A misrepresentation makes a contract voidable, thereby leaving the innocent party with the right to rescind(set aside) the contract if he so wishes. Where a person is induced to enter into the contract as a result of misrepresentation, the representee has the right to bring an action for the rescission of the contract. Thus, rescission is an equitable remedy available to an injured party for a fundamental breach in respect to the contract entered into through mistake or misrepresentation. This operates to set aside or invalidate the contract.
The remedy of rescission is available to the representee in all classes of misrepresentation whether Fraudulent, Negligent or Innocent. This implies that the effect of misrepresentation is that,it makes the contract voidable or void ab initio (at initial stage).This is however justified for two reasons.
Firstly, because the representee can choose to be bound or not to be bound by the contract. Secondly, because the transaction and effect of the (voidable) contract are recognized to have taken place. Therefore the main essence of rescission is “Restitution in integrum” ( which is to restore the parties to their original position).Where this is impossible, ideal of restitution is not considered.
Also rescission can be exercised in two ways:either by informing the representor or requesting an order from the court. Where the first option is considered, the representor must be informed by the representee of his decision to rescind the contract on grounds of mistake and thereby demand for the complete restoration of the status quo. In a situation where the representee has taken all reasonable step to repudiate the contract and where it was impossible for him to reach the representor, his action would still be valid. Also in this situation, subsequent purchaser acquires no title, as the title had reverted to the representee on rescission, through the reasonable steps taken to repudiate the contract., Thus, in CAR & UNIVERSAL FINANCE V CALDWELL “The court held that the contract was voidable because of the fraudulent misrepresentation and the owner had done everything within his reach in the circumstances to repudiate the contract, as it has been avoided before the sale to the third party, no title was passed to them.Thus,the owner could reclaim the car. The same was reaffirmed in SHOGUN FINANCE LTD V HUDSON.
Also, where the second option is considered, which is where an order from the court has been requested by the representee, it is not important to notify the representor before applying to set aside the contract. This is because the representor would be adequately informed on notice when served with the writ of summons. The argument against this format has been rejected and settled by law… See the case of OLUWO V ADEWALE.lll
The doctrine of rescission makes it possible for a party to sue and to recover what would have been lost,thereby returning the affected party to his normal condition before the contract was effectuated.This enshrines the principle of equity and fairness in a contract when misrepresentation arises. However, parties are left with the choice to rescind the contract or not, either by informing the representor of his intention or by seeking a writ of summons from the court. Nevertheless, there are some limits to the possibilities of restitution, some of which are Indemnity, Affirmation, Lapses of Time, Third parties right etc. All of which may render restitution impossible.
ALOBO ENI EJA- LAW OF CONTRACT.
JACOB OTU ENYIA – LAW OF CONTRACTUAL OBLIGATIONS IN NIGERIA.
CAR UNIVERSAL FINANCE CO LTD V CALDWELL(1965)1 QB 525
SHOGUN FINANCE LTD V HUDSON(2004)1 AC 919
OLUWO V ADEWALE(1964)NMLR 17, SC.
About the author
LAWRENCE EMEKA is a law student of faculty of law University of Calabar and can be reached via 08130356783 [email protected]
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