“When an actionable misrepresentation has been investigated and established, it becomes necessary to consider the remedies available to the misrepresentee”.

Ressision

Rescission means setting aside the contract and is possible in all cases of misrepresentation. The aim of rescission is to put the parties back in their original position, as though the contract had not been entered into or taken place.

The damaged party may withdraw from the contract by giving notice to the other. However, this in some cases is non-necessary as any action which indicating repudiation, e.g. notifying the authorities, may suffice. Car & Universal Finance v Caldwell [1965] 1 QB 525.

The Bars to Rescission:

The equitable remedy of Rescission is awarded entirely at the discretion of the court. The damaged party may [ if the courts see fit] lose the right to rescind in the following four circumstances:

Affirmation

The damaged party will affirm subjection to the contract if they with full knowledge of the misrepresentation and of their right to rescind, they explicitly proclaim that they have a desire to continue with the contract, or if they perform an act from which the intention may be implied. Long v Lloyd [1958] 1 WLR 753.

Noteworthy, is that the court of appeal in Peyman v Lanjani [1985] Ch 457, considered and held that the claimant had not lost his right to rescind the contract because he knew a misrepresentation had occurred or that he proceeded with the contract. The fact that it was not within his knowledge that he was entitled to rescind the contract was sufficient to show to the court that, he could not be said to have elected to affirm the contract.

Lapse of Time

If the damaged party fails to take action to rescind within a reasonable time, the right may be lost.

Where the misrepresentation is deemed fraudulent, a lapse in time runs from the time when the fraud was, or with rational diligence could have been revealed. In the case of non-fraudulent misrepresentation, time runs from the date of the contract, not the date of discovery of the misrepresentation. Leaf v International Galleries [1950] 2 KB 86.

Restitution in Integrum Impossible

The damaged party will be unable to claim the right to rescind if considerable restoration is impossible, i.e. if the parties cannot be restored to their original positions. Vigers v Pike (1842) 8 CI&F 562.

Precise restoration is not required and the remedy is still available if considerable restoration is possible. Thus, corrosion in value or condition of the property is not a bar to rescission: Armstrong v Jackson [1917] 2 KB 822.

Third Party Attains Rights

If a third party attains rights in material goods, in good faith and for value, the misrepresentee may lose their right to rescind. Phillips v Brooks [1919] 2 KB 243 under the doctrine of Mistake.

The right to annul the contract will also be lost if the court exercises its discretion to award damages in lieu of rescission. The court will consider this path under s2(2) of the Misrepresentation Act 1967.

For innocent misrepresentation two preceding bars to rescission were removed by The Misrepresentation Act 1967 section 1: the misrepresentee can rescind despite the misrepresentation becoming a term of the contract (s1(a)), and the misrepresentee can rescind even if the contract has been executed (s1(b)). Generally, this will be relevant to contracts for the sale of land and to tenancies.

Indemnity Principle

A court ordering rescission may be also be accompanied by an indemnity. This, in short, is a money payment by the misrepresentor in respect of incidentals necessarily created in complying with the terms of the contract and is different from damages. Whittington v Seale-Hayne (1900) 82 LT 49.

Damages

Fraudulent Misrepresentation

The damaged party may have the right to claim damages for fraudulent misrepresentation in the legal principles of the tort of deceit. The drive of damages is to reinstate the victim to the position he occupied prior to the representation being made.

The examination of remoteness in deceit is that the damaged party may recover all the loss incurred as a result of the fraudulent misrepresentation, irrespective of foreseeability Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158

Moreover, damages may comprise of lost opportunity, loss of profits costs etc.

 Excluding Liability for Misrepresentation

Any term or condition in a contract which excludes liability for misrepresentation or restricts the remedy available is subject to the court’s test of reasonableness. Section 3 of the Misrepresentation Act 1967, as amended by s8 of UCTA 1977, provides that:

“If a contract contains a term which would exclude or restrict: a) any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made; or b) any remedy available to another party to the contract by reason of such a misrepresentation, that term shall be of no effect except insofar as it satisfies the requirement of reasonableness as stated in s11(1) of the Unfair Contract Terms Act 1977, and it is for those claiming that the term satisfies that requirement to show that it does.”

(Section 11(1) UCTA 1977 provides that “… the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made.”)


Last modified: 24th October 2017