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

Damages

Rescission

Innocent NO YES

Fraudulent YES – tort of deceit YES

Negligent 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, or2. 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