The position may have been different if the case had arisen today, as
damages may have been recoverable instead of an indemnity. An indemnity
may still be awarded, even since the Misrepresentation Act 1967, but will
not apply where damages are given. However, it is a useful remedy where
a contract is rescinded for a wholly innocent misrepresentation.
Rescission
To rescind is to set the contract aside. The aim is to put the parties back into
the position that they were in before the contract existed (i.e. to terminate
it ab initio, or from the outset). A contract may be rescinded whether the
misrepresentation is fraudulent or non-fraudulent, even if wholly innocent.
When a misrepresentation occurs, the contract is voidable rather than void.
This means that it remains in force unless the person to whom the
misrepresentation has been made chooses to set it aside. The injured party
must indicate his intention to rescind either:
- by notifying the other party directly, or
- by some other act which clearly shows that he does not intend to be
bound by the contract.
An example of the second situation arose in the Court of Appeal case of
Car and Universal Finance Co Ltd v Caldwell (1965), where it was held
that notifying the police and other appropriate authorities would be
evidence of the wish to rescind.
Bars to rescission
It is clear that there is a general right to rescind where misrepresentation is
proved. However, as rescission is based in equity it means that the contract is
Misrepresentation 179repaid the costs necessarily incurred in buying the farm, such as rates
and other legal requirements. However, it did not replace the cost of the
poultry, as it was said that the buyer did not have to put these on the
farm, but chose to do so.Is it right that a person who makes a misrepresentation totally innocently
may have the contract rescinded? Think about this from the point of view of
both the misrepresentor and the misrepresentee.