Rescission

The clearest statutory statement of rescission as a remedy for misrepresentation is the Misrepresentation Act 1967. Section 1, headed “Removal of certain bars to rescission for innocent misrepresentation,” preserves a claimant's right to rescind even where the misrepresentation has become a term of the contract or the contract has been performed: “if otherwise he would be entitled to rescind the contract without alleging fraud, he shall be so entitled, subject to the provisions of this Act, notwithstanding the matters mentioned in paragraphs (a) and (b) of this section.” The section title itself confirms that rescission for misrepresentation is otherwise subject to bars which the Act partially removes.

Rescission is not, however, an automatic or unqualified remedy. Section 2(2) of the 1967 Act gives the court a discretion to refuse rescission and award damages instead: where a claimant would be entitled to rescind for a non-fraudulent misrepresentation, “the court or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of opinion that it would be equitable to do so,” having regard to the nature of the misrepresentation and the loss rescission would cause to each side. Section 3 of the Act also restricts a party's ability to exclude or restrict liability for misrepresentation by contract term, rendering such clauses ineffective except to the extent they satisfy the reasonableness test in the Unfair Contract Terms Act 1977.