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TOPIC 4 - VITIATING FACTORS IN CONTRACT Readings: Arjunan & Majid, Business Law in Hong Kong , chap. 15-17. Objectives To provide an introduction to the factors which may vitiate a contract, in particular, misrepresentation, mistake, duress, undue influence and illegality. Vitiating Factors A vitiating factor is a factor that makes a contract invalid. That is to say, it is a factor that makes a contract fundamentally defective and not legally binding. Vitiating factors include: A. Misrepresentation B. Duress C. Undue Influence D. Mistake E. Illegality A. MISREPRESENTATION If a representee is induced to enter into contract by a misleading statement, the representee may claim certain relief if actionable misrepresentation established. Meaning of misrepresentation: A misrepresentation is a false statement of a material fact made by one contracting party to another before or at the time contract is made which is designed to and does induce that party to enter into a contract. A statement that is incorporated into a contract becomes a term of the contract. If it is false, the other party can sue on the falsity. An actionable misrepresentation, on the other hand, is a misleading statement which does not become a part of the contract. It is made before the contract is made and is made to induce or cause the other party to enter into the contract and normally does not become a part of the contract. Because a misrepresentation is not a part of the contract, the innocent party cannot sue for breach of the contract. However, as we shall see, the party misled may have other remedies. A party alleging misrepresentation must establish: (a) that the representation was of a fact; (b) that the representation was false; (c) that the misrepresentation was of a material fact (d) that it was addressed to the party misled (before or at the time the contract was made); (e) that it was intended to induce and did induce the contract. We will turn now to each of these requirements. 67 1. It must be a representation of a fact The representation must be one of a fact. A fact is something that is objectively verifiable. An expression of opinion is a statement of belief based upon grounds incapable of actual proof. It is not therefore a representation of fact. Bisset v. Wilkinson [1927] AC 177 Facts: The defendant wanted to sell some land to the plaintiff. The land had never been used for sheep farming, but the plaintiff wanted to buy land for sheep farming. He asked the defendant, who he knew had never raised sheep, how may sheep the land could hold. The defendant said that it could support 2,000 sheep. Relying on this statement, the plaintiff bought the land. His statement turned out to be untrue and the plaintiff wanted to rescind the contract on the ground of misrepresentation. ... View Full Document

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