## Facts

- Mr. Caldwell sold his car to a fraudster who paid with a counterfeit cheque.
- Upon discovering the fraud, Mr. Caldwell promptly informed the police and the Automobile Association of his intention to cancel the contract.
- The fraudster, before being located, sold the car to Car and Universal Finance Co Ltd, an innocent third-party purchaser.
- The court needed to determine whether Mr. Caldwell had effectively rescinded the contract prior to the vehicle's sale to the third party.

## Issues

1. Whether it is necessary to give direct notice of rescission to a fraudulent party in circumstances where communication is impossible.
2. Whether taking all reasonable steps to recover goods demonstrates an intention to rescind a contract sufficiently to defeat third-party rights.
3. Whether an innocent third-party purchaser acquires good title when the original owner has acted to rescind the contract.

## Decision

- The Court of Appeal held that direct communication of rescission to the fraudster is not required when such contact is impossible due to the fraudster’s disappearance.
- The court found that taking all reasonable steps to recover the property, such as notifying authorities, is sufficient to effect rescission.
- It was determined that once the innocent party has done everything reasonable to indicate an intention to rescind, third-party purchasers cannot acquire good title to the goods.

## Legal Principles

- A contract induced by fraud is voidable at the instance of the injured party, who may rescind by manifesting a clear intention to do so.
- Actual notice to the fraudster is not necessary where they have absconded; reasonable efforts to communicate and recover the goods suffice.
- The timing of rescission is decisive: third parties who acquire goods after effective rescission obtain no legal title.
- The assessment focuses on the injured party's actions and intent rather than the receipt of notice by the fraudster.

## Conclusion

Car and Universal Finance Co Ltd v Caldwell clarified that, in cases of fraud where the wrongdoer cannot be located, an innocent party may rescind a contract by taking all reasonable steps to recover goods, thereby preventing third parties from acquiring rights. The decision remains a key authority on rescission and third-party protection in contract law.


Car & Universal Finance Co Ltd v Caldwell [1965] 1 QB 525