Wrongful procurement decisions and remedies
Wrongful Procurement Decisions: Overview
Wrongful procurement decisions typically occur when a contract, property, or right is acquired through illegal means such as fraud, misrepresentation, undue influence, duress, mistake, or breach of fiduciary duty. Courts provide remedies to restore fairness and justice.
Key Concepts
Fraud: Deliberate deception to secure unfair or unlawful gain.
Misrepresentation: False statements inducing someone to enter a contract.
Undue Influence: Excessive pressure or unfair persuasion, exploiting a relationship.
Duress: Threats or coercion forcing a party into a contract.
Mistake: Erroneous belief about facts leading to contract formation.
Breach of fiduciary duty: Abuse of trust or loyalty in a relationship.
Remedies for Wrongful Procurement
Rescission: Cancelling the contract or transaction.
Damages: Monetary compensation.
Specific Performance: Court orders fulfillment of contract terms.
Injunction: Preventing further wrongful acts.
Restitution: Restoring parties to their original position.
Detailed Explanation with Case Law
1. Derry v Peek (1889) 14 App Cas 337
Facts:
A company prospectus stated the company had the right to use steam-powered trams, but the right was subject to Board approval, which was refused. The plaintiff invested based on the prospectus.
Issue:
Was there fraud in the statement?
Decision:
The House of Lords held there was no fraud because the company honestly believed the statement was true. Fraud requires a false statement knowingly made or recklessly without belief.
Significance:
Established the definition of fraud in misrepresentation cases. Fraudulent misrepresentation can make a contract voidable, allowing rescission and damages.
2. Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256
Facts:
A company advertised a product with a promise to pay £100 to anyone who used the smoke ball and caught influenza. Mrs. Carlill used it and caught flu but was refused payment.
Issue:
Was the advertisement a binding offer or mere puffery?
Decision:
The court held the advertisement was a valid offer to the world, accepted by Mrs. Carlill’s performance. The company’s promise was enforceable.
Significance:
Highlights how wrongful inducement or misleading promises can lead to enforceable obligations or claims.
3. Lloyds Bank Ltd v Bundy [1975] QB 326
Facts:
An elderly man mortgaged his farm to Lloyds Bank under undue influence and without independent advice. The bank did not disclose risks.
Issue:
Was the contract voidable due to undue influence?
Decision:
The court set aside the mortgage, ruling that the bank had breached its duty by taking advantage of the vulnerable man without ensuring informed consent.
Significance:
Established that undue influence can void contracts procured unfairly, protecting parties from exploitation.
4. Allcard v Skinner (1887) 36 Ch D 145
Facts:
A woman joined a religious order and donated her property under the influence of the order’s leader. Later, she sought to recover her property claiming undue influence.
Issue:
Could she rescind the gift for undue influence?
Decision:
The court allowed rescission but stressed the need to act promptly; delay may bar the claim.
Significance:
Illustrates undue influence in fiduciary relationships and the importance of timely action for remedies.
5. Economic Duress: The Universe Sentinel Case (The Universe Sentinel) [1983] 1 AC 366
Facts:
A shipping company was forced under threat of detention of its ship to pay extra money.
Issue:
Was the contract made under duress and thus voidable?
Decision:
The court held the contract voidable due to economic duress — coercion involving illegitimate pressure.
Significance:
Confirms economic duress as a ground for relief where wrongful pressure forces contract formation.
6. Redgrave v Hurd (1881) 20 Ch D 1
Facts:
A man was induced to buy a law practice based on false financial statements by the seller.
Issue:
Was the contract voidable for misrepresentation?
Decision:
The court ruled in favor of rescission, stating the buyer was entitled to rely on the misrepresentation even if he could have discovered the truth by inspection.
Significance:
Establishes that misrepresentation can lead to rescission regardless of due diligence.
7. R v Attorney General for England and Wales (No. 2) [2003] UKHL 68
Facts:
A contract was procured by bribery of public officials.
Issue:
Could the contract be enforced?
Decision:
The House of Lords held the contract was void because it was procured unlawfully.
Significance:
Illegal conduct in procurement voids contracts and entitles affected parties to remedies.
Summary Table
| Case | Key Issue | Remedy/Outcome | Significance |
|---|---|---|---|
| Derry v Peek | Fraud | No fraud, no rescission | Definition of fraud |
| Carlill v Carbolic Smoke Ball | Misleading promise | Contract enforceable | Offers by advertisement |
| Lloyds Bank v Bundy | Undue influence | Rescission of mortgage | Protection from exploitation |
| Allcard v Skinner | Undue influence | Rescission (with delay caution) | Fiduciary relationships |
| The Universe Sentinel | Economic duress | Contract voidable | Illegitimate pressure |
| Redgrave v Hurd | Misrepresentation | Rescission | Reliance on false statements |
| R v AG (No. 2) | Illegal procurement | Contract void | Illegal contracts void |
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