FLK1 · Multiple-choice practice

FLK1 Contract Law — Question 26

Question

Emma enters into a contract with David to purchase a rare painting for £20,000. The contract specifies that Emma will pay David £10,000 upfront, with the remaining £10,000 to be paid upon delivery of the painting. After paying the initial £10,000, Emma learns that David does not actually own the painting and has no legal right to sell it. Emma immediately notifies David that she is rescinding the contract and demands a refund of the £10,000 she already paid. David refuses to refund the money, claiming that Emma breached the contract by failing to pay the full purchase price. What legal principles apply to this situation?

The contract is void due to David’s lack of contractual capacity.
Emma is entitled to rescind the contract due to David’s misrepresentation as to his ownership of the painting.
Emma is not entitled to rescind the contract as she breached it by failing to pay the full purchase price.
The contract is voidable at Emma’s option due to David’s fraudulent misrepresentation.
Emma is entitled to specific performance of the contract, requiring David to deliver the painting as agreed.

Answer and explanation

Correct answer: B. Emma is entitled to rescind the contract due to David’s misrepresentation as to his ownership of the painting.

In this scenario, Emma is entitled to rescind the contract and demand a refund of the £10,000 she already paid due to David’s misrepresentation as to his ownership of the painting. Misrepresentation occurs when one party makes a false statement of fact that induces the other party to enter into the contract. Here, David falsely represented that he owned the painting and had the legal right to sell it to Emma. However, since David did not actually own the painting, his misrepresentation vitiates the contract, allowing Emma to rescind it and seek a refund of the money she already paid. The reason why D is wrong (albeit similar) is because we don’t know whether David intentionally misrepresented his rights over the painting (fraudulent) and because caselaw supports the proposition that fraudulent misrepresentation renders a contract void ab initio, not merely voidable on the insistence of the victim.

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