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