Car & Universal Finance Co Ltd v Caldwell
Court of Appeal
Citations:  1 QB 525;  2 WLR 600;  1 All ER 290;  CLY 3286.
The defendant owned a car which they sold to a rogue. The rogue paid by cheque. The cheque was dishonoured, by which time the rogue had disappeared with the vehicle. The defendant immediately reported the theft to the police and the Automobile Association. Later, the rogue sold the car to a car dealership. The dealership then sold the car to a finance house, who sold it to another dealer, who sold it to the claimant. None of these individuals were aware that the car was stolen.
The contract between the defendant and the rogue was voidable. Who owned the car depended on whether the defendant had successfully rescinded the contract between himself and the rogue before it was sold on to any third parties. If he had, then he retained ownership of the car. If not, then he would have lost his power to rescind the contract, and the rogue would have passed on valid title to the third-parties.
- Had the defendant validly rescinded the contract between himself and the rogue before the car was sold on to any third parties?
The Court of Appeal held in favour of the defendant. Since the defendant was incapable of rescinding the contract by communicating their intentions to the rogue, it was enough that they had reported the theft to the police. Therefore, the contract was rescinded before the rogue had sold the car on.
This Case is Authority For…
A party who absconds with property acquired under a voidable title, intentionally making themselves impossible to communicate with, waives their right to be made aware that the seller is rescinding the contract. In those circumstances, the seller can void the contract by taking all reasonable steps to get the goods back.
It is generally sufficient that the seller reports the theft to the appropriate authorities. Sellers LJ also noted that if the defendant had managed to physically retake possession of the car before it was sold on, this would also rescind the contract.
All three Court of Appeal judges were keen to limit the principles in this case to instances of fraud. It is therefore not clear whether a seller can rescind a contract without communication if the original buyer makes an innocent or negligent misrepresentation and happens to become uncontactable for innocent reasons.