Misrepresentation as a defence to a claim for specific performance.

Here we may mention a form of mis-statement in connexion with the sale of land, which has not exactly the true characteristics of a misrepresentation inducing the contract, but partakes of the same nature. That is where a man by mistake or inadvertence, or through fraud, sells some property, of which he is not entitled to dispose (k). In this case there will, in the ordinary course of things, he a breach of his obligation to show a good title. We have seen (l) that such a breach of the vendor's obligation under the contract will justify the purchaser in rescinding it: but in these circumstances the right of rescission is founded rather on the fact that the vendor cannot deliver the article contracted for, than on a false representation inducing the purchaser's consent. At the same time the vendor, by making the contract of sale, impliedly represents that he has the property described to dispose of; and it is on the ground of his estoppel by this representation that the Court allows the purchaser to claim specific performance with compensation, where the vendor has good right to a part, but not the whole, of the property sold (m). And if this implied representation were fraudulently made, the same consequences follow as if there had been a positive assertion in words of the vendor's ownership, and that representation had induced the other to enter into the contract (n).

Sale by mistake or through fraud of land to which the vendor has no title.

Brick and Tile Co. v. Butler, 15 Q. B. D. 261, 16 Q. B. D. 778; Me Marsh and Earl Granville, 24 Ch. D. 11; Re Davis and Cavey, 40 Ch. D. 601; above, pp. 32, 61, n. (w), 157 - 159, 165, 166; and see p. 172.

(c) Above, pp. 733 sq.

(f) Above, pp. 728, 730.

(g) Lamare v. Dixon, L. R. 6

H. L. 414, 428; Re Banister, Broad v. Munton, 12 Ch. D. 131, 142, 147, 149; above, pp. 160, 687.

(h) See the cases stated and cited above, pp. 31, 32, 157 - 160, 165 - 168, 685, 693.

(i) See previous note; and cf. above, pp. 722, 738.

As before mentioned (o), a person induced by misrepresentation, whether fraudulent or innocent, to enter into a contract for the sale of land, has the option of rescinding or affirming it: but the contract is voidable only, not void, and remains good until set aside. If the party so misled, being the purchaser, elect to affirm the agreement, he may, as a rule, enforce specific performance with compensation for the deficiency; and the limits of his right in this respect have been already explained (p). If the party misled propose to rescind the contract, his election to do so must be made within a reasonable time after the discovery of the misrepresentation; for long delay in claiming rescission after he has become aware of the true facts may be evidence of an intention to affirm the contract (q). And his election to rescind the contract must be communicated to the other party (r). If he elect to rescind the contract, he is entitled to take active proceedings under the equitable jurisdiction of the Court to have the agreement set aside and cancelled; he is not obliged to wait for this relief until he is sued thereon by the other party (s). Election to affirm the agreement may not only be expressly declared, but may be inferred from the acts of the party concerned (7), as by a purchaser's exercising acts of ownership in respect of the property bought (u). When the party misled, being aware of the misrepresentation made, has once elected to affirm the contract, he cannot afterwards rescind it (x). And where through the act of the person entitled otherwise to avoid the contract it has become impossible to restore the parties to their former position, the contract can no longer be rescinded (y). Thus if one induced to purchase mines by a fraudulent misrepresentation have entered into possession and worked the mines, he cannot afterwards rescind the contract (z). But this rule only applies where the act of the party claiming to rescind has made complete restitution impossible. The defrauding party cannot resist rescission on the ground that his act has prevented the possibility of such restitution (a). Thus on a sale of mines voidable at the vendor's instance, he may set aside the sale, notwithstanding that the purchaser has worked them (b). As was pointed out in the previous chapter, the right to set aside a contract of sale or a conveyance of lands induced by fraud cannot be enforced, either at law or in equity, as against any person who has acquired the land sold, or any part thereof or interest therein, as a purchaser for valuable consideration in good faith and without notice of the fraud (c). A fortiori, the equity to set aside a contract for innocent misrepresentation would not be enforceable against any such purchaser. In the case of innocent misrepresentation, however, this point can hardly arise; since it is held that contracts for the sale of land induced by innocent misrepresentation cannot be set aside after completion (d); and the plea of purchase for value without notice cannot be set up by an assignee of the benefit of the contract, whilst it remains a mere chose in action (e). Subject to the limitations indicated in this paragraph, a contract to sell land may, if induced by fraud, be set aside after as well as before completion (f). And as we have seen, an action can be maintained, after completion, to recover damages at law for a false representation innocently made in connexion with the formation of a contract for the sale of land, if the representation amounted to a warranty collateral to the contract, but otherwise not (g).

Election to rescind or affirm a contract induced by misrepresentation.

Purchaser's right to specific performance with compensation.

Election to rescind must be made

(k) Above, pp. 636, 640, 642. (I) Above, p. 727. (m) Above, p. 636.

(n) Above, pp. 577, 736. (o) Above, pp. 723, 729. {p) Above, pp. 636 - 644, 729. within a reasonable time.