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

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

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 Caldwell had effectively rescinded the contract prior to the vehicle's sale to the third party.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.
  • 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.

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