Attwood v Small & Ors

A. contracted with S. S. and T. for the sale to them, in their own, names, of freehold and leasehold property, including mines and works for making iron; the purchase being made, in fact, for a numerous company, of which S. S. and T. were managing directors. Some difficulty occurring as to A.'s title, the time for completing the contract elapsed; but upon further treaty, S. S. and T. agreed to complete it, if A. would verify his statements of the capabilities of the property; and on his consenting, they deputed some of their co-directors, together with experienced agents, to ascertain the correctness of his statements. These persons examined the property and works, and the accounts kept by A., receiving from him and his agents all facility and aid for the purpose; and they reported to their constituents that A.'s statements were correct, and P. T., their partner and agent remaining on the property, with particular instructions to make further examination, made a similar report; whereupon a supplemental contract was completed, varied from the first by reducing the purchase money, and releasing S. S. and T. from personal liability for the unpaid instalments. After six months' possession by the agents of S. S. and T., and the company, working the mines, and exercising other acts of ownership in deterioration of the property, all the directors and P. T. filed a bill in the Exchequer, on behalf of themselves and all their partners ([6 Cl. and F.] 571), against A. and his agents, to rescind the contract for fraud. After replication to the answers, the plaintiffs, except T. and P. T., obtained an order of Court, though opposed by A., to amend the bill by striking out the names of T. and P. T. as plaintiffs, and making them defendants, and they amended the bill accordingly, and charged P. T. with collusion in the alleged fraud of A.

Held by the House of Lords (reversing the decree of the Court of Exchequer, except so far as it acquitted P. T. of the charge of collusion, and dismissed the bill as against him), that the contract could not be rescinded; first, because there was no proof of fraud (Lords Lyndhurst and Wynford dissentientibus); and secondly, because the purchasers did not rely on A.'s statements, but tested their accuracy, and after having knowledge, or the means of knowledge, declared that they were satisfied of their correctness..

If on the treaty for the sale of property, the vendor makes representations which he knows to be false, the falsehood of which the purchaser had no means of knowing, but he relies on them, a court of equity will rescind a contract so entered into, although it may not contain the misrepresentations; but it will not rescind without the clearest proof of fraudulent misrepresentations, and that they were made under such circumstances as show that the; contract was based on them (see [6 C1. and F.] pp. 330, 395, 444, 466, 478, 502).

If a purchaser,…