Salt v Stratstone Specialist Ltd [2015] EWCA Civ 745

Facts

  • Mr. Salt purchased a Cadillac from Stratstone Specialist Ltd in 2007, which was represented as “brand new.”
  • It was later discovered that the car was manufactured in 2005, had been in a crash, and was repaired prior to sale.
  • These facts conflicted with the claim that the car was “brand new.”
  • Mr. Salt sought rescission of the contract.
  • The first instance court refused rescission, reasoning that exact return to original positions was impossible due to the car's use and diminished value.

Issues

  1. Whether rescission should be granted when it is impossible to return parties to their exact pre-contract positions, particularly when the item (here, the car) has decreased in value or been used.
  2. Whether the loss in value or use of the goods prevents rescission in cases of misrepresentation.
  3. How Section 1(2) of the Misrepresentation Act 1967 interacts with the remedy of rescission.

Decision

  • The Court of Appeal reversed the first instance decision, holding that exact restoration is not required for rescission.
  • The court emphasized that rescission should be available where a substantial and practical return to original positions is possible, even if an exact reversal cannot be achieved.
  • Financial adjustments (such as for the use of the car) can be employed to ensure a fair outcome following rescission.
  • Value loss or use of the item alone does not bar rescission if fairness can be achieved through adjustments.
  • The court clarified that Section 1(2) of the Misrepresentation Act 1967 should not be used to deny rescission where practical restitution is possible.

Legal Principles

  • Rescission aims to restore parties to their pre-contractual positions when a contract is affected by misrepresentation.
  • Exact restitution is not required; practical restoration suffices if fairness can be achieved.
  • Courts have the discretion to impose financial adjustments to account for benefits received under the contract.
  • A decline in the value of goods or their use does not, in itself, preclude rescission provided practical return is feasible.
  • Section 1(2) of the Misrepresentation Act 1967 gives the court a power to substitute damages for rescission only where rescission would be unduly harsh, not simply because restitution cannot be exact.

Conclusion

Salt v Stratstone Specialist Ltd clarified that rescission remains a flexible remedy in contract law, focused on practical rather than exact restitution, and reinforced consumer protection by ensuring that misrepresentation can result in rescission notwithstanding use or value loss of the goods, so long as pre-contract positions can be substantially restored.

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