Topic 4: Improperly Obtained Consent
1. General Introduction
Where there has been improperly obtained consent the contract could be voidable and not void, this is because
the requirement of consent is still met, but it has been achieved through improper means
There is consensus, therefore not as serious as a situation where there is for e.g. a iustus error, but the victim
whose consent is improperly obtained may rescind the contract
- Thus, the contract is voidable at victims’ instance, not void
Division of improper ways of obtaining consent:
- (1) Misrepresentation
- (2) Duress (unlawfully threatening a person with harm)
- (3) Undue influence (exploiting a weakness in the victim)
- (4) Bribery
Problems with division:
- It is not clear where the division ends – it is an open-ended category, we don’t know what else
constitutes an improper manner of obtaining consent
- Possible overlap
E.g. Some forms of bribery may appear as misrepresentation
It is not always entirely possible to tell, in relation to the fact patterns, what manner is being
utilised to improperly obtain consent
- Therefore, it has been argued that we should do away with the divisions and just have one general
ground of improper obtaining of consent
But we do not work with one general ground, but the specific categories
Have to argue based on a specified ground of improperly obtained consent
- What about manners which may not be as serious as the specific examples, but which still amount to
obtaining consent in an ‘improper’ manner?
E.g. taking advantage of another’s inexperience, illiteracy, or weaker bargaining power
E.g. taking advantage of the necessity of another
Exploiting a situation of weakness is not in itself a ground of improper obtaining of consent
There are several situations in common law dealing with “weaker” people, but these do not
qualify (legally) as manners of obtaining consent which are improper, and which we should
therefore protect contracting parties from
There is credit legislation which protects weaker parties, but there is no statutory protection in
any other case
Potential remedies
- Rescission and restitutio in integrum (restored to your previous position)
Both parties must return the performance rendered by the other party
The innocent party may decide whether to rescind and claim restitution, or to enforce the
contract – once this decision is made and communicated to the other party it is irreversible
without the consent of the other party
If the other party is unable to make restitution then the innocent party is entitled to claim the
value of the performance that he or she made
- Delictual claims for damages
The manner of improperly obtaining consent may amount to a delict
Where a delict is committed in this way the innocent party may claim damages in respect of any
losses incurred as a result of the delict (this is available regardless of whether the innocent party
decides to enforce or rescind the contract)
1
, The wronged party may not want to attack the contract itself but feel that they should be
entitled to damages because of the manner in which they were ‘forced’ into the contract
The damages will be measured according to the innocent party’s negative interest (position that
the party would have been in had the delict not been committed – i.e. usually the position prior
to contracting)
Damages will supplement a claim for rescission and restitution or will compensate the innocent
party for losses suffered due to the transaction in cases where he or she elects to enforce
2. Misrepresentation
Definition: a false statement of past or present fact, not law or opinion, made by one party to another before or
at the time of the contract concerning some matter or circumstance relating to it
Will usually be an express, verbal statement, but may also be implied by conduct
- E.g. covering rust patches on a car
Misrepresentations are classified in three ways: fraudulent, negligent or innocent – and each is dependent on
the state of mind with which the representation was made (and therefore the remedies differ)
- A fraudulent misrepresentation is one made (1) knowingly, or (2) without belief in its truth, or (4)
recklessly, careless whether it should prove to be true or false
i.e. there is no honest belief in its truth
Test of honest belief is subjective
- A negligent misrepresentation is one made honestly but carelessly
- An innocent misrepresentation is one made without fraud or negligence (no fault)
Where a misrepresentation causes a mistake in motive (non-material mistake), the contract is voidable
- NB consensus is not excluded in these cases
- E.g. X tells Y that a painting is by Picasso, but it is not, and Y then agrees to buy it
The contract will not be void, because there is consensus
But, the law does not like the way in which consent was obtained, and the contract is thus
merely voidable
- Gives the victim the choice to rescind the contract
Where the misrepresentation causes a material mistake, then the contract could be void under the iustus error
doctrine
- The misrepresentation fulfils the requirement of the reasonableness of the mistake
2.1 Elements of Misrepresentation
Depends on the remedy which you want to employ – e.g. if you want to claim delictual damages then must
prove the elements of a delict
- The requirements for relief are not the same for all of the remedies, the requirements for rescission are
different from the requirements for damages, for e.g.
- Do you want to avoid? Rescind? Or claim damages?
(1) Representation
- Misrepresentation distinguished from other pre-contractual misstatements:
Warranties or contractual terms: where a statement of fact is made during pre-contractual
bargaining or is embodied in a contractual document (e.g. the car is a 1985 model), it may be a
question as to whether the statement is a mere representation or a warranty (a term of the
contract) – test focuses on the intention of the parties to distinguish: did they intend that the
statement form part of the contract?
May also be liable though in terms of the Smith v Hughes doctrine if the other party
placed a reasonable reliance on the impression that the statement was being warranted
Opinions, statements as to the future and statements of law : expressions of opinion, forecasts,
or statements of intention that prove to be incorrect or unfulfilled will not usually amount to
misrepresentations – but, if the speaker does not hold a genuine belief in what he or she is
2
, stating, or lacks the will to give effect to his or her statement of intention, then he or she is
misrepresenting his or her state of mind, and may be held liable for this
A statement of law has traditionally been considered as one of opinion, and thus not
actionable, but doubtful whether this is still the position, as it is essentially a
misrepresentation of fact (especially if implies a reasonable ground for his or her belief)
Puffs (simplex commendatio): mere general laudation (puffery) doesn’t amount to
misrepresentation if confined to “indiscriminate puffing and pushing and does not condescend
to particulars” – the party is merely singing the praise of his wares – will only entail liability
where it brings in facts and details (will be objectively determined)
Dicta et promissa: a material statement made by the buyer to the seller during the negotiations,
bearing on the quality of the res vendita and going beyond mere praise and commendation – if
the statement is unfounded the purchaser has the Aedilitian actions at his or her disposal
Can include warranties, opinions and predictions, as well as misrepresentations
- The representation must be made as to a matter of fact
Why? Only facts are capable of verification
But, can be problematic to determine if a matter of fact or a matter of opinion
- Misrepresentation as to a matter of opinion?
Feinstein v Niggli:
Facts: Agreement for the sale of a restaurant (the Copper Kettle), in the course of the
negotiations the seller made certain representations as to the profitability of the
business – these representations included statements regarding past turnover
(performance) and whether the income of the restaurant would be sufficient to make
payments of the purchase price, but also to provide for the subsistence of the
purchaser. It became clear that these statements were wildly unfounded, the seller
knew that the restaurant did not do that well and that the income would not be
sufficient for the purposes for which it was represented to be.
It was argued that these were merely statements of opinion and not fact
- They did not meet the traditional parameters of a statement of fact
[see case summary]
It is not so simple to say that an opinion cannot amount to fact, they can be quite
indistinguishable
But, it is obvious that if a seller represented to you that the car he is trying to sell you is
beautiful, this would be a matter of opinion
- Misrepresentation by silence:
Can you make a representation by silence? When would keeping quiet amount to a
representation? Sometimes, by saying nothing, one says a lot
How much must the seller disclose during negotiations? How much do you tell your contracting
partner? The law doesn’t expect you to be your partner’s keeper
How can the law expect you to tell everything to your contracting partner?
The market is dependent on your effort in trying to get a good deal, and rewards you
with good deals
Cicero example: a group of people are stranded on an island with no food or water, a boat
approaches with a merchant who declares that he has barrels of food and water on board and
asks what the islanders have to trade. They declare that they have nothing but sacks of gold and
diamonds. The merchant then proposes an exorbitant trade for meagre portions of food and
water (e.g. a sack of gold for one loaf of bread), and the islanders agree out of their absolute
necessity. What the merchant knew, and what the islanders did not, was that a fleet of ships
were arriving behind him with barrels of free food and water to relieve the islanders. Because
the islanders did not have this information at their disposal, they could not bargain with the
merchant. The issue that arises then, is whether the law should allow the merchant to sell his
3
, goods to these desperate people when he had such a clear information advantage, or whether
he is obliged to tell them what he knows (and in the process, damage his chances of financial
success)
Should there be a duty to speak? A duty to disclose? Did he commit a misrepresentation
by remaining silent?
Should he be liable for a misrepresentation by omission?
- To answer this question, one needs to consider the factors at play
- [NB] Need to consider the factors
Failure to disclose a material fact when under a legal duty to do so
constitutes a misrepresentation by silence therefore the party induced
to contract would be entitled to the same remedies as any other victim
of misrepresentation
NB: “it is not the norm that one contracting party need tell the other all
he knows about anything that may be material” – therefore no duty to
disclose even if the party is aware that disclosure would influence the
other party’s decision
[NB] General test for liability:
Where the contract is one of insurance, agency, partnership or
engagement – these are contracts of utmost good faith
(uberrimae fidei)
Where there is a fiduciary relationship between the parties –
e.g. attorney-client or guardian-ward
Where a statute imposes a duty of disclosure
Where a seller has knowledge of a latent defect in the thing he
or she is selling – will be liable for such defects in terms of the
Aedilitian actions even if not aware of them
Where an applicant for credit is an unrehabilitated insolvent –
status must be disclosed
Where a party’s prior conduct or statement renders silence
misleading
- Where prior conduct has the effect of concealing facts
that would otherwise be apparent to the other party
- Where prior conduct has led the other party not to
expect to find a particular clause in the contract (there
is then a duty to draw attention to the clause)
E.g. Du Toit v Atkinson’s Motors
- Where silence distorts a positive representation – i.e.
where the statement is true, but misleading because it
is not the whole truth, or because it implies further
facts that are false, or where a change of circumstances
falsifies a statement that was true when it was made
Milner: a duty of disclosure exists when there is an “involuntary reliance of the one party on the
frank disclosure of certain facts necessarily lying within the exclusive knowledge of the other
such that, in fair dealing, the former’s right to have such information communicated to him
would be mutually recognised by honest men in the circumstances”
Christie: this principle accords well with the duty of disclosure in uberrimae fidei
contracts as well as with the softening of the distinction between these and other
contracts – this is because these contracts invariably present a relationship of
dependency and trust and hence the “involuntary reliance” – this duty will not be
4
1. General Introduction
Where there has been improperly obtained consent the contract could be voidable and not void, this is because
the requirement of consent is still met, but it has been achieved through improper means
There is consensus, therefore not as serious as a situation where there is for e.g. a iustus error, but the victim
whose consent is improperly obtained may rescind the contract
- Thus, the contract is voidable at victims’ instance, not void
Division of improper ways of obtaining consent:
- (1) Misrepresentation
- (2) Duress (unlawfully threatening a person with harm)
- (3) Undue influence (exploiting a weakness in the victim)
- (4) Bribery
Problems with division:
- It is not clear where the division ends – it is an open-ended category, we don’t know what else
constitutes an improper manner of obtaining consent
- Possible overlap
E.g. Some forms of bribery may appear as misrepresentation
It is not always entirely possible to tell, in relation to the fact patterns, what manner is being
utilised to improperly obtain consent
- Therefore, it has been argued that we should do away with the divisions and just have one general
ground of improper obtaining of consent
But we do not work with one general ground, but the specific categories
Have to argue based on a specified ground of improperly obtained consent
- What about manners which may not be as serious as the specific examples, but which still amount to
obtaining consent in an ‘improper’ manner?
E.g. taking advantage of another’s inexperience, illiteracy, or weaker bargaining power
E.g. taking advantage of the necessity of another
Exploiting a situation of weakness is not in itself a ground of improper obtaining of consent
There are several situations in common law dealing with “weaker” people, but these do not
qualify (legally) as manners of obtaining consent which are improper, and which we should
therefore protect contracting parties from
There is credit legislation which protects weaker parties, but there is no statutory protection in
any other case
Potential remedies
- Rescission and restitutio in integrum (restored to your previous position)
Both parties must return the performance rendered by the other party
The innocent party may decide whether to rescind and claim restitution, or to enforce the
contract – once this decision is made and communicated to the other party it is irreversible
without the consent of the other party
If the other party is unable to make restitution then the innocent party is entitled to claim the
value of the performance that he or she made
- Delictual claims for damages
The manner of improperly obtaining consent may amount to a delict
Where a delict is committed in this way the innocent party may claim damages in respect of any
losses incurred as a result of the delict (this is available regardless of whether the innocent party
decides to enforce or rescind the contract)
1
, The wronged party may not want to attack the contract itself but feel that they should be
entitled to damages because of the manner in which they were ‘forced’ into the contract
The damages will be measured according to the innocent party’s negative interest (position that
the party would have been in had the delict not been committed – i.e. usually the position prior
to contracting)
Damages will supplement a claim for rescission and restitution or will compensate the innocent
party for losses suffered due to the transaction in cases where he or she elects to enforce
2. Misrepresentation
Definition: a false statement of past or present fact, not law or opinion, made by one party to another before or
at the time of the contract concerning some matter or circumstance relating to it
Will usually be an express, verbal statement, but may also be implied by conduct
- E.g. covering rust patches on a car
Misrepresentations are classified in three ways: fraudulent, negligent or innocent – and each is dependent on
the state of mind with which the representation was made (and therefore the remedies differ)
- A fraudulent misrepresentation is one made (1) knowingly, or (2) without belief in its truth, or (4)
recklessly, careless whether it should prove to be true or false
i.e. there is no honest belief in its truth
Test of honest belief is subjective
- A negligent misrepresentation is one made honestly but carelessly
- An innocent misrepresentation is one made without fraud or negligence (no fault)
Where a misrepresentation causes a mistake in motive (non-material mistake), the contract is voidable
- NB consensus is not excluded in these cases
- E.g. X tells Y that a painting is by Picasso, but it is not, and Y then agrees to buy it
The contract will not be void, because there is consensus
But, the law does not like the way in which consent was obtained, and the contract is thus
merely voidable
- Gives the victim the choice to rescind the contract
Where the misrepresentation causes a material mistake, then the contract could be void under the iustus error
doctrine
- The misrepresentation fulfils the requirement of the reasonableness of the mistake
2.1 Elements of Misrepresentation
Depends on the remedy which you want to employ – e.g. if you want to claim delictual damages then must
prove the elements of a delict
- The requirements for relief are not the same for all of the remedies, the requirements for rescission are
different from the requirements for damages, for e.g.
- Do you want to avoid? Rescind? Or claim damages?
(1) Representation
- Misrepresentation distinguished from other pre-contractual misstatements:
Warranties or contractual terms: where a statement of fact is made during pre-contractual
bargaining or is embodied in a contractual document (e.g. the car is a 1985 model), it may be a
question as to whether the statement is a mere representation or a warranty (a term of the
contract) – test focuses on the intention of the parties to distinguish: did they intend that the
statement form part of the contract?
May also be liable though in terms of the Smith v Hughes doctrine if the other party
placed a reasonable reliance on the impression that the statement was being warranted
Opinions, statements as to the future and statements of law : expressions of opinion, forecasts,
or statements of intention that prove to be incorrect or unfulfilled will not usually amount to
misrepresentations – but, if the speaker does not hold a genuine belief in what he or she is
2
, stating, or lacks the will to give effect to his or her statement of intention, then he or she is
misrepresenting his or her state of mind, and may be held liable for this
A statement of law has traditionally been considered as one of opinion, and thus not
actionable, but doubtful whether this is still the position, as it is essentially a
misrepresentation of fact (especially if implies a reasonable ground for his or her belief)
Puffs (simplex commendatio): mere general laudation (puffery) doesn’t amount to
misrepresentation if confined to “indiscriminate puffing and pushing and does not condescend
to particulars” – the party is merely singing the praise of his wares – will only entail liability
where it brings in facts and details (will be objectively determined)
Dicta et promissa: a material statement made by the buyer to the seller during the negotiations,
bearing on the quality of the res vendita and going beyond mere praise and commendation – if
the statement is unfounded the purchaser has the Aedilitian actions at his or her disposal
Can include warranties, opinions and predictions, as well as misrepresentations
- The representation must be made as to a matter of fact
Why? Only facts are capable of verification
But, can be problematic to determine if a matter of fact or a matter of opinion
- Misrepresentation as to a matter of opinion?
Feinstein v Niggli:
Facts: Agreement for the sale of a restaurant (the Copper Kettle), in the course of the
negotiations the seller made certain representations as to the profitability of the
business – these representations included statements regarding past turnover
(performance) and whether the income of the restaurant would be sufficient to make
payments of the purchase price, but also to provide for the subsistence of the
purchaser. It became clear that these statements were wildly unfounded, the seller
knew that the restaurant did not do that well and that the income would not be
sufficient for the purposes for which it was represented to be.
It was argued that these were merely statements of opinion and not fact
- They did not meet the traditional parameters of a statement of fact
[see case summary]
It is not so simple to say that an opinion cannot amount to fact, they can be quite
indistinguishable
But, it is obvious that if a seller represented to you that the car he is trying to sell you is
beautiful, this would be a matter of opinion
- Misrepresentation by silence:
Can you make a representation by silence? When would keeping quiet amount to a
representation? Sometimes, by saying nothing, one says a lot
How much must the seller disclose during negotiations? How much do you tell your contracting
partner? The law doesn’t expect you to be your partner’s keeper
How can the law expect you to tell everything to your contracting partner?
The market is dependent on your effort in trying to get a good deal, and rewards you
with good deals
Cicero example: a group of people are stranded on an island with no food or water, a boat
approaches with a merchant who declares that he has barrels of food and water on board and
asks what the islanders have to trade. They declare that they have nothing but sacks of gold and
diamonds. The merchant then proposes an exorbitant trade for meagre portions of food and
water (e.g. a sack of gold for one loaf of bread), and the islanders agree out of their absolute
necessity. What the merchant knew, and what the islanders did not, was that a fleet of ships
were arriving behind him with barrels of free food and water to relieve the islanders. Because
the islanders did not have this information at their disposal, they could not bargain with the
merchant. The issue that arises then, is whether the law should allow the merchant to sell his
3
, goods to these desperate people when he had such a clear information advantage, or whether
he is obliged to tell them what he knows (and in the process, damage his chances of financial
success)
Should there be a duty to speak? A duty to disclose? Did he commit a misrepresentation
by remaining silent?
Should he be liable for a misrepresentation by omission?
- To answer this question, one needs to consider the factors at play
- [NB] Need to consider the factors
Failure to disclose a material fact when under a legal duty to do so
constitutes a misrepresentation by silence therefore the party induced
to contract would be entitled to the same remedies as any other victim
of misrepresentation
NB: “it is not the norm that one contracting party need tell the other all
he knows about anything that may be material” – therefore no duty to
disclose even if the party is aware that disclosure would influence the
other party’s decision
[NB] General test for liability:
Where the contract is one of insurance, agency, partnership or
engagement – these are contracts of utmost good faith
(uberrimae fidei)
Where there is a fiduciary relationship between the parties –
e.g. attorney-client or guardian-ward
Where a statute imposes a duty of disclosure
Where a seller has knowledge of a latent defect in the thing he
or she is selling – will be liable for such defects in terms of the
Aedilitian actions even if not aware of them
Where an applicant for credit is an unrehabilitated insolvent –
status must be disclosed
Where a party’s prior conduct or statement renders silence
misleading
- Where prior conduct has the effect of concealing facts
that would otherwise be apparent to the other party
- Where prior conduct has led the other party not to
expect to find a particular clause in the contract (there
is then a duty to draw attention to the clause)
E.g. Du Toit v Atkinson’s Motors
- Where silence distorts a positive representation – i.e.
where the statement is true, but misleading because it
is not the whole truth, or because it implies further
facts that are false, or where a change of circumstances
falsifies a statement that was true when it was made
Milner: a duty of disclosure exists when there is an “involuntary reliance of the one party on the
frank disclosure of certain facts necessarily lying within the exclusive knowledge of the other
such that, in fair dealing, the former’s right to have such information communicated to him
would be mutually recognised by honest men in the circumstances”
Christie: this principle accords well with the duty of disclosure in uberrimae fidei
contracts as well as with the softening of the distinction between these and other
contracts – this is because these contracts invariably present a relationship of
dependency and trust and hence the “involuntary reliance” – this duty will not be
4
