8.1 Vitiating Factors
Key Takeaways
- A misrepresentation is a false statement of existing fact that induces a contract; remedies differ for fraud, Misrepresentation Act 1967 s.2(1), and wholly innocent statements.
- Common mistake at law is extremely narrow after Great Peace Shipping; English law does not keep a separate equitable power to unwind a shared bad assumption.
- UCTA 1977 mainly tests business-to-business exemption clauses for reasonableness; CRA 2015 Part 2 uses fairness, good faith, and transparency for trader-consumer terms.
- Economic duress needs illegitimate pressure that is a significant cause and leaves no practical alternative; lawful-act duress after Times Travel is exceptional.
- Undue influence follows Etridge: actual pressure, or a relationship of trust plus a transaction that calls for explanation; husband and wife is not an automatic Class 2A relationship.
8.1 Vitiating Factors
Quick Answer: A vitiating factor impeaches consent or public policy so that a contract is void, voidable, or unenforceable. The SRA SQE1 Assessment Specification for FLK1 Contract (from 1 September 2026) lists misrepresentation, mistake, unfair contract terms, duress and undue influence, and illegality. Independent OpenExamPrep materials treat these as live file issues: can the client get out, who has title, and what money moves.
A newly qualified solicitor is not marked for reciting history. The paper asks whether a café buyer can unwind a sale, whether a bank can enforce a spouse's charge, or whether a standard-term cap on damages will survive. Start by classifying the complaint. A false pre-contract statement is usually misrepresentation. A shared false assumption with no inducing statement may be mistake. Pressure is duress or undue influence. A clause that strips rights may be an unfair term. A prohibited purpose is illegality. Mixing those labels is a common SQE miss.
Misrepresentation
A misrepresentation is a false statement of existing fact (and, in modern cases, of law) made by one contracting party to the other that induces the representee to contract. Sales talk and honest forecasts are not enough. Bisset v Wilkinson treated a sheep-capacity estimate by a non-expert as opinion. The same words from someone with exclusive knowledge, or an opinion that implied undisclosed facts (Smith v Land and House Property Corp), can be a statement of fact. Conduct can speak: posing as a performing group can represent that the advertised line-up will appear (Spice Girls v Aprilia). Silence is not usually a representation, but a half-truth, a fiduciary setting, a contract of utmost good faith, or a failure to correct a statement that has become false (With v O'Flanagan) can found a claim.
Inducement does not require the statement to be the only reason. The representee may still rescind even if they could have checked (Redgrave v Hurd), unless they in fact relied on their own investigation rather than the statement.
Types and remedies
| Type | Mental element | Who proves fault? | Money claim | Rescission |
|---|---|---|---|---|
| Fraudulent (Derry v Peek) | Knowledge of falsity, no belief in truth, or reckless indifference | Claimant | Deceit: all direct loss flowing from entering the contract | Yes, unless a bar applies |
| Statutory (Misrepresentation Act 1967 s.2(1)) | Treated as if fraudulent unless the representor proves reasonable grounds and actual belief up to contract | Representor (reverse burden) | Court of Appeal in Royscot Trust v Rogerson applied the deceit measure | Yes, unless a bar applies |
| Common-law negligent (Hedley Byrne) | Duty of care in a special relationship; claimant proves want of care | Claimant | Negligence measure; remoteness is reasonable foreseeability | Yes, if the statement also vitiates the contract |
| Innocent | Honest belief with reasonable grounds | Representor who has discharged s.2(1) | No automatic damages; possible indemnity for obligations created by the contract; discretionary damages in lieu under s.2(2) | Primary remedy |
s.2(1) is the workhorse on SQE files because the defendant must prove reasonable grounds. Howard Marine v Ogden shows how hard that is when the speaker ignored an available register. s.2(2) lets the court keep a non-fraudulent contract on foot and award damages instead of rescission, weighing the nature of the misrepresentation and the hardship of unwinding. Do not treat s.2(2) as a free-standing compensatory claim if rescission is already barred.
Bars to rescission: affirmation with knowledge; inequitable delay (time runs from discovery for fraud); third-party rights (a bona fide purchaser of a voidable title); and impossibility of substantial restoration. Prompt communication of rescission matters where goods are about to move (Car and Universal Finance v Caldwell).
Exclusion or restriction of misrepresentation liability, including many non-reliance clauses, is of no effect unless reasonable (MA 1967 s.3, using the Unfair Contract Terms Act 1977 reasonableness standard). A party cannot exclude its own fraud.
Exam trap: voidable title passes to a rogue buyer until rescission. If the rogue sells on, the original seller may lose the asset. Identity mistake (below) can make the first contract void, so title never passed — a different result for the later purchaser.
Mistake
Common mistake requires both parties to share a mistake so serious that the contract is impossible or the subject matter is essentially different. Bell v Lever Bros set a high bar. Great Peace Shipping v Tsavliris confirmed that there is no parallel equitable jurisdiction to unwind a shared bad assumption after Solle v Butcher. A salvage fixture made on a wildly wrong position for the casualty was still a contract to provide a service, not a nullity. Res extincta (subject matter already gone) and res sua (buyer already owns the thing) remain classic voids.
Mutual mistake is cross-purposes: Raffles v Wichelhaus (two ships named Peerless). Unilateral mistake as to terms can prevent agreement where one party snaps up an offer they know was not intended (Hartog v Colin & Shields). Mistake as to identity splits on the mode of contracting. In a written contract that names a creditworthy party, the law treats the named person as the only party (Shogun Finance v Hudson). Face-to-face, the presumption is that you intend to deal with the person in front of you (Phillips v Brooks; Lewis v Averay), so the contract is often only voidable for fraud. Non est factum (Saunders v Anglia Building Society) is reserved for a radical difference in the document signed by someone who was not careless.
Mistake is not a tool for escaping a bad bargain about quality or value.
Unfair contract terms
FLK1 lists unfair contract terms even though the clause may remain in an otherwise valid contract. Two statutes dominate practice files.
| Feature | Unfair Contract Terms Act 1977 | Consumer Rights Act 2015 Part 2 |
|---|---|---|
| Typical parties | Business to business (consumers largely moved to the 2015 Act) | Trader and consumer |
| Death or personal injury from negligence | Cannot be excluded (s.2(1)) | Cannot be excluded |
| Other negligence and standard-term controls | Reasonableness (s.2(2), s.3, and implied-term controls in ss.6–7) | Fairness: contrary to good faith and a significant imbalance (s.62); transparency and prominence |
| Core bargain | Reasonableness still bites many exemption clauses | Main subject matter and price may sit outside the fairness test if transparent and prominent (s.64) |
| International supply | Often outside UCTA (s.26) | Still needs a consumer/trader analysis |
UCTA Schedule 2 points (bargaining strength, inducement, knowledge of the term, special order, insurance) are the reasonableness checklist. On a client file, identify whether the cap sits in the supplier's written standard terms (s.3) and whether it seeks to exclude negligence. CRA 2015 also prevents exclusion of the statutory goods, digital-content, and services rights in consumer contracts (ss.31, 47, 57) and uses Schedule 2 as an indicative grey list of suspect terms.
Duress and undue influence
Duress makes a contract voidable. Threats to the person or to goods remain straightforward. Economic duress needs illegitimate pressure, a significant causal link, and no practical alternative (DSND Subsea; Atlas Express v Kafco). A threatened breach of contract can be illegitimate; ordinary hard bargaining is not. Lawful-act duress is narrow after Times Travel (UK) Ltd v Pakistan International Airlines [2021] UKSC 40: using a lawful monopoly position to re-trade terms in genuine commercial self-interest will not usually suffice. Bad-faith extra-legal leverage (blackmail-type threats) is another matter.
Undue influence is equitable. Class 1 (actual) is overt pressure. Class 2A presumed relationships of trust include parent and child, solicitor and client, trustee and beneficiary, and doctor and patient — not husband and wife. Class 2B is a proven relationship of trust and confidence on the facts, plus a transaction that calls for explanation (Royal Bank of Scotland plc v Etridge (No 2)). The remedy is rescission, with similar bars to those for misrepresentation.
Where a non-commercial surety charges the home for another's debts, the bank is put on inquiry. Etridge steps: insist on independent legal advice and obtain a solicitor's confirmation that the surety understands the documents. Skip those steps and the bank risks being fixed with notice so that the charge is set aside as against the lender.
Illegality
Do not stop at "illegal therefore void." Patel v Mirza [2016] UKSC 42 replaced the old reliance test with a policy enquiry: the purpose of the prohibition, any other public policies (including preventing unjust enrichment), and whether denial of the claim would be proportionate. A statute may expressly or impliedly prohibit formation or performance. Common-law public policy still strikes contracts to commit crime and some agreements that oust the court's jurisdiction. Restraint of trade is a specialised control: a restriction is enforceable only if reasonable in the interests of the parties and of the public (Nordenfelt). Severance may save a valid remainder if a blue-pencil deletion can be used without rewriting the bargain.
Gambling contracts are generally enforceable under the Gambling Act 2005 — do not apply Victorian gaming-voidness on a 2026 paper.
File-handling sequence
On SQE1, work in this order: (1) is there an inducing false statement; (2) if not, is there a sufficiently fundamental mistake; (3) was consent obtained by duress or undue influence; (4) does a statutory unfair-term control strike a clause rather than the whole contract; (5) does illegality bar enforcement or recovery. Then ask void, voidable, or merely unenforceable — because that controls third-party title and the restitution story in the next section.
Official source: SRA SQE1 FLK1 and the FLK1 PDF applying from 1 September 2026, Contract heading "Vitiating factors."
A seller of a high-street café tells the buyer that weekly takings are £8,000. The seller has no records and does not care whether the figure is true. Takings are in fact about £3,500. The buyer completes, relying on the figure. What is the most accurate classification?
A salvage company and a shipowner both believe a casualty is 35 miles away. It is in fact 410 miles away and the booked service is commercially useless. Applying Great Peace Shipping, which statement is most accurate?
A director's spouse signs a legal charge over the family home to secure the company's overdraft. The couple's relationship is one of trust. The bank does not explain the documents or require independent legal advice. Which analysis is best?
A software supplier's written standard terms, used with a small business customer, exclude all liability for negligence causing property damage. The customer had no realistic chance to negotiate. Which statement is most accurate?