3.4 - Vitiating factors - misrepresentation and economic duress

Defective Consent

A contract normally rests on voluntary agreement.

In this lesson the two relevant vitiating factors are:

• Misrepresentation: one party enters the contract because of an actionable false statement made before or at the time of contracting.
• Economic duress: one party enters or varies a contract because illegitimate commercial pressure leaves no realistic practical choice.

The victim may be able to rescind, meaning that the court treats the contract as if it had not been made and tries to restore both parties to their pre-contract position. That is different from termination for repudiatory breach, which ends the contract prospectively after the innocent party elects to treat it as at an end.

This distinction matters because AQA examiners repeatedly warn against using "rescission" as a general word for ending any contract. Rescission belongs with misrepresentation, duress and similar defects in consent. Termination for breach belongs with conditions, serious innominate-term breaches and repudiatory conduct.

Misrepresentation Elements

Misrepresentation deals with false statements made before the contract.

AQA mark schemes commonly expect three linked ideas: meaning, type, and remedy. Start with meaning before rushing to fraud, negligence or damages.

The core elements are:

1. A representation: a statement or conduct by one contracting party, or their agent, made before or at the time of contracting.
2. Fact rather than mere opinion or sales talk: the statement must be legally capable of being true or false.
3. Falsity: the representation must be untrue or substantially misleading.
4. Inducement: it must cause the claimant to enter the contract, though it need not be the only reason.

A representation is not the same as a term. A term is part of the contract and breach leads to contractual remedies. A representation is a pre-contractual statement which, if false and relied on, may make the contract voidable. The same statement can sometimes be both a term and a representation, but in an AQA answer you must show which route you are using and why.

Use cases as tools for the boundaries:

Inducement is often the decisive point. Do not write that a false statement must be the sole reason for contracting. It is enough that it was a real and material cause. Conversely, if the claimant checked the matter independently and contracted on that basis, Attwood v Small may defeat reliance.

Types Of Misrepresentation

Once actionable misrepresentation is established, classify it. The type affects damages and evaluation. The three AQA categories are fraudulent, negligent and innocent.

Fraud is a high threshold. It does not require the exact phrase "I know this is false", but it does require lack of honest belief or recklessness. A careless but honest statement is more likely to be negligent under s2(1), especially if the maker could reasonably have checked the facts.

Negligent misrepresentation under the 1967 Act has an important burden point: once misrepresentation is proved, the representor must show reasonable grounds for belief. That makes it easier for the claimant than proving common law deceit. Innocent misrepresentation is left for the representor who both believed the statement and had reasonable grounds for that belief.

Common confusion: a genuine belief does not automatically make the misrepresentation innocent. If the belief was unreasonable, the better classification is usually negligent. This is exactly the kind of distinction AQA expects students to analyse rather than assert.

Misrepresentation Remedies

The main remedies for misrepresentation are rescission and damages. In an AQA answer, remedy analysis should come after the elements and type. A strong answer asks: what does the claimant actually want, and does the law make that available?

Rescission is the primary remedy. It sets the contract aside and aims for restitutio in integrum, meaning restoration of both parties as far as possible. The buyer returns the goods; the seller returns the price. It is equitable and discretionary, so it is not automatic.

Rescission may be barred by:

• affirmation: the victim chooses to continue after discovering the truth, as in Long v Lloyd;
• lapse of time: delay may make rescission inappropriate, especially for non-fraudulent misrepresentation, as in Leaf v International Galleries;
• impossibility of substantial restoration: the parties cannot realistically be restored;
• third-party rights: an innocent third party has acquired rights in the subject matter.

Damages depend on the type:

Do not assume damages are always useful. If the claimant's real loss is simply that they paid for something they would not have bought, rescission may be the practical answer. If the claimant also suffered consequential loss, damages become more important, especially for fraudulent or negligent misrepresentation.