Overview of Vitiating Factors
Even where a valid contract has been formed (with offer, acceptance, consideration, and intention), certain factors may undermine the validity of the agreement. These are known as vitiating factors and may render a contract void (treated as if it never existed) or voidable (valid until set aside by the innocent party).
The five main vitiating factors in English law are: misrepresentation, mistake, duress, undue influence, and illegality. Each has distinct rules regarding when it applies and what remedies are available.
Misrepresentation
A misrepresentation is a false statement of fact (not opinion or future intention) made by one party to the other, which induces the other party to enter the contract. The statement must be one of existing fact, not a statement of opinion (Bisset v Wilkinson [1927] AC 177), future intention, or law.
There are three types of misrepresentation, each with different remedies:
Fraudulent misrepresentation: Made knowingly, without belief in its truth, or recklessly (Derry v Peek (1889) 14 App Cas 337). Remedies: rescission and damages in the tort of deceit.
Negligent misrepresentation: Under s.2(1) of the Misrepresentation Act 1967, the representor bears the burden of proving they had reasonable grounds to believe the statement was true. Damages are assessed on the same basis as fraud (Royscot Trust v Rogerson [1991] 2 QB 297).
Innocent misrepresentation: Made with reasonable grounds for believing it to be true. The remedy is rescission, with the court having discretion to award damages in lieu of rescission under s.2(2) of the 1967 Act.
Bars to rescission: The right to rescind may be lost through: affirmation, lapse of time (Leaf v International Galleries [1950]), impossibility of restitution, or third-party rights.
Mistake
Common mistake (both parties share the same mistake): The contract is void at common law only if the mistake is as to the existence of the subject matter (Couturier v Hastie [1856]) or as to a fundamental quality that renders the subject matter essentially different from what was contracted for. However, the threshold is very high — Bell v Lever Brothers [1932] AC 161 established that the mistake must render the contract "essentially and radically different" from what the parties believed.
Mutual mistake (parties at cross-purposes): Where neither party is aware of the other's intention, the court applies an objective test. In Raffles v Wichelhaus (1864) 2 Hurl & C 906 (the "Peerless" case), the contract was void because there were two ships called Peerless and neither party could be said to have agreed to the same thing.
Unilateral mistake (one party knows of the other's mistake): The contract is void if one party knows the other is mistaken as to the identity of the contracting party and identity is fundamental. The distinction between face-to-face and distance transactions is crucial: Cundy v Lindsay [1878] 3 App Cas 459 (void — distance dealing), cf. Lewis v Averay [1972] 1 QB 198 (voidable — face-to-face).
Duress
Duress renders a contract voidable. It involves illegitimate pressure that leaves the victim with no practical alternative but to enter the contract.
Duress to the person: Physical threats or violence. The contract is voidable (Barton v Armstrong [1976] AC 104).
Duress to goods: Threats to seize or damage property (Astley v Reynolds (1731)).
Economic duress: Recognised in Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366. The requirements are: (1) illegitimate pressure, (2) which was a significant cause of the claimant entering the contract, and (3) the claimant had no practical alternative. The pressure must go beyond ordinary commercial pressure (DSND Subsea v Petroleum Geo-Services [2000]).
Undue Influence
Undue influence is an equitable doctrine that renders a contract voidable where one party has exercised improper influence over the other.
Actual undue influence (Class 1): The claimant must prove that the other party actually exerted undue influence. No presumption arises.
Presumed undue influence (Class 2): Divided into Class 2A (relationships where influence is automatically presumed — e.g., solicitor/client, doctor/patient, parent/child, religious adviser/follower) and Class 2B (relationships where influence is proved on the facts — e.g., husband/wife in certain circumstances).
The leading case is Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773, which established the modern framework. Where a wife provides security for her husband's debts, the bank is put on inquiry and must take reasonable steps to ensure the wife has received independent legal advice.
Key Cases
| Case | Key Principle |
|---|---|
| Derry v Peek(1889) | Defines fraudulent misrepresentation: knowingly, without belief, or recklessly |
| Bell v Lever Brothers(1932) | Common mistake must render the contract essentially and radically different |
| RBS v Etridge (No 2)(2002) | Modern framework for presumed undue influence in surety cases |
| Universe Tankships v ITF(1983) | Recognition of economic duress as a vitiating factor |
| Cundy v Lindsay(1878) | Unilateral mistake as to identity renders contract void (distance dealing) |
Exam Tips
Exam Tip
When tackling a vitiating factors problem question, work through them systematically: (1) Is there a misrepresentation? Classify it and identify remedies. (2) Is there a mistake? Identify the type. (3) Was there duress or undue influence? Always discuss the available remedies for each factor you identify.
Common Mistake
Students often confuse void and voidable contracts. A void contract is a nullity — it never existed, so property passes to third parties. A voidable contract is valid until set aside — property does not pass to innocent third parties until avoidance. This distinction is crucial in mistake vs misrepresentation questions.