Vitiating Factors

• Vitiating Factor

  Makes a contract void or voidable, it effectively invalidates a contract. A contract is void if it has no legal standing.

  Two types of vitiating Factors - Misrepresentation or Economic Duress
• Misrepresentation

  A false statement of material fact made by a party to the contract that induces the other party to enter the contract
• Misrepresentation

  • Can only happen during formation of the contract, they influence the decision
  • Only misrepresentations when false
  • Makes the contract voidable - valid unless a party to the contract who has suffered takes an action to court
  • As a result the court can rescind a contract - recission treats the contract as if it never existed, parties would be put back in positoons they were in before the contract was made
• 4 elements of misrepresentation

  • False statement
  • Material fact
  • Party to the contract
  • Induces the other party
• Element 1 - False statements

  • Statements are usually written or verbal but they dont have to be, it could be anything that would influence the others decision as seen in Spice Girls Ltd , However it can also be through silence as seen in Hamilton v Allied Domecq
  • The statement must be false and the extent of the persons knowledge of the accuracy of the statement when it is made defines the type of misrepresentation it might be.
  • No obligation to make statement about what's being offered but what is said must be true - Fletcher v Krell
• Element 1 - False Statements

  • If it becomes false once the contract is made it can become a misrepresentation
  • A person must correct information where the situation has changed following With v O'flanagan
  • Silence can be a misrepresentation where a statement is a half truth and there's a duty to reveal the whole truth as in Dimmock v Hallett
• Element 1 - False statements

  • Where the relationship between the parties is based on trust then silence may be a misrepresentation as in Tate v Williamson
  • where contract is a contract of 'utmost good faith' then all material facts must be disclosed whether asked about or not as in the case of Lambert v Co-operative Insurance society
• Element 2 - Material Fact

  • Misrepresentation must be of a material fact - would have led a person to make the contract and did in fact influence the mind of the person making the contract
  • Cannot be mere opinion - bisset v Wilkinson, an expression of future intent or mere trade puff - Carlil v Csc
  • A statement of future intention can be seen as a fact if at the time that's what the person intends to do - Edington v Fitzmaurice.
  • If it can be shown the person making the statement couldn't have held such an opinion or had no such intention then there will be a misrepresentation
• Element 3 - Made by a party to the contract

  • Person not liable for statements made by others unless they're his/her agent
• Element 4 - Induces the other party to enter the contract

  • The statement must lead the other into making the contract and must be a critical part in making the contract
  • statement must be important to the person making the contract, they must've relied on the statement made rather than their own judgement or outside information as seen in Atwood v Small.
  • Doesn't matter if they could've discovered truth by taking reasonable steps
• Element 4 - Induces the other party to enter the contract

  • the fact the untrue statement was relied upon is enough to make it amount to a misrepresentation
  • What the reasonable person would/ wouldn't do isn't relevant
• Innocent misrepresentation - Only misrepresentations that can be innocent are those where a party makes statement with honest belief in its truth 


  Remedies -

  • Isnt an automatic or absolute right to damages
  • Right to damages is discretionary
  • Recission can be possible
  • contract can be affirmed
• Negligent Misrepresentation - Occurs when statement isn't true and is made without reasonable belief in its truth

  Can be done in a careless manner or with no reasonable grounds to believe in its truth


  Remedies -

  • Recission and/or damages
  • Damages available under common law
  • Amount of damages can be reduced for contributary negligence
• Fraudulent Misrepresentation - Knowingly false assertion intended to mislead another and make them agree to a contract 


  Remedies -

  • recession and damages in the tort of deceit aiming to put victim in the position before the tort
  • C entitled to reparation for all the damage flowing from the fraudulent inducement Doyle v Olby
  • Possible to recover damages for lost profit following East v Maurer
  • Consequential loss causally linked to misrepresentation can be claimed following Smith New Court Securities Ltd
• Economic Duress

  • Any contracts made where one party is forced into it shouldn't be valid, This could be the result of undue influence - abuse of threats, duress or economic duress
• Undue Influence

  • One party entered contract as a result of pressure which deprived that party of independent judgement
  • Presumed where the relationship is one of trust and one party will benefit at the expense of another. - Allcard v Skinner - novice nun gave nearly all her money to mother superior
• Duress

  • Contract signed under duress might involve threats or violence to persuade one party to sign the contract.
  • Threats of violence too can amount to crimes or torts if those threats were carried out.
  • Barton v Armstrong - death threats made
• Economic Duress

  • threat to damage business or person financially
  • Threats must be improperly coercive.
  • Decide where line is crossed between tough business bargaining, exploiting weaknesses to advantage and improper pressure.
  • In the case of The Sibeon and The Sibotre, court said that serious threats to property should be considered as duress but commercial pressure not enough.
  • Threat to small firm by larger firm that they would breach a contract can be economic duress - Atlas Express v Kafco
• Key Requirements - Must be pressure

  • Practical effort of which there is a lack of choice for the victim
  • Which is illegitimate and
  • which is a significant cause of entering the contract
  • Universe Tankships v ITWF - Threat must leave party with no other choice but to enter the contract and the threat must go beyond legitimate business bargaining
• Key Requirements - Which is illegitimate

  Court in Pao v Lau yiu Long identified the following actors to help decide whether economic duress was present :

  • did the person claiming to be coerced protest about the pressure ?
  • Did the person have any other available course of action that was reasonable?
  • Was he or she independently advised before taking the action?
  • After entering the contract, did he or she take steps to make the contract void?
• Key Requirements - which was illegitimate

  • in CTN cash & carry v Gallagher it was decided that duress was not available when the action threatened was lawful
  • Pressure can illegitimate following Progress Bulk Carries Ltd v Tube City
• Remedies for economic duress


  • Effect of finding a duress is contract is then voidable
  • Doesn't result in an award of damages
  • Injured party can have the contract put aside and recission mus tbe sought out as soon as possible after original economic duress has stopped
  • A restitution order of property or money extracted under duress can be made. This is an equitable remedy and is discretionary