Core principles of contract law - Vitiating factors

Learning Outcomes

This article covers vitiating factors in English contract law, including:

• Distinguishing void and voidable contracts and the consequences for title and third-party rights
• Elements and types of actionable misrepresentation (fraudulent, negligent under section 2(1) of the Misrepresentation Act 1967 and negligent misstatement, innocent), and the effect of entire agreement/non-reliance clauses subject to statutory controls
• Remedies for misrepresentation: rescission, damages (tortious and statutory), and bars such as affirmation, lapse of time, impossibility, and bona fide purchasers
• Operative mistake: common, mutual, and unilateral mistake (terms and identity), plus non est factum and rectification, and when a contract is void
• Duress: personal, goods, and economic duress; assessing illegitimacy, lack of practical choice, causation, protest, and promptness in variation scenarios
• Undue influence: actual and presumed, relationships giving rise to presumption, and lender “put on inquiry” duties with independent legal advice safeguards
• Illegality and public policy: statutory illegality, proportionality in restraint of trade, and modern policy-based analysis of enforceability
• Application to SQE2 scenarios: spotting vitiating factors, advising on remedies, statutory frameworks (Misrepresentation Act 1967, UCTA 1977, CRA 2015), and equitable bars

SQE2 Syllabus

For SQE2, you are required to understand vitiating factors both in theory and in practice, with a focus on the following syllabus points:

• understanding the specific types of misrepresentation and their remedies
• distinguishing between common, mutual, and unilateral mistake
• understanding the circumstances in which duress or undue influence renders a contract voidable
• understanding how these issues may appear in exam client scenarios, including spotting, explaining, and advising upon vitiating factors or defenses
• understanding the bars to rescission and their impact on available remedies
• understanding the treatment of third-party rights where contracts are void versus voidable
• understanding the effect of illegality or restraint of trade on enforceability and remedies
• defining and distinguishing between void and voidable contracts
• identifying and analysing whether a contract is void for mistake, or voidable for misrepresentation or duress/undue influence
• recognising typical fact-patterns likely to trigger vitiating factors in assessment scenarios
• applying the elements of actionable misrepresentation (statement, falsity, inducement, attribution)
• advising on the scope of economic duress and how it differs from hard bargaining
• explaining how undue influence may be presumed and how lenders can avoid being bound by third-party undue influence through appropriate safeguards
• evaluating whether rescission is available and when damages are recoverable, including statutory routes

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. In which circumstance will a contract be classified as “void” rather than “voidable”?
2. What key elements must a claimant prove to establish actionable misrepresentation?
3. Under what conditions does undue influence arise, and how does the presumption operate?
4. How is economic duress different from mere commercial pressure?

Introduction

Contracts may appear valid but can still be set aside if entered into due to certain legal flaws—a group known as vitiating factors. For the SQE2, it is essential to distinguish contracts that are unenforceable (void) from those where parties may choose to rescind (voidable). This article explains each core vitiating factor and how to analyse typical exam scenarios, with attention to remedies, bars to rescission, third-party rights, and practical client advice.

Void and Voidable Contracts

Key Term: void contract
A contract that is treated as never having existed. No legal effect arises, and property may not pass to a third party.

Key Term: voidable contract
A contract valid until one party chooses to set it aside (rescinds). If not rescinded, it remains fully effective.

The distinction matters for remedies and third-party rights. Under a void contract, title cannot pass at all; under a voidable contract, title can pass unless and until rescission occurs, and bona fide purchasers for value from the innocent party may obtain good title. A voidable contract requires an election: the aggrieved party either rescinds or affirms. Affirmation can be express or implied by conduct (continuing to perform, accepting benefits), and once affirmed, rescission is no longer available. Delay may also bar rescission, especially where the vitiating factor is not obvious immediately; time is assessed contextually (promptness is expected once the defect is discovered).

Rescission is an equitable remedy. Practically, the rescinding party must notify the other party and, where necessary, seek a court order to unwind transfers. Restitution to the pre-contract position is required as far as possible; if this is impossible (e.g. goods consumed or materially altered), rescission may be barred.

Misrepresentation

Misrepresentation occurs when one party enters a contract based on a false statement of fact made by or attributable to the other party. It renders the contract voidable, giving the innocent party options for rescission or damages in certain cases.

Key Term: misrepresentation
An untrue statement of fact or law that induces the other party to enter into a contract.

Elements of actionable misrepresentation include:

• A clear, false representation of fact or law (by words or conduct). Statements of opinion are generally not actionable unless not genuinely held or made by someone with special knowledge where the opinion implies facts. Statements of future intention are not facts but may be actionable if the maker had no such intention at the time. Silence is not usually actionable, but half-truths and changes of circumstances may create a duty to correct a previously true statement before contracting.
• Attribution to the other party. The statement must be made by the contracting party or be legally attributable to them (e.g. their agent).
• Inducement. The representation must materially influence the decision to contract. The claimant need not prove the statement was the sole or dominant reason; it suffices if it played a real and substantial part. Having an opportunity to verify the statement does not prevent inducement unless the claimant in fact relies on their own investigation and not the misstatement.
• Timing. The representation must precede and relate to the contract formation.

Distinguish representations from contractual terms: if a false statement is incorporated as a term, the remedy is for breach of contract; if it remains a representation, misrepresentation remedies apply. Entire agreement and non-reliance clauses may affect this distinction, but they are subject to statutory control.

Types of Misrepresentation

There are three main types:

• Fraudulent: Made knowingly or recklessly without belief in its truth. The maker is liable in the tort of deceit; damages aim to put the claimant in the position as if the misrepresentation had not been made and are not confined by contractual remoteness rules.
• Negligent: Made carelessly; at common law requires a special relationship akin to an assumption of responsibility, or under the Misrepresentation Act 1967, section 2(1), where the burden shifts to the representor to show reasonable grounds for belief in the statement’s truth. If they cannot, damages follow the fraudulent measure.
• Innocent: The maker had reasonable grounds to believe it was true. The court has a discretion under section 2(2) of the 1967 Act to award damages in lieu of rescission.

Remedies for Misrepresentation

• Rescission: The contract can be unwound, putting both parties back to their pre-contract positions, unless a bar applies (e.g. affirmation, lapse of time, impossibility of restitutio in integrum, or third-party rights).
• Damages:
  • Fraudulent misrepresentation: tortious damages (all losses flowing directly from the deceit, subject to causation; foreseeability is not the controlling test).
  • Negligent misrepresentation:
    • Under section 2(1) of the Misrepresentation Act 1967: damages assessed as if the misrepresentation were fraudulent (subject to the representee’s obligation to mitigate and causation).
    • At common law (negligent misstatement): damages per negligence principles where a duty of care existed and was breached.
  • Innocent misrepresentation: rescission remains the primary remedy; the court may award damages in lieu under section 2(2), considering fairness, the nature of the misrepresentation, and whether rescission is disproportionate.
• Contractual controls: Clauses seeking to exclude or limit liability for misrepresentation are subject to section 3 of the Misrepresentation Act 1967 (reasonableness under the Unfair Contract Terms Act 1977), and for consumer contracts the Consumer Rights Act 2015 fairness test applies. Non-reliance wording and entire agreement clauses are scrutinised; they cannot deprive a party of misrepresentation remedies unless reasonable.

Bars to rescission operate to protect certainty and third parties:

• Affirmation: If the innocent party elects to continue the contract after discovering the misrepresentation, rescission is barred.
• Lapse of time: Unreasonable delay, especially where the misrepresentation is non-fraudulent, may bar rescission. For fraud, time generally runs from discovery.
• Impossibility: Where returning parties to their original positions is impossible (e.g. perishable goods consumed), rescission may not be available.
• Third-party rights: If property has passed to a bona fide purchaser for value, rescission cannot unwind their rights.

Mistake

A mistake can prevent a contract from coming into effect or render it void if it is "operative" and fundamental.

Key Term: mistake
A fundamental error about an aspect of the contract that may result in the agreement being void.

Mistake is concerned with the validity of the agreement at the moment of formation. Only fundamental mistakes that prevent true agreement or make the agreement essentially different from what was intended will void a contract; minor mistakes are dealt with by interpretation, rectification, or misrepresentation rather than voidness.

Types of Mistake

• Common mistake: Both parties share the same fundamental error. The classic operative example is when the subject matter has ceased to exist at the time of the contract (res extincta), or where the buyer already owns the subject matter (res sua). Mistakes about quality rarely suffice unless they render the item essentially different from what was contemplated.
• Mutual mistake (cross-purposes): Each party misunderstands the other; objectively, it is impossible to identify a clear agreement. If the court cannot objectively determine meaning, no contract is formed.
• Unilateral mistake: Only one party is mistaken, and the other party knows or ought to know of the mistake, or induces it. Two frequent contexts:
  • Mistake as to terms: Where the non-mistaken party snaps up an offer knowing the other has made a clear error in the terms (e.g. price), the contract may be void.
  • Mistake as to identity: If identity is fundamental and the mistaken party intended to deal with someone else, the contract may be void (particularly where agreement is via written correspondence). In face-to-face dealings, the presumption is that the party intends to deal with the person physically present, so the contract is generally voidable for misrepresentation rather than void for mistake, unless identity was objectively essential and known to be so.

Other mechanisms can address mistakes without voiding the contract:

• Non est factum: A narrow plea allowing a signer to avoid a document where, through no negligence of their own, they sign believing it to be fundamentally different in nature (not merely different in terms).
• Rectification: An equitable remedy aligning a written document with the parties’ common continuing intention where the writing misstates what was agreed.

Effect of Mistake

If operative, the contract is void and treated as having never existed. This has important consequences for property passing and third parties: title cannot pass under a void contract, and restitutionary claims are likely. Where the mistake is not operative, courts may address the issue via construction or equitable remedies; parties may also face misrepresentation analysis if one side contributed to the other’s mistake.

Duress

A contract may be set aside if entered into due to illegitimate threats or pressure amounting to duress.

Key Term: duress
Actual or threatened pressure (physical, goods, or economic) that coerces a party into agreement and deprives them of free consent.

Duress focuses on whether the innocent party’s consent was overborne by illegitimate pressure. Pressure is ubiquitous in negotiations; the law intervenes only when it crosses into illegitimacy and compulsion.

Types of Duress

• Duress to the person: Physical threats; consent is tainted where such threats are a reason for contracting or varying terms.
• Duress to goods: Unlawful threats against property (e.g. detention of goods) used to coerce agreement.
• Economic duress: Illegitimate financial threats depriving the victim of practical choice and significantly inducing the agreement.

Requirements for Economic Duress

Courts evaluate a constellation of factors:

• Illegitimate pressure or threat. Threats to breach contract, commit a tort, or blackmail are paradigmatic examples. Hard bargaining and legitimate commercial pressure (e.g. leveraging supply-demand conditions) are not illegitimate.
• Lack of practical choice. The victim must be compelled in the practical sense, with no realistic alternative (e.g. no timely legal remedy, no viable substitute supplier).
• Causation. The pressure is a significant reason for contracting (it need not be the only reason).
• Protest and promptness. The victim should protest contemporaneously or soon after and take timely steps to avoid or rescind; undue delay or acceptance of benefits risks affirmation.

Economic duress often arises in contract variations: a party demands more money or new terms after formation, threatening breach. Even if practical benefit consideration supports the variation in contract law, it may still be voidable for duress if illegitimate pressure vitiated consent.

Effect of Duress

Duress makes an original or renegotiated contract voidable. The primary remedy is rescission; damages are not typically available for duress itself. Bars to rescission apply:

• Affirmation: Continuing with the contract after the duress abates, or taking benefits, may amount to affirmation.
• Undue delay: Failure to act promptly to rescind can bar the remedy.
• Bona fide purchaser: Where third-party rights intervene, equitable relief may be denied.
• Impossibility: If restitution is impracticable, rescission may be barred.

Undue Influence

Undue influence arises when a relationship of trust and confidence is exploited to influence another party’s decision.

Key Term: undue influence
Improper pressure or abuse of trust/coercion where true consent is impaired, either actually (overt acts) or presumed (due to a special relationship).

Undue influence is equitable and focuses on impaired autonomy, especially in relationships where one party reposes trust in another.

Actual vs. Presumed Undue Influence

• Actual undue influence: Proven improper pressure or domination in a specific transaction (e.g. threats, manipulation, exploitation). The burden rests on the claimant to show the conduct that overbore their will.
• Presumed undue influence: Arises where a relationship of trust and confidence exists (either well-recognised categories like solicitor-client, doctor-patient, trustee-beneficiary, religious adviser-disciple, guardian-ward, or proven on the facts), and the transaction calls for explanation. A gift or substantial transfer without obvious benefit to the influencer may trigger a presumption; then the burden shifts to the alleged influencer to rebut it by showing free, informed consent—typically via independent advice.

Third Party Undue Influence

Where a third party (usually a lender) seeks to enforce a transaction potentially procured by undue influence (e.g. a spouse giving security for the other’s debts), the lender may be put on inquiry. Being put on inquiry arises when the transaction is not obviously beneficial to the surety and there is a risk of undue influence. The lender must take reasonable steps to ensure independent consent, commonly by:

• Insisting that the surety receive independent legal advice from a solicitor unconnected with the influencer.
• Ensuring the advice covers the nature and risks of the transaction (including the extent of liability and possible consequences of default).
• Holding evidence of the advice and, if appropriate, meeting the surety separately so the explanation is untainted.

If these steps are not taken, the security may be voidable as against the lender.

Illegality and Public Policy

A contract may be void if it is illegal by statute or contrary to public policy (e.g. criminal contracts, unreasonably restrictive covenants, some anti-competitive agreements).

Key Term: illegality
A quality of an agreement that renders it void or unenforceable because it is unlawful or contrary to public policy.

Illegality at formation typically renders contracts void, while illegality in performance may render the contract unenforceable by the party committing the illegal act. Modern courts adopt a policy-based approach when deciding whether to deny relief in the context of illegality, considering factors such as the purpose of the prohibition, proportionality, and the impact on parties’ rights. Covenants in restraint of trade must be no wider than reasonably necessary in scope and duration to protect legitimate interests; otherwise, they are unenforceable. Attempts to exclude liability for illegality or contravention of statutory controls are ineffective.

Worked Example 1.1

Scenario: Emma signs a contract to purchase goods from Daniel, based entirely on Daniel’s assurance that the items are brand new. Emma later discovers they are used and would not have bought them had she known.

Answer:
This is actionable misrepresentation. The contract is voidable; Emma may rescind and may be entitled to damages if the statement was negligent or fraudulent.

Worked Example 1.2

Scenario: George agrees to sell a painting to Ruth, believing (as does Ruth) that it is an original by a famous artist. It is in fact a forgery, unknown to both.

Answer:
This is a common mistake as to the subject matter's quality. Unless the forgery is so fundamental as to make the contract essentially different from what was intended (which is unusual for quality), the contract is likely valid. If both believed the painting existed but it had already been destroyed, the contract would be void.

Worked Example 1.3

Scenario: Simon faces a genuine commercial dispute over payment. The other party threatens to report him to the authorities for an unrelated (but true) tax irregularity unless he pays immediately.

Answer:
This is economic duress if Simon’s agreement is induced by the threat, the threat is illegitimate (blackmail), and he protests. The contract may be set aside as voidable.

Worked Example 1.4

Scenario: A parent persuades their adult child to transfer significant funds to them, but the transfer is made without any meaningful explanation or benefit to the child.

Answer:
In a parent-child relationship, the court presumes undue influence. The transaction calls for explanation. The burden shifts to the parent to show the child’s free and informed consent, usually by showing the child received independent legal advice.

Worked Example 1.5

Scenario: A seller falsely states that a car has had one owner. The buyer learns the truth a week later, continues using the car for months, and seeks rescission six months after purchase.

Answer:
Rescission may be barred by affirmation and undue delay. Continuing to use the car after discovering the misrepresentation indicates affirmation. The buyer may still pursue damages if the misrepresentation was negligent or fraudulent, but rescission is unlikely.

Worked Example 1.6

Scenario: A trader advertises high-end laptops at £50 due to a typographical error. A sophisticated buyer, noticing the obvious mistake, places a large order immediately and insists on performance.

Answer:
This is a unilateral mistake as to terms. If the buyer knew or ought to have known of the error and sought to snap up the offer, the contract may be void for mistake. The trader is unlikely to be bound to supply at the erroneous price.

Worked Example 1.7

Scenario: An elderly person signs a guarantee believing it is a simple letter of reference. They did not read it and could have asked for help but did not. Later, they deny liability, claiming they did not understand the nature of the document.

Answer:
Non est factum is unlikely. The plea is narrow and applies only where the document signed is fundamentally different in nature and the signer is not negligent. Here, the failure to take reasonable steps (e.g. ask for explanation) suggests negligence, so the guarantee stands unless undue influence or misrepresentation is established.

Worked Example 1.8

Scenario: A bank takes a charge over a family home to secure the husband’s business debts. The wife signs at the husband’s request without independent advice. The bank did not insist on a separate meeting or any legal advice for the wife.

Answer:
The bank was put on inquiry and failed to take reasonable steps to ensure the wife’s independent consent. The security is likely voidable for undue influence as against the bank. If the bank had required and obtained evidence of independent legal advice covering the nature and risks, the security would be more likely to be enforceable.

Exam Warning

If you wrongly advise that all contracts induced by threats are void (rather than voidable), or fail to distinguish between types of misrepresentation, you risk losing marks for misidentifying remedies or defences. Do not treat legitimate commercial pressure as economic duress; focus on illegitimacy, lack of practical choice, and timely protest. For misrepresentation, identify the route to damages: fraudulent (tort of deceit), negligent under section 2(1) of the Misrepresentation Act 1967, negligent misstatement at common law, or damages in lieu of rescission under section 2(2) for innocent misrepresentation. Ensure you consider bars to rescission (affirmation, delay, impossibility, third-party rights) and the impact on title and third parties. In mistake, resist defaulting to voidness for quality disputes; operative mistake is rare and narrowly confined.

Revision Tip

Focus revision on the facts that trigger vitiating factors. You will often see scenarios in the SQE2 assessment involving one party acting under mistake, misrepresentation, or pressure. Practise advising step by step: identify the factor, confirm elements, test for bars to rescission, consider damages routes and statutory controls (Misrepresentation Act 1967; UCTA reasonableness; CRA fairness in consumer contracts), and address third-party rights. For undue influence in surety cases, remember lenders’ “put on inquiry” obligations and the importance of independent legal advice.

Key Point Checklist

This article has covered the following key knowledge points:

• Vitiating factors include misrepresentation, mistake, duress, undue influence, and illegality.
• Void contracts are treated as never having existed; voidable contracts require choice by the innocent party.
• Misrepresentation must be a false statement inducing the contract and is classified as fraudulent, negligent, or innocent; remedies include rescission and damages (statutory and tortious), subject to bars and statutory controls.
• Operative mistake can make a contract void; subject matter existence mistakes are classic examples. Quality mistakes rarely suffice; unilateral mistake may void contracts where the other party knows of the error.
• Duress requires illegitimate, coercive pressure depriving the other party of real consent; economic duress is assessed by practical choice, illegitimacy, causation, protest, and promptness; remedy is rescission.
• Undue influence may be actual or presumed; certain relationships and transactions may shift the burden of proof. Lenders are put on inquiry in surety scenarios and must ensure independent consent.
• Illegality or contracts contrary to public policy are not enforceable; restraint of trade clauses must be proportionate to legitimate interests.
• Remedy may be rescission, damages, or both, depending on the vitiating factor; rescission may be barred by affirmation, delay, impossibility, or third-party rights.
• Title consequences differ: under a void contract title does not pass; under a voidable contract title may pass unless rescinded before transfer to a bona fide purchaser.
• SQE2 scenarios often test the correct classification and remedy for each vitiating factor, including recognition of statutory frameworks and equitable bars.

Key Terms and Concepts

• void contract
• voidable contract
• misrepresentation
• mistake
• duress
• undue influence
• illegality