“I know that you
believe you
understand what
you think I said, but
I’m not sure you
realize that what
you heard is not
what I meant.”
Robert McCloskey
(1914–2003)
American author and illustrator of children’s books
Chapter 12
Reality of consent
Essential elements of contract
• Lawfulness
• Capacity
• Serious intention
• Communication – offer and acceptance
• Certainty of terms
• Reality of consent
• Possibility of performance
What is covered in this chapter
• Mistake
• Misrepresentation
• Duress
• Undue influence
• Statutory rights to fair and honest dealing
Reality of consent
A contract may not represent a true meeting of the minds and the
contract may be void or voidable:
– Common law:
• Mistake
• Misrepresentation
• Duress
• Undue influence
– Statutory rights to fair and honest dealing:
• Consumer Protection Act.
‘Mistake’ defined
• A misapprehension of the existence or non-existence of a fact or a
state of facts.
• If all elements are met - mistake is ‘operative’ and contract is void.
Types of mistake
• There are four types of mistake that are recognised by our law, but only one (mistake of fact) is
regarded as ever being operative:
❶ Mistake of law
Ignorance of law is no excuse
No effect on validity
❷ Mistake of expression
Caveat subscriptor (let the signer beware)
Bound by terms, whether he or she has read them or not.
Hotel guest and indemnity clause
Rectification
“Snatch the bargain”
No effect on validity
Other party knew or should reasonably have not known contract ≠ intentions
❸ Mistake of motive
Entering for wrong reason into contract no effect on validity
❹ Mistake of fact
• The only type of mistake that is ever operative in South African law.
• Must be both reasonable (not carelessly made) and material (essential to the contract)
to be operative.
• If operative the contract is void.
• The mistake of fact could be one of the following categories:
– Nature of the contract (contract of sale v contract of lease).
– Subject matter of the contract (insurance v wrong car name and registration no.
– Attributes of the subject matter (20 000km v 12 000km).
– Parties to the contract (name spelt incorrectly)
Types of mistake of fact
• Common: (handbag)
– both parties made the same mistake (20 000km v 20 000km).
– If the mistake is material, the contract is void even if the mistake was not
reasonable.
• Mutual:
– both parties made different mistakes (sale v lease v donation).
– The contract is void only if the mistake is both material and reasonable.
• Unilateral:
– only one party made a mistake.
– The error must be both material and reasonable to affect the validity of the
contract.
Doctrine of unjustified enrichment
• To recover payment or delivery of property made under a mistake of
fact.
• There are four requirements to prove liability
for unjustified enrichment:
– The defendant must have been enriched.
– The plaintiff must have been impoverished.
– The defendant’s enrichment must have been at the expense of the
plaintiff.
– The enrichment must have been unjustified.
Misrepresentation and statements made during negotiations
• Puff:
– Boost one’s goods.
– Not meant to be taken seriously.
• Warranty:
– a statement that becomes a term of the contract and is enforceable.
– Remedy for a breach of warranty aims to place the aggrieved person in
the position he or she should have been in if the warranty had been
true.
• Opinion
– Forecast/opinion usually not misrepresentation
– If persons dos not believe in own opinion – misrepresentation
• Representation:
– A statement made by one party to another, before or at the time of
contracting, that induces the contract but does not become a term of
the contract.
– If erroneous – not misrepresentation
‘Misrepresentation’ defined
• A false statement of fact made by one person to another,
before or at the time of the contract, of some matter or
circumstance relating to the contract
• Intention of inducing the latter to contract
• Which actually induces other party to do so.
• The remedy for misrepresentation is to place the aggrieved
person in the position he or she should have been in if the
misrepresentation had not been made.
Types of misrepresentation
• Fraudulent misrepresentation
• Negligent misrepresentation
• Innocent misrepresentation
Fraudulent misrepresentation
• Fraudulent misrepresentation:
– made fraudulently without an honest belief in its truth
– OR reckless as to whether or not it is true or false
– May comprise an act or omission
– Active concealment:
The failure to correct a false impression or half-truth.
– Designed concealment:
A person purposefully conceals information he or she has a duty to disclose.
– When is disclosure necessary?
When is disclosure required?
• Selfstudy
• The omission of facts has created a misleading impression.
• A statement that is no longer correct because of a change in circumstances.
• A person has effectively prevented the other from discovering the true state of
affairs.
• The proposed contract will require the parties to work in a relationship of trust and
confidence with one another.
• Where the other party is involuntarily dependent on the frank disclosure of facts
within that person’s exclusive knowledge.
• The law in respect of the particular contract requires disclosure.
Remedies for fraudulent misrepresentation
• Defence:
– If sued.
• Specific performance:
– Enforce contract and claim damages to be placed in a
position as if the misrepresentation had not been made.
• Cancellation:
– Claim all his or her own performance back, and give back to
the other party all that remains of that person’s
performance.
• Extra remedy of delictual damages:
– Damages costs and expenses, and possibly consequential
losses incurred as a result of the fraud.
Remedies for negligent
• Defence: misrepresentation
– If sued.
• Specific performance:
– Enforce contract and claim damages to be placed in a
position as if the misrepresentation had not been made.
• Cancellation:
– Claim all his or her own performance back, and give back to
the other party all that remains of that person’s
performance..
• Not clear if extra remedy of delictual damages:
– Damages costs and expenses, and possibly consequential
losses incurred as a result of the fraud.
Remedies for innocent
misrepresentation
• Defence:
– If sued.
• Cancellation:
– Claim all his or her own performance back,
and give back to the other party all that
remains of that person’s performance.
Remedies for misrepresentation
‘Duress’ defined
• A situation in which a person enters into a contract because of violence,
threat or fear.
• The force must have been so great that no reasonable person could
have resisted it.
• If operative, the contract is voidable.
• Examples – boss forces employee to sign a contract to get promoted
Requirements to prove duress
• A reasonable and substantial fear of imminent harm to life, person or
dignity, or to that of family.
• Threat must be illegal, or involve the use of legal means to achieve an
illegal result.
• The pressure must have caused the agreement and the contract would
not have been entered into if there had been no duress.
‘Undue influence’ defined
• The weakening of a person’s resistance to make his or her will
pliable.
• The transaction must be inherently prejudicial, and would otherwise
never have been entered into had the person had normal freedom
of will.
• Contract is voidable if the person acts reasonably soon after the
influence is removed.
• Undue influence is easier to prove where there is a special
relationship between the parties.