1. Vitiating Factors To vitiate:
To impair; to make void or voidable; to cause to fail of force or effect.
To destroy or annul, either entirely or in part, the legal efficacy and binding force of an act or instrument
Black’s Law Dictionary

2. Vitiating Factors Inducement by undue influence
Inducement by force and fear (duress).
Inducement by mistake
Inducement by misrepresentation

3. Mistake
Common Mistake
Mutual Mistake
Unilateral Un-Induced Mistake

5. Common Mistake
Here, the parties make the same mistake. Where the mistake is fundamental, or goes to the root of the contract, the position adopted by the law is that a valid contract was never formed.
In other words, the essential ingredient of consensus in idem (a meeting of the minds) never really occurred.

6. “Does the state of the new facts destroy the identity of the subject-matter as it was in the original state of facts?”
Leaf v International Galleries [1950] 2 KB 86 (Constable)
Nicholson & Venn v Smith Marriott (1947) 177 LT 89. (Linen)
The common error, although relating to the quality of the goods, also affected the description and nature of them.

7. Great Peace [2002]
There must be a common assumption as to the existence of a state of affairs;
There must be no warranty by either party that that state of affairs exists;
The non-existence of the state of affairs must not be attributable to the fault of either party;
The non-existence of the state of affairs must render performance of the contract impossible; and
The state of affairs may be the existence, or a vital attribute, or the consideration to be provided which must subsist if performance is to be possible.

8. Mutual and Uninlateral
There must be a fundamental mistake
The mistake must induce the contract

9. Mutual Mistake
In these cases, the parties are said to be at ‘cross-purposes’. In other words, the error is not shared by both parties, as is the case with common error. The parties simply have entirely different ideas as to what the contract involves.
Raffles v Wichelhaus [1864]
Scriven Bros v Hindley & Co [1913]

11. Unilateral Mistake of Identity
Mistaken party must have intended to deal with some person other than the person with whom he has apparently made the contract; and
That the latter was aware of this intention; and
That, at the time of negotiating the contract, he regarded the identity of the other party as a matter of fundamental importance; and
That he took reasonable steps to verify the identity of that party.

13. Unilateral Mistake
The appeal court held that this was a case where the maxim caveat emptor (‘buyer beware’) applies. A sample of the product was displayed and there was a reasonable opportunity to examine the sample. Nothing was said by the seller to indicate that the oats were new and not old. As Chief Justice Cockburn put it:
“The buyer in no way refers to the seller, but acts entirely in his own judgement.”
In such cases, there is no remedy for the mistaken party.

14. Unilateral error can give grounds for having the contract set aside.
This occurs when the other party is aware of the error being made and seeks to take advantage of it. Where he does so, the unilateral error can allow the party to have the contract reduced. This is sometimes described as the idea that a party is not allowed to unfairly ‘snatch at a bargain’.
In order for the contract to be able to be set aside in this way, the mistaken party must not be at fault for his mistake. Also, the courts have made it clear that as long as the mistake ought reasonably to have been known to the other party, this will suffice, there is no need to prove actual knowledge. (Hartog [1939])

15. Mistake in Respect of Documents
Rectification: This allows the contract to be altered where it does not accurately represent the intentions of the parties.
3 Requirements:
There must be agreement between the parties on all points;
The agreement must have continued unchanged until the time it was put into writing;
The writing fails to express the common intention of the parties.

16. Mistake in Respect of Documents
Non est factum
Trans. “A plea denying execution of instrument sued on” or “it is not my deed”
This may operate where someone, without carelessness, signs a document under a misapprehension as to its true nature or content.

17. Misrepresentation:
A false statement of fact that must have induced the contract in the sense that it must be material to the decision to contract, be known to the representee, be intended to be acted upon, and have been acted upon.

18. Misrepresentation False statements But not,
Conduct as a ‘statement’: Spice Girls
But not,
Sales puffs
Opinion, usually
Statements of law, unless made by a professional
Silence, unless there is a duty to disclose

19. Expression of Opinion, Exception
Where the statement maker has some special knowledge, skill or expertise on the subject matter of the statement. In such a case, although it is still statement of opinion, it will be regarded as a misrepresentation if false: Esso Petroleum Ltd. v Mardon [1976].
The same is true where the person who expresses his view is in the best position to know the true situation. So, in Smith v Land & House Property Corporation (1884), the seller of property who described the tenant to the buyer as ‘a most desirable tenant’, when the case was otherwise, was held to have made a statement of fact, not expressed an opinion.

20. Assuming the utterance is a statement of fact, how do we know when it is a misrepresentation?
A misrepresentation is not made when one party indicates his future intention, and then changes his mind and does something different, as long as he does so innocently. (Edgington v Fitzmaurice [1885])

21. Silence Can a misrepresentation be made by saying nothing?
There are some cases where there is a duty of disclosure implied by the law and where a failure to disclose will, therefore, constitute a misrepresentation.
For example, in a special class of contracts, known as contracts uberrimae fidei (‘of utmost faith’). (ex. Insurance)
Fiduciary relationships.

22. Half-truths
Where a statement is made and only part of the story is told (albeit truthfully) and some of the position remains undisclosed, this can be regarded as a false statement of fact.
Dimmock v Hallett [1866] (farm tenants)
Curtis v Chemical Cleaning & Dyeing Co [1951] (beads)

23. Change of Circumstances
Believes statement is true but then must disclose if circumstances change.
With v O’Flanagan [1936] (Dr. practice)

24. Misrepresentation must be material
Assuming the aggrieved party can establish that a misrepresentation was actually made, it must be a material one in order to form the basis of an argument to cancel the contract.
The test of whether this is the case involves considering whether the misrepresentation would positively influence a reasonable person into entering the contract. Museprime Properties v Adhill Properties [1990]

25. Misrepresentation must be material
An objective approach is taken, so the question is not whether it positively influenced the party to enter the contract. So, trivial false statements will have no effect on the validity of the contract. Pan Atlantic Co Ltd v Pine Top Insurance [1994]

26. Misrepresentation induces the contract
The party seeking to cancel the contract on the basis of a misrepresentation must establish that he entered the contract in reliance of it.
This does not mean that the misrepresentation must be shown to have been the only reason the contract was entered into, only that it was one such reason.

27. No reliance if,
1. Representee was unaware of misrepresentation at time of contracting. Re Northumverland and Durham District Banking Co, ex parte Bugge [1858]
2. Used own judgement. Attwood v Small [1838]
3. Representee was aware of untruth. Peekay Intermark Ltd v Australia and NZ Banking Group [2006]

28. Be a misrepresentation Be a material misrepresentation and
To summarise, in order to be actionable as a misrepresentation, the utterance must:
Be a statement
Be a misrepresentation
Be a material misrepresentation and
Induce the contract

29. Misrepresentation Fraudulent misrepresentation
Negligent misrepresentation
Innocent misrepresentation

30. Fraudulent: Derry v Peek
“...fraud is proved when it is shown 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. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states.
To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth.”

31. Fraudulent
The most difficult of these three types is the category of a reckless statement. The distinction between a reckless statement and a negligent one appears to be that the maker of a negligent misrepresentation believes it to be true, but has been careless in making it.
The maker of a reckless misrepresentation (which is classed as a fraudulent one for damages purposes) is taking a risk: he/she does not know whether the statement is false or not, but makes it anyway.

32. Negligent
There is a belief that the statement being made is true. However, it is only in cases where the maker of the statement can be relied upon to use his skill, knowledge or expertise in the relevant area that the possibility of a negligent misrepresentation arises.
In other words, if someone with no knowledge or qualifications in the area concerned makes a statement, there would be no reason to rely upon it.
So, negligent misrepresentations can only be made by certain persons.
The maker of such a misrepresentation need not, however, be a professional person, although he/she usually will be. He/she just needs to be someone with some skill, knowledge or expertise in the area.

33. On the question of the standard of negligence,
This occurs when the statement is made without due care and attention.
There is a professional standard of care and a non-professional one, and the question of whether the statement fell below the appropriate standard is one answered by the law of tort.
Hedley Byrne & Co. v Heller & Partners [1964]

34. On the question of the standard of negligence,
So, it is not enough that the statement is simply wrong and is made by a professional, for example. It requires to have been negligently made.
There is a duty not to make negligent misstatements if there is a ‘special relationship’ between the parties.
Proximity and special relationship
Caparo Ind. V Dickman et al [1990]

35. Innocent
The false statement is made in the honest belief that it is true, but in circumstances where the statement has not been made negligently.
Representor believed facts he stated and can prove that he had reasonable grounds for believing so. (MA s2(1))

36. A statutory alternative is provided in s
A statutory alternative is provided in s. 2(1) of the Misrepresentation Act 1967:
(1) Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made the facts represented were true…

37. Benefits of relying on the statutory provision:
The burden of proof is reversed.
The party alleging the misrepresentation is not required to prove that it occurred; the party disputing it is required to establish that it did not occur. In addition, the claimant in a case under this section is only required to establish that the misrepresentation was made. It is then for the other party to establish reasonable grounds to believe as well as an actual belief on his/her part that the facts represented were true. (Howard Marine & Dredging v Ogden & Sons [1978])
Damages are required to be paid on the basis of the law of tort, even where the claimant does not manage to establish that the misrepresentation has been made negligently.

38. Remedies for Misrepresentation
Affirmation
Bar to Specific Performance
Rescission
Damages
Misrepresentation Act 1967

39. Rescission
This remedy involves asking the court to ‘set the contract aside’ in other words to cancel it.
However, this is not the same as treating the contract as ‘void’, which involves a finding by the court that it never existed. Voiding a contract is not one of the remedies available for misrepresentation.
Rescission involves cancelling the contract and putting the parties back in the position they were in before the conclusion of the contract.

40. Rescission
One of the fundamental problems with the right to rescind is that it does not affect third party right acquired in the subject matter of the contract between the time of conclusion of the contract and the court action to rescind. In other words, until the remedy of rescission is sought, the contract continues in full force.
So, for example, if the goods have been sold on, and the buyer (third party) takes them in good faith, the original seller will not be able to obtain the remedy of rescission if he/she seeks it after the re-sale, the third party keeps the goods.

41. Recission
The remedy of rescission will not be available where it is not possible to put the parties back in the position they were in before the contract was concluded.
Therefore, if the goods have been destroyed or no longer exist or if the contract has been completed and a reversal of the situation would be very difficult, rescission will not be possible.
This idea is sometimes stated as the rule that restitution in integrum (restoring the parties to their original positions) must be possible.

42. Damages
This remedy involves the party aggrieved seeking monetary compensation for the loss suffered. This might be due to a diminution in the value of the item bought.
Where damages are claimed, the amount of damages is calculated according to the relevant tort principles.

43. Damages
In the case of innocent misrepresentation, the position is that restitution of the price paid is all that is possible at common law.
So, if the item, for example the painting, has reduced in value since the sale, this loss will not be able to be recovered only the original price paid would be awarded as damages.

44. Damages
In the case of negligent and fraudulent misrepresentation, the party can seek to rescind the contract as well as seeking damages (under the tort principles) for any additional loss.
For example, the price and goods would be handed back, and any loss suffered in addition would be able to be claimed.

45. Damages
There is one other possibility here. Sometimes the innocent misrepresentation will be a breach of contract. This leaves the party induced by it with two options:
He can seek to rescind the contract and force the return of the price paid or
He could simply sue for breach of contract.
This will only apply in cases of innocent misrepresentation, since in the other two types; damages can be claimed in addition to rescission anyway.

46. Statutory Alternative: Misrepresentation Act 1967
s 2 Damages for misrepresentation. ….(2) Where a person has entered into a contract after a misrepresentation has been made to him otherwise than fraudulently, and he would be entitled, by reason of the misrepresentation, to rescind the contract, then, if it is claimed, in any proceedings arising out of the contract, that the contract ought to be or has been rescinded, the court or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of opinion that it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract were upheld, as well as to the loss that rescission would cause to the other party.

47. Contributory Negligence
Once it has been established that damages are payable, it might be possible to argue that they should be reduced on the basis of the negligence of the person relying on the misrepresentation.
The possibility of contributory negligence applying to non-fraudulent misrepresentations has been established
There can be, as a matter of policy, no contributory negligence argument where the misrepresentation is fraudulent.