Court's discretion to award damages in lieu of rescission (Misrepresentation Act 1967 s.2(2))
In May 2026 Harrowby Print Ltd bought a used printing press for £85,000 from Selwyn Graphics Ltd. Before the sale, Selwyn's manager told Harrowby the press had been made in 2019. He honestly believed this, relying on the manufacturer's service records, which turned out to contain a clerical error. The press was in fact made in 2018. It works perfectly and its value is only about £2,000 lower than that of a 2019 model. Harrowby discovered the truth two weeks after delivery, at once asked to rescind, and has since issued proceedings claiming rescission. No bar to rescission has arisen.
Which of the following best describes the court's powers in Harrowby's claim?
Choose one answer to see the reasoning.
Worked answer
Correct answer D: The court may declare the contract subsisting and award damages in lieu of rescission, if it considers it equitable to do so.
THE RULE TO REMEMBER
For a non-fraudulent misrepresentation, the court may declare the contract subsisting and award damages in lieu of rescission where equitable, weighing the misrepresentation and each side's losses (MA 1967 s.2(2)).
Court's discretion to award damages in lieu of rescission (Misrepresentation Act 1967 s.2(2))
Section 2(2) of the Misrepresentation Act 1967 applies where a person has entered into a contract after a misrepresentation made otherwise than fraudulently, and would be entitled to rescind. If it is claimed in proceedings that the contract ought to be or has been rescinded, the court may declare the contract subsisting and award damages in lieu of rescission, if of opinion that it would be equitable to do so. It must have regard to the nature of the misrepresentation, the loss that would be caused by it if the contract were upheld, and the loss that rescission would cause to the other party. Selwyn's statement was a non-fraudulent misrepresentation which induced the contract, and Harrowby could otherwise rescind. Since the press works perfectly and the difference in value is small, while rescission would cost Selwyn far more, the court may well uphold the contract and award damages instead.
Why A is wrong: Section 2(2) gives the court a discretion to refuse rescission and award damages instead, even where rescission is available.
Why B is wrong: An innocent misrepresentation still allows rescission, and s.2(2) lets the court award damages in lieu of it.
Why C is wrong: Section 2(1) liability is avoided where the representor proves reasonable grounds for belief, which Selwyn can probably do on these facts.
Why E is wrong: Misrepresentation makes a contract voidable, not void; it stands unless and until rescinded.
A little more practice done.
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