vitating factors (invalidating contracts) Flashcards
misrepresentation
False statement of fact.
Made by one party to another.
To induce the other into a contract.
Innocent party believed statements to be true.
Statement musth ave been intended to be acted upon and actually acted upon.
misrepresentation case example: spice girls Ltd v Aprilla world service BV 2002
SC Ltd contracted to promote AWS motorcycles in return for sponsorship on their world tour.
Before signing the contract, Geri informed, she was leaving, the group did not inform AWS and participated in the promotion material.
Geri left 3 weeks after contract was signed, AWS would not have entered the contract if they knew Geri was leaving.
Decision = participation I the promotion amounted to misrepresentation by conduct.
Types of misrepresentation
Fraudulent: making a statement knowing it is false or making it recklessly not caring if it is true or false.
Negligent: making a statement believe it is true but have no reasonable grounds for that belief.
Innocent: making a statement believing it is true and having reasonable grounds too for that belief.
Misrepresentation act 1967
when a person has entered into a contract after a misrepresentation and as a result, he has suffered loss:
he can claim damages even though the misrepresentation had not been made fraudulent,
unless; the party making the statement proves that he had reasonable grounds to believe and did believe, up to the time he contract was made that the facts represented were true.
Duress
if someone enters into a contract under duress if it lacks that consensual agreement.
Traditional view of duress has changed in terms of the law to cater for commercial agreements. Not all parties are of equal bargaining strength in a contract. This was the case in Atlas v Kafco.
Economic duress arises where a contract has been agreed to after extortion by one of the parties. The economic coercion does not have to be unlawful, but it must be greater than normal commercial pressure.
Atlas express Ltd v Kafco
D had delivery contract with C to deliver the goods to stores for a set price.
C insisted on renegotiating the price. D had no alternative but to accept the new terms. The contract was set aside for economic duress.
Mistake
General rule - mistake does not invalid contract.
Except where a mistake is so fundamental to the contract that is an operative mistake which makes the contract void.
mistakes may be
Common - both parties make the mistake.
Mutual - parties are at cross purposes.
unilateral - one party is mistaken.
Under influence
Contract is voidable - it may be set aside by the court on application of the party that has been forced or subject to under influence to enter into the contract.
In some circumstances under influence may be presumed if there is a special relationship existing between the parties such as solicitor and client, doctor and patient, trustee and beneficiary and guardian and ward.
Royal bank of Scotland v Etridge 2001
a bank is ‘put on enquiry’ whenever a wife (or other partner) offers to stand as surety of her husband’s debts
Once a bank has been ‘put on enquiry’ then it must take reasonable steps to satisfy itself that the wife understands the nature and basic elements of the transaction she is intending to enter into.
