‘Where a person has entered into a contract after a misrepresentation has been made to him otherwise than fraudulently, and he would be entitled, by reason of the misrepresentation, to rescind the contract, then, if it is claimed, in any proceedings arising out of the contract, that the contract ought to be or has been rescinded, the court or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of opinion that it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract were upheld, as well as to the loss that rescission would cause to the other party.’
Jacob J held (at 590) that the power to award damages under s 2(2) did not depend on the representee having an existing right to rescission and that it was sufficient if the representee had had such right in the past.
In June 1992 the claimant agreed to purchase an executive jet aircraft from BAe. In November 1992 CIBC was substituted as purchaser with the claimant agreeing to lease the aircraft from CIBC for a period of 10 years. Shortly after delivery, various faults appeared and the aircraft was returned to BAe for repair. The faults continued and the claimant ceased its rental payments to CIBC. In February 1994 CIBC terminated the lease, re-possessed the aircraft and sold it to a third party. The claimant then issued a writ against BAe seeking rescission of the original purchase agreement or damages on the ground that BAe had falsely represented that the aircraft would airworthy, reliable, and without design or construction defects.
Judge Raymond Jack QC held that the court had no power to award damages under s 2(2) of the Misrepresentation Act 1967 where rescission was no longer available.
‘. . . section 2(2) gives the court a discretionary power to hold the contract to be subsisting and to award damages where it would otherwise be obliged to grant rescission or to hold that the contract had been rescinded by the representee. The court does not have that power, and does not need to have that power, where rescission is no longer available. In short, the power to award damages is an alternative to an order for rescission or the upholding of a prior rescission by the representee if that has occurred’ (Judge Raymond Jack QC at 2343).
You cannot copy content of this page
