Remedies following a misrepresentation

Question 1

A misrepresentation makes the contract voidable - what does this mean?

Answer 1

This means that the rights and obligations under the contract exist unless and until the contract is rescinded (set aside /rendered void). In other words, the representee can choose to avoid the contract or carry on with it

Question 2

What is the main thing to note with a voidable contract?

Answer 2

With a voidable contract, if the representee chooses to avoid the contract, s/he must give notice to the representor.

Question 3

What was held in the case of Car and Universal Finance v Caldwell? - buyer makes misrepresentation to the seller.

Answer 3

. It was held that by notifying the police and the Automobile Association (and asking for their assistance in recovering the car) C had done enough to rescind the contract between himself and N. This meant that N had no title (i.e. ownership) to the car when he sold it so he could not pass the title to the innocent third party. This meant C could recover the car.

Question 4

Rescission - The effect of rescission (ending the contract) - mutual restitution

Answer 4

Parties recover anything paid for or delivered under the terms of the contract.

Question 5

The distinction between rescission and a damages claim

Answer 5

Rescission may well be the only remedy needed by the buyer. So, for example, it may be that the buyer’s only loss is that he has a piece of property that was misrepresented to be worth more than it actually is. In such a case all s/he needs is to get his/her money back and this is what s/he gets by the rescission remedy - refund is not always sufficient as other implications such as physical damage to the buyer etc may occur.

Question 6

Key point of rescission and a damages claim -

Answer 6

The remedy of rescission does not help in relation to any of these losses - as we have seen, all it does is to provide a refund of the basic price paid under the contract. Losses such as those just described can only recovered via a damages claim (and sometimes via a so-called ‘indemnity payment’). This is a quite separate remedy from the rescission remedy and you should not confuse them.