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 the contractual doctrine of misrepresentation, the claimant does freely enter the contract but what they were agreeing to is based on a misunderstanding or false statement. Contrastingly, the contractual doctrines of duress and undue do allow for contracts to be set aside due to the claimant not truly consenting to the contract. It is likely that the claimant would not have entered the contract was it not for illegitimate pressure or the exploitation of a relationship vitiating the element of consent. Therefore, the reason that the claimant did not truly consent is only applicable in the doctrines of duress and undue influence.
Misrepresentation refers to an ambiguous, false statement of fact or law that is addressed to the innocent party, that is material and induces them to enter the contract. Lord Herschell in Denny v Peak 1889[1] defined a false statement as "made knowingly, or without belief in its truth, or recklessly, careless as to whether it be true or false"[2] which must have been directed at the representee and is likely to have affected the judgement of a reasonable person. The claimant must also show a link between that representation and that contract, and that that they did not know the statement was untrue, proving they were consenting based on a misunderstanding. Therefore, in the doctrine of misrepresentation, it is not that the claimant did not truly consent but rather they consented on a false statement or misunderstanding. This can be seen in the case of Redgrave v Hurd 1881[3] in which the court of appeal rescinded the contract between Redgrave and Hurd based on innocent misrepresentation. The claimant had not read the accounts provided by the defendant; thus, he did not know what he was consenting to although he freely agreed and signed the contract. It must be noted that the right of recission of the contract can be lost for reasons such as a lapse of time and so recission is not guaranteed. Therefore, the contractual doctrine of misrepresentation makes a contract voidable rather than void as it does not automictically allow for recission. Additionally, the innocent party must want the contract rescinded otherwise it is still enforceable and they must notify the other party of this as seen in Reese Silver Mining v Smith 1869[4] in which it was held that recission for misrepresentation is always the act of the representee themselves. However, in situations where the other party cannot be contacted, recission can still take place as demonstrated in Car and Universal Finance v Caldwell 1869[5] where the claimant could not notify the other party that they wish to rescind the contract as he had disappeared.
Duress is the common law response to illegitimate and overt pressure during the contracting and negotiation process which results in the disturbance of the balance of the negotiation process, enabling the contract to be set aside because the claimant did not truly nor freely consent. The illegitimate pressure must be to such an extent that is significant and unlawful can come in different forms from threats to the person or property and economic duress. To claim there was duress, there must have been a coercion of the will and illegitimate pressure which the courts previously viewed as only violence or threats of violence. Now however, a more expansive view to include threats to a person's property or economic interests and so the defense of duress has risen. Economic duress relates to the unlawful use of economic pressure or threats to overcome the free will of a person which was developed in the Siboen and Sibotre case 1976[6]. To prove economic duress, there must have been a coercion of the will and more recently, a lack of practical choice or alternative must also be shown, and illegitimate pressure, proving the consent was not freely given thus allowing the contract to be set aside. Therefore, although consent may have been given, it must have been under one's free will and not under duress as "duress, whatever form it takes, is a coercion of the will as to vitiate consent"[7] as said by Lord Scarman in Pao On v Lau Yiu Long 1979. Therefore, the doctrine of duress means that the claimant did not truly consent but was forced, diminishing the freedom of choice, making the contract voidable and the court will try to put the parties back in the position they would have been in prior to the contract. Barton v Armstrong 1976[8] saw the chairman of the company threaten the innocent party to have him killed if he did not agree to buy shares in the company. On appeal, court decided if it were not for the threats, then the innocent party most likely would not have entered the contract, reinforcing that there was not genuine consent or freedom of choice.
Similarly, undue influence is an equitable concept that relates to subtle ongoing pressure, enabling contracts to be set aside because the claimant did not truly consent to the contract as it is unlikely, they would have freely entered the contract was it not for the improper influence imposed on the claimant. However, this doctrine is more contested than misrepresentation or duress as there is ongoing debate regarding the meaning of undue and the scope of the doctrine is unclear, especially since "No court has ever attempted to define undue influence" as said by Lord justice Lindley in Allcard v Skinner 1887[9]. Nonetheless, Lord Justice Lindley did give some guidance stating that "generally, though not always, some personal advantage obtained by a donee placed in some close and confidential relation to the doner", enabling one party to unfairly influence the other party to enter the contract. The pressure, like with duress, must be to an extent that is illegitimate and must be used in an illegitimate way which "arises out of a relationship between two persons where one has acquired over another a measure of influence"[10] which is then taken advantage of. Royal Bank of Scotland v Etrdige[11] highlights undue influence in domestic relationships as the wives claimed they had been unduly influenced and their relationship exploited by their respective husbands into signing the security agreement with the bank and the court decided in their favour. Therefore, like duress, the doctrine of undue influence allows for recission as the contract was likely not entered under free will btu from coercion.
In summation, the contractual doctrine of misrepresentation allows for contracts to be set aside due to the contract being, albeit freely, agreed on based on a misunderstanding or false statement. Therefore, what they agreed to, and their understanding is not what the contract is. Alternatively, under duress or undue influence, claimants may know exactly what the contract entails and enter it but not through free will diminishing the concept of consent. Therefore, the reason that the claimant did not truly consent is arguably only true in the doctrines of duress and undue influence and not misrepresentation, thus it cannot be the common reason between the three doctrines for why contracts are set aside.
Grade: 62
References: [1] Denny v Peak (1889) [2] Denny v Peak (1889 [3] Redgrave v Hurd (1881) 20 Chd1 [4] Reese Silver Mining v Smith (1869) HL [5] Car and Universal Finance v Caldwell (1869) [6] Siboen and Sibotre case (1976) [7] Pao On v Lau Yiu Long (1979) [8] Barton v Armstrong (1976 AC 104) [9] Allcard v Skinner (1887 36 Ch.D 145 at 183). [10] Royal Bank of Scotland v Etrdige (no.2) (2001 UKHL 44) [11] Royal Bank of Scotland v Etrdige (no.2) (2001 UKHL 44)
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