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Contract: Vitiating Factors Economic Duress and Misrepresentation
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Detailed explanation on contract law, specifically vitiating factors.
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Contract: Vitiating Factors: EconomicDuress and Misrepresentation
Vitiating Elements
• Vitiating factors occur at the point when the contract is being discussed and formed.
• Vitiating factors give you an opportunity to get out of a contract if the circumstances aren’t
what you thought they were.
• Where consent has been vitiated the contract is not an expression of one of the party’s free
will.
A vitiating element can destroy the contractual agreement; making it VOID.
The effect is that there was never in fact a contract (i.e., never existed / happened), so neither party
can choose to uphold it. Neither parties can resurrect it or be held to their obligations under it.
Vitiating elements that can make a contract void:
• Undue Influence
• Mistake
• Illegality e.g.:
o Illegal to contract to commit a crime
o Illegal if contract is contrary to good morals e.g., Uphill v Wright (1911)
o Illegal to have terms which restrict an employee’s freedom of contract
(during or after employment)
o Some contracts are void by statute e.g., anti-competitive agreements, cartels
Note: don’t need to know mistake or undue influence or Uphill v Wright (1911) case. Sue teaches us
illegality later.
A vitiating element can potentially destroy the contractual agreement; making the contract voidable.
The effect is that the agreement is made VOIDABLE. Note this is not the same as VOID!!! The
contract is not automatically void but the wronged party could AVOID it (i.e., treating it as if void and
therefore unenforceable) OR they could decide to continue with it and or amend its terms.
Vitiating elements that can make a contract voidable:
• Misrepresentation
• Economic Duress
Economic Duress
Barton v Armstrong (1975)
Case Facts
The claimant and defendant were major company shareholders. Following a meeting, it was agreed
that the claimant would buy the defendant’s interest. The claimant brought an action against the
defendant claiming that he was coerced into buying the defendant’s share and that the defendant
had threatened to have them murdered if they did not buy it.
, Case Decision
The Privy Council held that the agreement was under (physical) duress; enabling the agreement to
be set aside and considered voidable by the claimant.
Point to Take Away
Example of physical duress making contract voidable. From the 70s onwards the idea that you could
be economically pressured, not just physically pressured, to enter a contract (i.e., economic duress)
was introduced.
Ingredients / Components of Actionable Duress
• There must be pressure
• Which is illegitimate, and
• Compelling on the victim – leaving them with no practical choice
• Which is a significant cause for inducing the claimant to enter into the contract
• Claim must be brought within reasonable time or might be seen to have been affirmed
Note: actionable means giving sufficient reason to take legal action.
Atlas Express Ltd. v Kafco [1989]
Case Facts
The claimants, a road carrier, entered into a contract with the defendants, a small company
importing and distributing basketware, to deliver cartons (i.e., boxes / containers) of basketware
which the defendants had sold to Woolworths. Atlas tried to negotiate a further term in the contract
for a minimum order of £440 per trailer load. Later, a representative for the claimants turned up to
the defendants’ premises with an empty trailer and told the defendants that if the trailer was not
returned with £440 worth of goods as the new minimum, the trailer would be driven away
unloaded. The defendants were anxious about maintaining a good relationship with Woolworths but
was unable to easily find another carrier. Thus, the defendants agreed to the new terms but later
refused to pay. The claimants subsequently sued.
Case Decision
The High Court held that the defendants were not liable as the defendants’ agreement to the new
terms had been obtained by economic duress. One key factor being that the defendants would have
breached their own contract with Woolworths had they not agreed.
Point to Take Away
Economic duress can occur when illegitimate pressure is imposed. Note that any threat to breach a
contract can be deemed to be illegitimate, as it is a threat to break a legal obligation (here the
claimants were threatening to break their agreement with the defendants).
B&S Contracts and Design v Victor Green Publications [1984]
Case Facts
The claimants were contracted to erect exhibition stands for the defendants, who had let (i.e.,
rented) these stands to various exhibitors. A week before the date of the exhibition the claimant’s
workers refused to work unless a pay demand was met. The defendants paid £4,500 to avoid serious
losses, which would have resulted from the claims made by disappointed exhibitors. The defendants
later deducted the additional figure from the payment to the claimants.
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