Vitiating factors: misrepresentation, mistake, duress, undue influence — SQE1 Contract question
A worked single-best-answer question on vitiating factors: misrepresentation, mistake, duress, undue influence, with why each wrong option is wrong — the way SQE1 traps candidates.
During negotiations for the sale of his café business, Oscar told Wanda: 'Turnover last year was £180,000.' He was speaking from memory and had not checked the accounts, which showed turnover of £120,000. Oscar handed Wanda a copy of the accounts, but she did not read them because she trusted his figure. Wanda bought the business for a price based on the higher turnover and has since suffered losses. Oscar honestly believed his statement when he made it.
Which of the following best describes Wanda's claim for damages?
- AWanda can claim damages under section 2(1) of the Misrepresentation Act 1967 unless Oscar proves that he had reasonable grounds to believe, and did believe, that his statement was true.
- BWanda has no claim, because she was given the accounts and could have discovered the truth by reading them.
- CWanda can claim damages only if she proves that Oscar knew his statement was false or was reckless as to its truth.
- DWanda has no claim, because Oscar's statement about turnover was a statement of opinion.
- EWanda can rescind the contract but cannot claim damages, because Oscar's misrepresentation was innocent.
Show answer and reasoning
Rule: Under Misrepresentation Act 1967 s 2(1), the representor is liable in damages unless he proves reasonable grounds for believing, and actual belief, that his statement was true.
- B A representee who relies on a statement is not barred because they had the opportunity to discover its falsity (Redgrave v Hurd). (wrong rule)
- C That is the test for fraud; under s 2(1) the burden is on Oscar to disprove negligence. (wrong rule)
- D A specific figure about the business's own past turnover, within Oscar's knowledge, is a statement of fact. (right rule, wrong facts)
- E Oscar had no reasonable grounds for his belief when the accounts were available to him, so the misrepresentation is actionable in damages under s 2(1). (right rule, wrong facts)
Source: Misrepresentation Act 1967, s 2(1); Redgrave v Hurd (1881) 20 Ch D 1; Howard Marine & Dredging Co Ltd v A Ogden & Sons Ltd [1978] QB 574