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If I may add a small comment to this debate, it is dangerous, I suggest, to place significant weight on analogies to the law of innocent misrepresentation. The reason is that the basis of this excuse is itself unclear. Robert is no doubt correct to say that the effect of an innocent misrepresentation is 'vitiate consent'. But why does it have this effect? Whatever reasons explain why a contract can be set aside for mistake (e.g., implied term, mistake vitiates consent)do not apply to innocent misrepresentations. This is true even if we drop the requirement that the mistake be shared, since it is a further (and obviously sensible) requirement, shared by systems that allow for an excuse of unilateral mistake, that the mistake be serious. Nor does the analogy to duress or negl/fraudulent misrep. work, for the obvious reason that these acts involve wrongs. In short, the usual rule is that if there has been no wrongdoing, and nothing that otherwise significantly impairs consent (e.g., mistake, incapacity,) then the law leaves things as they are. So why an excuse of innocent misrepresentation? Consistent with these observations, the civil law systems I am familiar with do not recognize an excuse of innocent misrepresentation. I am not at this point suggesting there should be no excuse of innocent misrepresentation. This is a complex issue that requires more thought. But I am suggesting that the excuse is difficult to square with the others kinds of excuses that the law does and should recognize, and thus we should be careful before we use it as the basis for explaining another area of the law.

steve smith

Robert Stevens wrote:

Jason Neyers wrote:

This raises the question of why a contract can be rescinded for a material innocent misrepresentation. I agree the reason is not fault. But I do not agree that it has nothing to do with the implied agreement of the parties. I see the reason for the courts intervention, being similar to the reason the court intervenes (or is asked to intervene) in cases like Scott v. Coulson, Bell v. Lever Bros. The implied agreement/condition is that the contract is to bind only their shared fundamental assumption is true. Hence if you would have put the point to the parties in Redgrave v. Hurd, they would have objectively agreed that the contract was to bind only if the practice brought in L400 per year. While one may not agree with this analysis, it has a long history: see Grotius, The Law and War and Peace, Bk. II c.11 and the work of Peter Benson, The Unity of Contract of Law (2001: CUP).

I do not find this a convincing explanation as to why a misrepresentation entitles the misrepresentee to rescind.

I would be prepared to concede that where there is a common fundamental mistake made by both parties to a contract one plausible explanation as to why the contract is void is that there is an implied condition precedent that the agreement is not to bind.

A agrees to hire B's music hall and surrounding gardens. Unknown to both A and B, ten minutes before the deal was struck the music hall had burnt to the ground.

We might be prepared to say, on an officious bystander test, that there is no contract because it was an implied condition precedent that the music hall existed. We might also be prepared to say that if the music hall burnt down ten minutes after the agreement that there was an implied condition subsequent that the deal was to come to an end.

There are other plausible explanations for the result that the contract is no longer on foot and in the context of frustration the implied condition analysis has become unfashionable.

Where rescission for misrepresentation is concerned, the misrepresentation need not be fundamental nor need it be shared. All that is necessary is that the misrepresentation, however minor, was in part a cause of the decision to enter into the deal (Edgington v Fitmaurice (1885) 29 ChD 459).

A agrees to charter B's ship for six months. Wholly innocently, B misrepresents the size of the propeller. The size of the propeller played a minor role in A's decision to hire the ship.

As the contract is voidable, not void, the implied term would have to be something like:

"If either party misrepresents to the other, regardless of fault, a matter material to the other's entering into the contract, this shall entitle the other party to avoid the deal."

I don't think myself that such an implied term passes the officious bystander test. If we say the term is implied by law, rather than fact, we just get back to asking why the law should imply such a term.

It seems to me that a better explanation is that the misrepresentee's consent has been vitiated by the misrepresentation and that this entitles him to set aside the deal. If I make you a gift because of a misrepresentation you have made to me I am entitled to recover the gift. I do not, myself think that this can be explained through an implied agreement to return the gift. Similarly if I enter into a contract with you because of your holding a gun to my head or because I am hopelessly dependent upon you, I can avoid the deal. I don't think that this is because of any implied agreement that I am entitled to do so.