Facts
- Mr. Leaf purchased a painting from International Galleries, who represented it as the work of John Constable.
- Roughly five years later, Mr. Leaf discovered upon attempting to sell the painting that it was not painted by Constable.
- Mr. Leaf then sought to rescind the contract on the basis of innocent misrepresentation.
- International Galleries maintained the painting was by Constable and retained it for inspection.
- The trial court found for International Galleries, acknowledging innocent misrepresentation but holding that the contract was executed and considering whether the mistake was sufficient to void it.
Issues
- Whether the plaintiff retained the right to rescind the contract for innocent misrepresentation after a lapse of five years.
- Whether the mistake regarding the artist was fundamental enough to render the contract void.
Decision
- The Court of Appeal held that the right to rescind was barred due to the considerable lapse of time between the contract and the claim for rescission.
- It was found that there was a common mistake about the painter, but not about the subject matter of the contract, thus the contract was not void.
- The court determined that an innocent misrepresentation, while grounds for rescission, is a weaker claim than breach of condition, and the remedy can be lost through undue delay.
- The court upheld the trial judgment in favor of International Galleries.
Legal Principles
- A significant lapse of time after the formation of the contract will bar the right to rescind for innocent misrepresentation.
- The “reasonable time” for seeking rescission is context-dependent and typically shorter than the limitation period for breach of contract claims.
- A mistake must pertain to the subject matter, not merely a characteristic, to void a contract.
- There is a key distinction between rescission for misrepresentation and rescission for breach of condition: breach of condition is treated more seriously and does not lose the remedy for delay as easily.
- Misrepresentation must have induced the party into the contract for rescission to be available.
- Noted cases, such as Horsfall v Thomas, Attwood v Small, and Redgrave v Hurd, illustrate the aspects of inducement in misrepresentation.
Conclusion
The Court of Appeal in Leaf v International Galleries established that rescission for innocent misrepresentation is barred if not sought within a reasonable time. This case underlines the necessity for prompt action upon discovery of misrepresentation and clarifies the legal distinction between misrepresentation and breach of condition in assessing the availability of rescission as a remedy.
