Alati v Kruger

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Citation: Alati v Kruger (1955) 94 CLR 216

This information can be found in the Casebook: Paterson, Robertson & Duke, Contract: Cases and Materials (Lawbook Co, 11th ed, 2009), pp. 986-9 [39.15] or here

Contents

Background facts

  • The Plaintiff purchased a store off the Defendant.
  • The Defendant made some representations about how much the store makes etc. They turned out to be false.
  • The Plaintiff sought rescission of the contract and restoration to original position.

Legal issues

Judgement

  • The court notes how the Plaintiff could have alternatively brought an action for breach of contract (since an approximate income of the store was a warranty) or for fraud, but both would have only entitled him to damages and would affirm the contract. He chose misrepresentation because he wanted rescission.
  • Under the common law, rescission is only possible where it is actually possible to (precisely) restore parties to their original positions. This is called Restitutio in integrum.
    • "If the case had to be decided according to the principles of the common law, it might have been argued that at the date when the respondent issued his writ he was not entitled to rescind the purchase, because he was not then in a position to return to the appellant in specie that which he had received under the contract, in the same plight as that in which he had received it.[1]"
  • In this case, events have transpired which such restitution impossible.
  • However, equity allows rescission as long as substantial restitution is possible. This is because it has the powers to facilitate effective Restitutio in integrum.
    • "equity has always regarded as valid the disaffirmance of a contract induced by fraud even though precise restitutio in integrum is not possible, if the situation is such that, by the exercise of its powers, including the power to take accounts of profits and to direct inquiries as to allowances proper to be made for deterioration, it can do what is practically just between the parties, and by so doing restore them substantially to the status quo.[2]"
    • "The difference between the legal and the equitable rules on the subject simply was that equity, having means which the common law lacked to ascertain and provide for the adjustments necessary to be made between the parties in cases where a simple handing back of property or repayment of money would not put them in as good a position as before they entered into their transaction, was able to see the possibility of restitutio in integrum, and therefore to concede the right of a defrauded party to rescind, in a much wider variety of cases than those which the common law could recognize as admitting of rescission.[3]"
  • In this case, equity indeed has the powers to make substantial restitution possible.
  • The contract was validly rescinded by the Plaintiff.

References

  1. (1955) 94 CLR 216, 223
  2. (1955) 94 CLR 216, 223
  3. (1955) 94 CLR 216, 224
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