Question:
‘The contractual doctrines of misrepresentation, duress and undue influence allow for contracts to be set aside for a common reason: that the claimant did not truly consent to the contract.’
Discuss.
Answer:
In contract law, consent is the permission given to enter into an agreement or contract. The interference by courts due to the contractual doctrines of duress, undue influence, and misrepresentation allows for contracts to be set aside due to a so-called ‘common reason’: that the claimant did not truly consent to the contract. However, it must be recognised that the lack of ‘true consent’ is not always the main reason courts allow contracts to be set aside. In some circumstances, a lack of ‘true consent’ is insufficient a reason to set aside contracts. Fundamentally, the common justification for setting aside contracts is still unclear and lacks proper explanation.
Three conditions must be fulfilled for consent to be ‘truly’ given: voluntariness, genuine intent, and knowledge.[1] The condition of voluntariness reflects the claimant’s ability to enter into the contract of their own free will.[2] Whilst manifestation of genuine intent measures whether the claimant had the capacity to make their own judgement to enter a contract.[3] Finally, assessing the knowledge condition requires evaluating information in light of the facts known to both parties.[4] This condition can only be satisfied when both parties have a mutual agreement based on the same set of facts.
Duress
The issue of whether the claimant has ‘truly’ consented to a contract within the doctrine of duress involves the party’s lack of voluntariness due to threats.[5] It can be argued that when subjected to duress, the claimant was not able to enter the contract of their own free will either due to threats to the person, property, or economic duress. As seen in Barton v Armstrong, unlawful pressure was exerted by the defendant by threatening murder if an agreement was not reached.[6] The fact that this threat occurred made the agreement void as the claimant was not able to enter the contract completely free of pressure. Hence, this violates the condition that consent be voluntarily given.
Some may object to this by using Atiyah’s rationale: that a party who is subject to duress does choose to enter into the contract, but only does so to avoid the greater evil presented by the threat.[7] Although this statement is accurate, it is important to note that there is not an absence of consent, instead, emphasis is put on the fact that the claimant never ‘truly’ consented to the contract due to the lack of the condition of voluntariness. Even though consent is present, it cannot be said that the claimant ‘truly’ consented when there is compulsion due to the lack of practical choice. Therefore, when subjected to duress, the fact that the claimant has not ‘truly’ consented is a reason for the courts to set aside the contract.
Undue Influence
Similarly, with the doctrine of undue influence, consent is not ‘truly’ given as the claimant is not able to make a genuine judgment on whether to enter a contract due to the influence and ‘coercion from outside’.[8] However, not ‘truly’ consenting to an agreement is not always sufficient for courts to set aside a contract. With actual undue influence, as shown in BCCI v Aboody, the court held that undue influence was established, depicting that the claimant did not ‘truly’ consent. However, the contract was not set aside due to the lack of ‘manifest disadvantage’.[9] Therefore, not ‘truly’ consenting is not always a reason for contracts to be set aside in undue influence cases.
It can also be argued that the lack of information regarding the contract due to undue influence can lead the claimant to not ‘truly’ consent, hence resulting in the contract being set aside. As emphasised in CIBC Mortgages Plc v Pitt, the court recognised that the wife did not know about the contract’s true nature due to pressure from her husband to enter the contract. However, the court held that the transaction could not be set aside solely due to this reason.[10] It can thus be deduced that instead of ‘true consent’, perhaps substantive unfairness plays a role in having contracts set aside, as depicted in Schrader v Schrader.[11] Subsequently, this indicates that the lack of ‘true consent’ is not a ‘common reason’ for contracts to be set aside.
Misrepresentation
McKendrick defines misrepresentation as an unambiguous, false statement of fact or law, addressed to the complainant during negotiation, that is material, which induced them to enter into a contract.[12] Significantly, not all types of misrepresentation allow for contracts to be set aside due to the lack of ‘true consent’.
Lord Herschell defined fraudulent misrepresentation in Derry v Peek as a statement which the defendants knew to be false, without belief in its truth, or recklessly made.[13] Intentionally concealing facts from the claimant violates the knowledge condition as the parties did not enter into the agreement based on the same information. This highlights that the claimant did not ‘truly’ consent to the contract. The fact that the knowledge condition is not fulfilled creates the argument that consent is absent. As shown in Redgrave v Hurd, the fact that the claimant did not have all the facts suggests that they were not capable of making an accurate judgement on whether they should enter the contract, thus infringing on the condition of genuine intent.[14] It continues that there is a lack of voluntariness as the fraudulent misrepresentation made it so that the claimant was not given a true and free choice regarding their decision to enter into the contract.
However, as defined under s.2(1) of the Misrepresentation Act, innocent misrepresentation exists when the defendant truly believes the statement.[15] Under the same act, negligent misrepresentation occurs when the defendant has belief in his statement but has been careless in reaching this conclusion.[16] Arguably, the claimant is making the decision whether to enter into the contract based on the same set of facts known to both parties. In contrast to fraudulent misrepresentation, this indicates that the knowledge condition has been fulfilled. Furthermore, the voluntariness and genuine intent conditions have also been satisfied as the claimant entered into the contract of their own will and were not influenced by others in the decision-making process. This, therefore, accentuates that the claimant has ‘truly’ consented to the contract.
Nevertheless, courts do allow for contracts to be set aside due to innocent and negligent misrepresentations. For example, in Bisset v Wilkinson, Bisset’s statement was seen as innocent misrepresentation, thus allowing for the contract to be set aside.[17] Plausibly, there is an element of unfairness if the courts enforce the contract as this might inhibit the claimant’s ability to find a more suitable agreement. Thus, underlining an alternate reason for why courts set aside contracts. Furthermore, in With v O’Flanagan, the contract was rescinded due to a change of circumstances, not because of a lack of ‘true consent’.[18] This suggests that with innocent and negligent misrepresentation there are other underlining rationales for courts to set aside contracts, depending on the nature of each case.
In conclusion, the fact that the claimant did not ‘truly consent’ is not a ‘common reason’ for contracts to be set aside due to duress, undue influence, and misrepresentation. It is present in some types of the above doctrines but is not always the principal reason utilised by courts to set aside contracts. Therefore, the lack of ‘true consent’ cannot be established as the recurring rationale that binds the three doctrines together. Essentially, the ‘common reason’ described in the statement does not always apply and the law has not yet identified an adequate justification that includes all circumstances where contracts are set aside.
Feedback:
Grade: 70
Feedback:
There are some word choices in the introduction / rewording I might suggest to make both the mechanisms and your position more clear. Is it interference? What are you trying to say re: true consent? Good explanation of consent and the three conditions. (Review how whilst is used – not usually at the beginning of a sentence.) Rather than use ‘truly consent’ try grappling with the three conditions you named in the introduction – voluntariness, genuine intent, knowledge. You do a good job of this in the misrepresentation section. Why is it unfair to inhibit the claimant’s ability to find a more suitable agreement – not sure entirely what you are trying to say.
References: [1] Nancy S. Kim, 'Relative Consent and Contract Law' (2017) 18 Nev LJ 170 [2] Ibid. 172 [3] Ibid. 171 [4] Ibid. 172 [5]Orit Gan, 'Contractual Duress and Relations of Power' (2013) 36 Harv JL & Gender 180 [6] Barton v Armstrong [1976] AC 104 [7] P.S. Atiyah, “Economic Duress and the Overborne Will” [1982] L.Q.R. 197, 200 [8] Allcard v Skinner [1887] 36 Ch D 145 [9] Bank of Credit and Commerce International v Aboody [1990] 1 QB 923 [10] CIBC Mortgages v Pitt [1994] 1 AC 200 [11] Schrader v Schrader [2013] EWHC 466 (Ch) [12] Ewan McKendrick, Contract Law (14th edn, Red Globe Press 2021) 261 [13] Derry v Peek [1889] 5 T.L.R. 625 [14] Redgrave v Hurd [1881] 20 Ch D 1 [15] Misrepresentation Act 1967, s 2(1) [16] Ibid. [17] Bisset v Wilkinson [1927] AC 177 [18] With v O’Flanagan
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