Car & Universal Finance Ltd v Caldwell [1965]

Car & Universal Finance Ltd v Caldwell [1965] 1 QB 525 centres on the principle that rescission of a contract is barred if the subject matter is sold to a bona fide third-party purchaser without notice of misrepresentation, before any intention to rescind is communicated to the representor. However, the court recognised an exception allowing rescission without communication when such communication is impossible.

The claimant, who owned a Jaguar, was induced by fraud to sell it to a rogue buyer who subsequently absconded and could not be traced. Once the fraudulent buyer's cheque was rejected, the claimant promptly notified the police and sought their assistance in recovering the car. The rogue then sold the car to an intermediary buyer, and it went through a series of sales until it reached the hands of the defendant, Car & Universal Finance Ltd.

The Court of Appeal held that there was valid rescission before the sale to Car & Universal Finance Ltd, who was a bona fide purchaser without notice. It was established that the police report constituted sufficient notice to rescind the contract, preventing Car & Universal Finance Ltd from acquiring title to the car.

Seller LJ, delivering the judgment, emphasised the general rule that rescission requires informing the opposing party about the termination of the contract. However, an exception is recognised when it is impossible to communicate the intention to rescind, especially in cases involving a fraudulent rogue who has absconded. Seller LJ stressed that expressing the intention to rescind, even short of communication or repossession, would be adequate in such circumstances.

The judgment reasoned that imposing an impossible task on a defrauded seller, especially when dealing with a fraudulent party, is unjustifiable. It acknowledged that the presence of other innocent parties who may suffer due to rescission should not burden the defrauded seller with an unattainable obligation.

In summary, Car & Universal Finance Ltd v Caldwell establishes the principle that valid rescission can occur without direct communication to the representor if such communication is impossible, particularly when dealing with fraudulent parties who have absconded. The decision prioritises practicality and fairness in situations where the defrauded party faces challenges in communicating their intention to rescind.
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