Lecture on Law of Contract: Vitiating Factors

Introduction

• Continuing discussion on vitiating factors in contracts.
• Previously discussed mistake as a vitiating factor.
• Emphasis on mistake of fact, not law.
• Mistakes must be operative to affect consent.

Mistake

• Common Law vs. Equity

  • At common law, a mistake usually renders a contract void.
  • In equity, a mistake may render a contract voidable.

• Types of Mistakes

  1. Common Mistake: Both parties make the same mistake.
     • Case: Courturier v. Hastie.
  2. Mutual Mistake: Both parties make different mistakes.
     • Case: Raffles v. Wichelhaus.
  3. Unilateral Mistake: One party is mistaken about an aspect of the contract.
     • Often involves fraud.
     • Cases: Cundy v. Lindsay, Shogun Finance Ltd v. Hudson.

Misrepresentation

• Definition: False statement of fact made by one party to induce another to enter into a contract.

• Types of Misrepresentation:

  1. Innocent Misrepresentation:
     • Made without intent to deceive.
     • Remedy: Rescission.
     • Case: Redgrave v. Hurd.
  2. Fraudulent Misrepresentation:
     • Knowingly false or reckless disregard for the truth.
     • Case: Derry v. Peek.
     • Remedy: Damages.
  3. Negligent Misrepresentation:
     • Carelessness in ensuring truth of statement.
     • Introduced by Hedley Byrne & Co Ltd v. Heller & Partners Ltd.
     • Remedy: Damages.

• Key Elements:

  • False statement must be of fact, not opinion.
  • Must induce the contract.
  • Silence generally doesn't amount to misrepresentation unless it distorts truth or involves contracts requiring utmost good faith (e.g., insurance).

Remedies for Misrepresentation

• Rescission:

  • Sets aside the contract.
  • Subject to bars such as affirmation, lapse of time, impossibility of restoration, and third-party rights.

• Damages:

  • Available for fraudulent and negligent misrepresentation.
  • Under UK Misrepresentation Act 1967, damages may be awarded in lieu of rescission.

Conclusion

• Next topics: Undue influence and duress, illegality and public policy.
• Remaining lectures will prepare for examination.

Additional Notes

• Silence and Misrepresentation:

  • Silence as misrepresentation is considered in contracts of utmost good faith.
  • Case: With v. O'Flanagan.

• Impact of Mistakes and Misrepresentations:

  • Errors affect contractual obligations and can void or voidable contracts.
  • Equity's role in providing remedies and fairness in contracts.