Introduction
Rescission is an equitable remedy that aims to return parties involved in a contract to their positions before the agreement. This principle works on the basis that a contract affected by issues like misrepresentation should be undone to prevent one party gaining unfairly from the other. The main requirement for rescission is the ability to achieve a practical return to original positions, meaning parties can be largely restored without needing perfect or exact reversal. Salt v Stratstone Specialist Ltd [2015] EWCA Civ 745 clarified how this principle applies, especially in sales of goods.
The Facts of Salt v Stratstone
The case involved a Cadillac sold as “brand new” in 2007. Mr. Salt later found the car was made in 2005, had been damaged in a crash, and repaired before sale. These details conflicted with the “brand new” claim. Mr. Salt asked to undo the contract. The first ruling refused rescission, stating exact return was impossible due to the car’s value loss and use.
The Court of Appeal's Decision
The Court of Appeal reversed the first ruling, confirming exact return is not required for rescission. Lord Justice Longmore, giving the main judgment, stressed courts can modify rescission terms to ensure fair outcomes. This includes financial adjustments for benefits like car use. The Court ruled value loss alone does not block rescission. The key issue is whether a substantial return to original positions is feasible, not an exact reversal.
Practical Restitution and Section 1(2) of the Misrepresentation Act 1967
The case showed how rescission interacts with Section 1(2) of the Misrepresentation Act 1967. This section lets courts award damages instead of rescission if rescission would be overly harsh. The Court of Appeal stated this power should not block rescission when practical return is achievable. The main goal should be restoring pre-contract positions, using financial adjustments to ensure fairness.
Implications for Contract Law
Salt v Stratstone has important effects on contract law. It confirms practical return as the central requirement for rescission. This clarifies rules for items like cars that lose value, stating value loss alone does not prevent rescission. The ruling shows courts can use financial adjustments to balance benefits gained under the contract. This supports buyers in misrepresentation cases, letting them seek rescission even if the item’s value has dropped.
The Role of Salt v Stratstone in Consumer Rights
The case boosts consumer rights by confirming rescission remains available for misrepresentation even if the item has changed over time. It highlights the need for accurate descriptions in sales, particularly for goods. The decision makes clear sellers cannot avoid misrepresentation claims by arguing goods were used or lost value. This stops consumers being unfairly tied to contracts based on false claims.
Conclusion
Salt v Stratstone Specialist Ltd offers important clarity on rescission in contract law. The ruling confirms practical return to original positions, not exact reversal, decides whether rescission is granted. While focused on car sales, the case affects broader contract law by showing courts’ flexibility in using rescission with financial adjustments to ensure fairness. It supports the principle of return and improves legal protections for consumers affected by misrepresentation. This clarity helps maintain fairness in contracts and strengthens consumer rights. The case sets a key example for disputes involving items that lose value and clarifies how rescission works with the Misrepresentation Act 1967. It improves the legal approach to misrepresentation and offers clear guidance for businesses and consumers in contracts.
