. At the last moment D refused to provide the replacement unless C agreed to waive claims. This was considered Economic Duress

The pressure was a significant cause inducing C

The illegitimate pressure must have caused the making of the contract, i.e. “but for” the illegitimate threat or pressure, the claimant would not have agreed to enter the contract.

Pao on v Lau Yiu Long

If a party seeks legal advice before complying with a threat, they may be seen as having taken a business decision and be unable to claim duress

Need to protest at the time or shortly after

Economic duress makes a contract voidable, allowing for rescission. However this right can be lost through a lapse of time. It follows that the innocent party must ensure it takes action to protest at the time, or shortly after else the contract may be “affirmed”

The Atlantic Baron

The price of a ship was foxed. While it was being built, the seller decided to raise the price. The buyers were unhappy about this but didn’t want to delay the completion of the ship. 8 months after it was delivered, the buyer tried to claim economic duress, but it failed due to the lapse of time

Carillion Construction v Felix Ltd - Facts

Carillion construction were the main contractor for the construction of an office building. Felix was engaged as a subcontractor, and by the end of February had not completed their set work but still presented a bill. Carillion eventually agreed to pay as Felix was actively delaying the completion of the work

Carillion Construction v Felix Ltd - Law

4 criteria were referred to allowing the claim:

• Threat or application of pressure?

• Lack of practical alternative

• Was the pressure illegitimate

• Was the pressure a significant cause inducing the claimant to enter into the contract