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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.

Vitiating factors: misrepresentation, mistake, duress, undue influence

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?

  1. 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.
  2. BWanda has no claim, because she was given the accounts and could have discovered the truth by reading them.
  3. CWanda can claim damages only if she proves that Oscar knew his statement was false or was reckless as to its truth.
  4. DWanda has no claim, because Oscar's statement about turnover was a statement of opinion.
  5. EWanda can rescind the contract but cannot claim damages, because Oscar's misrepresentation was innocent.
Show answer and reasoning
A is the best answer. Under the Misrepresentation Act 1967 s 2(1), a person induced to contract by a false statement of fact may recover damages unless the representor proves that he had reasonable grounds to believe, and did believe up to the time of the contract, that the facts represented were true. Oscar spoke from memory without checking available accounts, so he is unlikely to discharge that burden. Wanda's failure to read the accounts does not prevent reliance (Redgrave v Hurd).

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

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