4.

Consensus that is vitiated or improperly obtained

When a contract does not suffer from a lack of consensus, but is induced by a pre-contractual wrong
(an error in motive rather than an error in the content of the agreement), that contract is valid
(provided the other elements of a valid contract are present), but it is voidable at the instance of the
innocent party.

In cases of vitiated consent, therefore, the innocent party has the following options available to him.
Once his decision has been made it is irreversible.

1. Rescind the contract using the restitution in integrum. It functions as both an action and a
defence to a suit in contract and aims at restoring negative interest - the position the parties
occupied before they entered into the contract.1 This can be done extra-judicially by the
innocent party or by approaching a court for an order.
2. Uphold the contract. Both parties are then bound as if no misrepresentation took place.
3. Regardless of which of the above decisions the party makes, he may be able to claim
delictual damages from the guilty party. These are governed by the principles of Aquillian
liability and are aimed at restoring negative interest.

The following general grounds for rescission for vitiated consent are currently available in South
African law:

1. Misrepresentation
2. Duress
3. Undue influence
4. Commercial bribery

The question emerges whether the above grounds are not simply manifestations of a more general
principle – and the answer to this question seems to be that no person should be bound by a
contract where his will was obtained in a way that the law considers illegitimate.2 This probably
means that some new grounds may emerge in time, either through the addition of a new category
(as what occurred with commercial bribery3) or through the extension of an old one (possibly
through adding economic duress).

4.2 Misrepresentation
A misrepresentation in this context is 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

1
Davidson v Bonafede (that’s ironic in a misrepresentation case) 1981 (2) SA 501 (C)
2
Plaaslike Boeredienste v Chemfos 1986 (A).
3
Ibid.

1
circumstance relating to it”.4 The statement can be verbal, implied by conduct (concealing rust
patches on a car) or silence when there is a duty to speak.

There are three categories of misrepresentation, each giving rise to different remedies:

1. Fraudulent misrepresentation, which is a misrepresentation made without an honest belief

in its truth.5
2. Negligent misrepresentation, which is a misrepresentation made honestly but carelessly.
3. Innocent misrepresentation, which is a misrepresentation made honestly and without
negligence.

4.2.2 Misrepresentation distinguished from other pre-contractual statements

Misrepresentation should be distinguished from other pre-contractual misstatements, as the
remedies differ. If one statement is covered by both categories, then the innocent party is entitled
to a choice of different remedies.6

Have a look at the diagram and explanation on page 120 of the textbook. It makes it very clear
how these categories relate to each other.

Warranties
A warranty is essentially a statement of fact that the parties intend to be a term of the contract.7
The difference between a warranty and an ordinary misrepresentation, therefore, is that in the
latter the parties do not intend for the statement of fact to be a part of the contract whereas in the
former they do.

In determining the subjective intention of the parties in this context, courts have had regard to the
objective following factors:

1. The importance of the truth of the statement;

2. The stage of the transaction at which it was made and;
3. Whether it was made in response to a query by the representee.

In the absence of subjective intention, a court can still uphold a warranty on the basis of quasi-
mutual assent or estoppel.

A breach of a warranty gives rise to ordinary contractual remedies for breach of contract.

Opinions, predictions and statements of law

4
Wright v Pandell 1949 (C).
5
R v Myers 1948 (A). In Derryv Peek it was held that gross negligence is not equivalent to fraud.
6
Prima Toy Holdings v Rosenberg 1974 (C).
7
Naude v Harrison.

2
Opinions, statements of intention and predictions usually do not amount to misrepresentation. If a
party misrepresents his state of mind, however, it would constitute a misrepresentation, as a state
of mind constitutes a “fact”.8

A statement of law has traditionally been held to be an opinion, rather than a statement of fact. The
textbook doubts this, and furthermore says that if a party misrepresents what he knows about a
legal issue, then it would constitute a misrepresentation. A statement as to the legal effect of a
document is a statement of law, but a party’s statement that he places a particular construction
upon a clause is binding upon that party.9

An incorrect opinion, prediction or statement of law does not give rise to an action. Furthermore,
Hutch has said that these are not important for the purposes of the course.

Puffs
Puffs are general, vague statements made in praise of a seller’s goods.10 The whole of a compound
statement must be considered in order to decide whether it is a puff or not.

An incorrect (if a puff can even reliably be disproved) does not give rise to any liability. It has been
suggested that this is because reliance on such statements are not reasonable.11

Dicta et promissa
A dicta et promissum is a “material statement made by the seller to the buyer during the
negotiations, bearing on the quality of the res vendita and going beyond mere praise and
commendation”.12 Fault on the part of the seller is not required.

If a dicta et promissum turns out to be false, the purchaser can elect to cancel the contract with the
actio redhibitoria or sue for a reduction in the purchase price with the actio quanti minoris. If a dicta
et promissuim is also a warranty, the purchaser may choose between the above remedies or the
ordinary remedies for breach of contract.

4.2.4 Contractual remedy – the restitutio in integrum

In order for misrepresentation to make the restitutio in integrum available, the following four
requirements must be met:

1. Misrepresentation by the other party;

2. Inducement;
3. Intention to induce and;
4. Materiality.

8
Edgington v Fitzmaurice.
9
Sampson v Union and Rhodesia Wholesale Ltd 1929 (AD).
10
Milne v Harilal 1961 (N).
11
Lubbe in “Onskuldige wanvoorstelling” (that means “innocent misrepresentation”).
12
Phame v Paizes 1973 (A).

3
Fault on the part of the misrepresenting party is not required for the restitutio in integrum to be
available.13

Misrepresentation
It must be made by the other party to the contract or his agent. If made by a third party, the
restititio in integrum is not available.14

Inducement
A misrepresentation must have induced the innocent party to enter into the contract in some way.
It does not have to be the only cause of the innocent party’s entry into the contract. Inducement
will therefore not be present if the innocent party knew the statement was false, if he was not
aware of the statement or if it did not influence his judgment.15

The test for inducement is subjective and there is not a reasonableness requirement.16 Objective
facts can be used to infer the innocent party’s state of mind.

The remedies available depend on the type of inducement:

1. Dolus dans: If, but for the inducement, the contract would not have been concluded at all,
the innocent party is entitled to restitutio in integrum.
2. Dolus incidens: This issue is unsettled, but the better view seems to be that if, but for the
inducement, the contract would still have been concluded but on different terms, then the
innocent party is only entitled to contractual damages but not the option of rescission.17

Originally, the above distinction was only applied to fraudulent misrepresentation, but it is likely the
courts will also apply the above distinction to other types of misrepresentation as well.18

Intention to induce
Some cases hold that, in order for the restitutio in integrum to be available, it is necessary for the
representor to have intended to induce the innocent party to enter into the contract. According to
this view, therefore, a representation made to a third party, but overheard and acted on by the
innocent party would not give rise to the restititio in integrum.19

Hutchison reckons that if unreasonable reliance by the innocent party was foreseeable by the
representor then the restititio in integrum should be available. Since these considerations relate to
materiality, Hutch thinks that there is no separate requirement of intention to induce.

13
Trollip v Jordaan 1961 (A).
14
Karabus Motors V Van Eck 1962 (C).
15
Bird v Murphy 1963 (D).
16
Ibid.
17
Novick v Comair Holdings 1979 (W).
18
Kahn “Random reflections on damages for misrepresentation”.
19
Geldenhuys and Neethling v Beuthin 1918 (AD).

4
My thoughts are that, in an exam question, we should leave this requirement out or at most briefly
skim over it. Hutch slates it in the textbook, did not include it in the course outline and questioned
whether it should be included in class.

Materiality
That the misrepresentation must be material is a well-established rule. It is capable of several
meanings, however:

1. The most widely accepted meaning is that the misrepresentation must have been of such a
nature that it would have had “the natural and probable effect of inducing a reasonable
person to enter into the contract”. This meaning is problematic, however, as it allows for a
person to get away with fraudulent misrepresentation if the innocent party is gullible. For
example, in Lourens v Genis, a father could not rescind a contract because he had been
induced into entering into it by a claim that a water-dousing child had x-ray eyes.
2. Lubbe has suggested that materiality would be present if one of the following elements are
present:
a. It was intended to be acted upon or,
b. It would have induced a reasonable person to act on it.

Hutchison likes the second interpretation, as it gets rid of intention to induce and would lead to a
more equitable solution in cases like Lourens v Genis.

There is another interpretation of materiality, but it is (a bit) complicated and Hutchison didn’t
mention it in class. It is on page 124 if you want to go check it out.

Delictual remedy
Whether or not the innocent party has the restitutio in integrum available to him and what he elects
to do under that remedy, he may in addition have delictual remedies available to him, depending on
the state of mind with which the representation was made.

Fraudulent misrepresentation
A representee who has been tricked into a prejudicial contract is allowed delictual damages,
providing the following five elements are present:20

1. A representation;
2. Which is, to the knowledge of the representor, false;
3. Which the representor intended the representee to act upon;
a. This intention can be dolus directus, dolus indirectus or dolus eventualis.
4. Which induced the representee to act and;
5. That the representee suffered patrimonial damage as a result.

20
Standard Bank of SA v Coetsee 1981 (A).

5
Materiality is no defence in such a misrepresentation. If damage was suffered in Lourens v Genis,
damages could thus have been claimed. Furthermore, a clause that excludes the right to claim
redress for fraud is against public policy.21

Delictual damages for fraudulent misrepresentation have long been recognised in South African
law.22 The general rule for contractual damages is that it should put him in the financial position he
would have been in had the misrepresentation not occurred (negative interest). It is not to put him
in the position that he would have been in had the misrepresentation been true (positive interest),
which is the case for damages for breach of contract.23 This general rule is difficult to apply in
practice, but some of the following guidelines have emerged:

1. Whether the contract is rescinded or upheld, damages are recoverable in respect of the
consequential losses flowing from the misrepresentation, provided that they are not too
remote.24 An example would be the reduction in value of your herd because of the purchase
of an infected cow.
2. When the contract is rescinded and restitution is ordered, the costs of the fraud are
generally wiped out by the restitution. Additional costs that in this case would be covered
by a delictual action would generally be wasted costs and other consequential losses.
3. When the contract is upheld, delictual damages are generally awarded for a loss on the
transaction itself (such as paying more for a thing than it is worth).
a. In the case of dolus dans, there would have been no contract but for the fraud. This
means that the innocent party must be given the value of his performance, less any
benefits that he has received as a result of the performance. In the case of sale, for
example, the innocent party must be given the amount that he paid minus the
actual or fair value of the merx.25 If the value of the performance is less than the
value of his benefits, then the innocent party is not entitled to delictual damages.26
b. In the case of dolus incidens the innocent party must be awarded the amount his
performance was inflated due to the misrepresentation. This is the price he actually
paid less the price he would have paid had there been no misrepresentation (the
putative price).
i. Example 1: Jan, a bad bargainer, wants to buy a merx worth R100 from
Christoffel. If there was no misrepresentation, he would have paid R120 for
the merx. Christoffel lies about the merx. If this lie was true, the merx
would be worth R150. Jan ends up paying R180 for the merx. Jan’s
damages in this case would be R60 (R180 less R120).
ii. Example 2: Jacomien, a good bargainer, wants to buy a merx worth R100
from Christoffel. If there was no misrepresentation, she would have paid
R90 for the merx. Christoffel lies about the merx. If this lie was true, the

21
Wells v SA Alumenite 1927 (AD).
22
Standard Bank of SA v Coetsee.
23
Trotman v Edwick 1951 (A).
24
Standard Bank of SA v Coetsee.
25
New word! A merx is the good or service that is the subject of a sale.
26
This is implied by the patrimonial harm element of the delict.

6
 merx would be worth R150. Jacomien ends up paying R120 for the merx.
Jacomien’s damages in this case would be R30 (R120 less R90).
iii. Note that contractual damages in Example 1 would be difference between
the misrepresented and actual value of the merx, which in the above
examples would be R50.

Typically, the innocent party would only have to establish the amount he would have offered had
the misrepresentation not occurred. If the fraudulent party then shows that this offer is lower than
the market price of the merx, then the innocent party has to prove that his lower offer would have
been accepted.

Negligent misrepresentation
Initially, South African law was unclear as to whether delictual damages could be awarded when a
negligent misrepresentation gives rise to a contract. In Administrateur, Natal v Trust Bank van
Afrika27 the AD expressly left the question open. The Cape Provincial Division then answered this
question in the affirmative in Kern Trust v Hurter28 and the AD confirmed this in Bayer v Frost.29

In Bayer v Frost, Bayer sold a pesticide to Frost which they negligently said could be applied by
helicopter. Frost did this and it damaged his crops. Frost could have claimed under the actio quanti
minoris, but this would only have led to a price reduction in the price he paid for the pesticide. The
court held that the misstatement could have been a warranty, but decided to apply the principles of
delict, holding that Bayer could claim for full consequential loss.

The principles for damages in the case of negligent misrepresentation are the same as those for
fraudulent misrepresentation above. The same elements of delictual liability must also be proven.

Innocent misrepresentation
The law is unsettled in this area. What is clear is that ordinary delictual damages cannot be claimed
as fault is not present, and contractual damages cannot be claimed as there is no breach of contract.
The question remains, however, to what extent the victim can claim reduction of performance
(quanti minoris type of damages). Several dicta are against damages for innocent
30
misrepresentation, but Maasdorp CJ took the opposite view in Brink v Robinson.

It is clear that, in cases of dicta et prommissa, that the buyer can choose to rescind the contract or
ask for a reduction in price, even in cases of innocent misrepresentation. This exception is limited,
however, as it does not cover consequential damages, only allows a buyer to claim from a seller and
the reduction in price is the difference between the actual price and the price paid, rather than the
difference between the putative price and the price paid. This last factor would have the strange
result that, in cases where the purchaser would have paid more for the merx anyway, he would

27
1979 (A).
28
1981.
29
1991.
30
Bowditch v Peel and Magill 1921 AD.

7
rather claim for innocent misrepresentation under the actio quanti minoris than for fraudulent
misrepresentation.

Furthermore, it should be noted that the court in Phame created the category of dicta et prommisa
for equitable considerations and left the consideration of other damages for innocent
misrepresentation open.

4.2.7 Misrepresentation by silence

When a party fails to disclose a fact that he is under a legal duty to disclose, it constitutes
misrepresentation by silence and the same principles apply.

The general rule, however, is that a contracting party is not under a legal duty to disclose
information to the other party, even if he is aware that it could influence the other party’s decision.
All exceptions to this general rule are situations in which one party has information which is in his
exclusive knowledge and the information is of such a nature that the duty of disclosure would be
recognised by honest men in the circumstances.31 Examples of such situations include:

1. Where the contract is one of insurance, agency, partnership or engagement.

2. Where there is a fiduciary relationship between the parties.
3. Where statute imposes a duty of disclosure.
4. Where the seller has knowledge of a latent defect in the thing that he is selling.
5. Where an applicant for credit is an unrehabilitated insolvent.
6. Where the party’s prior conduct renders silence misleading. Some examples:
a. Where prior conduct conceals facts that would otherwise be apparent to the other
party.32
b. Where prior conduct led a party not to expect a particular clause in a contract.33
c. Where silence distorts a positive misrepresentation, for example:
i. Where a statement is literally true but misleading because it is not the
whole truth.
ii. Where a true statement implies further facts that are false.34
iii. Where a change in circumstances falsifies a statement that was true when it
was made.35

Examples of the application of misrepresentation by silence

Dibley v Furter: A piece of agricultural land had a farmhouse and a graveyard on it. The seller
decided it would be easier to sell the land if the gravestones were removed. The buyer signed a
contract of sale, but when he found out about the graveyard he tried to get out of the contract. The
court held that the graveyard wasn’t a latent defect, as a defect is something that renders the
product less suitable for the purpose for which it is bought. The court decided that, according to the

31
Millner’s Test, as imported into South African Law in Millner v Fouche.
32
The removal of gravestones on a property in Dibley v Furter.
33
Du Toit v Atkinson Motors, Spindrifter.
34
Trotman v Edwick 1951 (A).
35
Cloete v Smithfield Hotel 1955 (D).

8
doctrine of good faith, that seller was liable, but today it probably would have been decided as
misrepresentation by silence.

Cloete v Smithfield Hotel: A hotel was being sold. A hotel was connected to another piece of land,
which the municipality allowed the hotel to use on a revocable basis. Just before the sale, the
municipality revoked its permission to use the land. The seller chooses not to tell the buyer about
this. The court again couldn’t put it in the category of a latent defect and there wasn’t a prior act of
commission. Here, it was dealt with as fraudulent, deliberate misrepresentation.

ABSA Bank v Fouche: Mrs Fouche had valuable jewellery that she didn’t want to keep at home. She
entered into a contract with ABSA for safe deposit. ABSA put a clause into the contract that said
that, while ABSA would take all reasonable care, they would not be liable for loss. Robbers robbed
the bank, cut open the safe, cut open the boxes and stole Mrs Fouche’s jewellery. Fouche wanted to
sue ABSA and it relied on its exclusion clause. The majority of the court did not accept the argument
that the bank was under a duty to disclose failures in its security system.

Mayes v Noordhof: Mayes looks to sell his property. A guy from Joburg comes down with an offer
to buy the property. Mayes accepts the offer and a month later the deal is finalised. In the
intervening time a land invasion occurs on an adjacent property. The Cape High court held that
there was definitely a duty to disclose and spent most of its time on a dolus dans/dolus incidens
issue.

Pretorius v Natal: A company had entered into a highly prejudicial contract which the director knew
was going to destroy the company. Pretorius wanted to buy the company and the directors knew
that it was a very bad buy. The court applied Milner’s test and held that there was a duty to
disclose.

Glaston House v Inag: Next to Groote Schuur was an old building, Glaston House. Inag was
negotiating to buy the property to demolish the building and put up a new property. Glaston House
knew Inag wanted to demolish the building, but knew that within the building was a historical
monument. Glaston didn’t tell Inag. This case was decided simply on the case of latent defect and
that it was knowingly not disclosed - and that the seller was required to disclose it.

4.3 Duress
A contract that is caused due to duress is voidable at the instance of the coerced party, and the
same rules of remedy apply as to misrepresentation. In order for a contract to be voidable due to
duress, the following elements must be present:36

1. Actual violence or reasonable fear.

a. The coercion is one that forces the innocent party to choose between the signing
the contract and some greater evil.
b. Grotius argues that the fear does not have to be reasonable, and Hutchison agrees.

36
Broodryk v Smuts NO 1942 TPD.

9
 2. The fear must be caused by the threat of some considerable evil to the party or his family.
a. The old authorities say that it must be directed at the life, bodily integrity or the
property of the person or his family.
b. Hutchison argues that the distinction between the different interests and between
the person’s family and others would not be upheld in court today.
c. Where no protest was made, courts have held that relief should be granted in where
the facts indicate the presence of economic duress.
d. The SCA has held that pure economic duress could in principle lead to a voidable
contract, but that in a competitive economy this would be rare.37
3. The threat must be imminent or inevitable.
a. Hutchison proposes that this criterion be relaxed to simply one that the party had no
acceptable alternatives to him other than by agreeing to the contract.38
4. The threat must be contra bonos mores.
a. A threat is unlawful if the threatened conduct is unlawful in itself or if it is for an
unlawful purpose.
b. Some examples:
i. A threat to bring a civil action is not unlawful.
ii. It is generally agreed that a threat to institute criminal proceedings to obtain
more than is due, or if the person so threatened is innocent, is unlawful.
iii. Some Natal cases have held that threatening criminal prosecution if a thief
does no repay what he has stolen is not unlawful.
iv. Some Cape cases disagree and Hutchison argues that it is against the
unlawful to use the criminal justice system to enforce purely private
interests.
5. The moral pressure used must have caused damage.
a. In Broodryk v Smuts, it was held that this “damage” is equivalent to inducing a
contract.

4.4 Undue influence

Undue influence is a form of improper pressure, more subtle than duress, that erodes the subject’s
ability to exercise free and independent judgment. In this case, there is usually a special relationship
between the between the parties, such as one between a doctor and patient, parent and child or
religious leader and disciple.

In the Patel case, a person who wants to set aside a contract on the basis of undue influence must
establish the following:

1. That the other party obtained influence over him or her;

2. That this influence weakened his or her powers of resistance and rendered his or her will
compliant and;

37
Medscheme Holdings v Bhamjee 2005.
38
Also in BOE Bank v Van Zyl.

10
 3. That the other party used this influence in an unscrupulous manner to persuade him or her
to agree to a transaction that
a. Was prejudicial to him or her and
b. Which he or she would not have concluded with normal freedom of will.

Hutchison argues that the prejudice criteria is unnecessary and should be interpreted to mean
inducement.

4.6 Abuse of circumstances

This is a situation where A unconscionably exploits an emergency situation to secure B’s consent to a
prejudicial contract.

Our common law is unclear on this point, but it seems to be that such a contract would be
unenforceable.

Van Huyssteen argues that undue influence should be incorporated into the abuse of circumstances
category. This has not been accepted by our courts.

4.7 Commercial bribery

In Plaaslike Boeredienste v Chemfos and Extel v Crown Mills, the AD recognised commercial bribery
as a new ground for the restitutio in integrum.

It is available when a reward, paid or promised, by one party (the briber) to another (the agent) who
is able to exert influence over a third party (the principle) with the intention that the agent should
be able to induce the principle, without the principle’s knowledge and for the direct or indirect
benefit of the briber to enter into or maintain or alter a contractual relationship with the briber, his
principal, associate or subordinate.39

39
A mouthful.

11