134 Chapter 4Misrepresentation, mistake, duress and illegality
n An actionable misrepresentation is an untrue statement of fact which induced the
other party to make the contract.
n Generally, silence cannot amount to an actionable misrepresentation.
n A misrepresentation is fraudulent if it was made either: knowing that it was untrue;
or not believing that it was true; or recklessly, not caring whether it was true or false.
n A misrepresentation is made negligently if the person who made it cannot prove that
he believed that it was true and that he had reasonable grounds for this belief.
n A misrepresentation is made innocently if the person who made it can prove that he
believed that it was true and that he had reasonable grounds for this belief.
n If a contract is rescinded the parties are restored to the positions which they were in
before the contract was made.
n The right to rescind can be lost if the contract is affirmed, or if a third party has
acquired rights, or if it is impossible to put the parties back into their pre-contract
positions.
n There is a common mistake when both of the parties freely reach agreement, but do so
while making the same mistake.
n A common mistake might be as to the existence of the subject matter of the contract,
or as to the ownership of goods sold or as to the quality of goods sold.
n If one party knows that the other is mistaken as to the terms of the contract, this will
make the contract void.
n A mistake as to the identity of the other contracting party can make the contract void
if the parties did not meet face to face.
n A contract will be voidable for duress if it was made as a result of actual physical
violence or the threat of it.
n A contract may be voidable for economic duress if a person was pushed into it in such
a way that there was no real consent to the contract.
n Many types of contracts are made illegal by statute.
n Some contracts are illegal at common law.
n Illegal contracts are void.Practice questions
1 Two months ago, Samikah bought a small bakery for £1 million. The vendor of the bakery,
Bill, told Samikah that the average monthly turnover was about £100,000. Bill offered to
show Samikah the business records, which he claimed would have proved that his statement
about the turnover was true. Samikah declined this offer, saying that she trusted Bill. The
written contract of sale made no mention of the business turnover. Since Samikah bought the
business, the turnover has been only £30,000 a month. Samikah has now discovered that
the monthly turnover of the business has never exceeded £45,000. Advise Samikah of her
legal position.2 Cedric, a manufacturer of jewellery, received an order from a company called Acme
(Superjewellers) Ltd. Cedric sent a small amount of jewellery and received prompt payment.