Redgrave v Hurd (1881) 20 Ch D 1 is a significant case in English contract law that clarified the principles governing innocent misrepresentation and the right to rescind a contract. The case firmly established that a contract may be rescinded for innocent misrepresentation even when the party misled had the opportunity to verify the accuracy of the statement but failed to do so. The Court of Appeal emphasised that reliance on a misrepresentation is sufficient to set aside a contract, and there is no obligation upon the representee to investigate the truth of the representation before acting upon it.
Redgrave v Hurd (1881) 20 Ch D 1 continues to be a leading authority on misrepresentation and equity’s role in protecting individuals who are induced into contracts by false statements. The judgement delivered by Sir George Jessel MR, with Baggallay LJ and Lush LJ concurring, remains one of the cornerstones of English contract law on this subject.
Facts of Redgrave v Hurd
In Redgrave v Hurd (1881) 20 Ch D 1, the plaintiff, Mr Redgrave, was an elderly solicitor who wished to take on a partner in his legal practice. To achieve this, he placed an advertisement titled “Law Partnership”, seeking a successor who would purchase his property and join the business as a partner.
The defendant, Mr Hurd, responded to the advertisement and attended an interview with the plaintiff. During the meeting, Mr Redgrave represented that the practice brought in an income of £300 per year. However, in reality, the income was closer to £200 per year. To support his statement, Mr Redgrave produced documents and summaries showing business amounting to approximately £200 per year. He further told Mr Hurd that the remainder of the income — the additional £100 — could be verified from other papers in the office, which were available for inspection.
Mr Hurd did not check these papers at that stage. Believing the plaintiff’s statement to be true, he agreed to purchase the property and enter the partnership. He signed the contract, paid a deposit, and took possession of the premises. However, before the agreement was fully completed, Mr Hurd discovered that the business was not as profitable as represented and was, in fact, worth significantly less.
As a result, Mr Hurd refused to complete the transaction. Mr Redgrave then filed an action seeking specific performance of the contract, essentially asking the court to compel Mr Hurd to fulfil the agreement. In response, Mr Hurd counterclaimed for rescission of the contract on the ground of fraudulent misrepresentation.
At first instance, Fry J found in favour of Mr Redgrave, holding that since Mr Hurd had been given the opportunity to inspect the papers and verify the income, but chose not to, he could not be said to have relied on the misrepresentation. Dissatisfied with this finding, Mr Hurd appealed to the Court of Appeal, which ultimately reversed the decision.
Issue
The central issue before the Court in Redgrave v Hurd (1881) 20 Ch D 1 was whether a person who has been induced to enter a contract by a misrepresentation may rescind the agreement even if they had the means and opportunity to discover the truth but failed to do so.
In other words, the Court had to determine whether Mr Hurd’s failure to verify the truth of Mr Redgrave’s statements barred him from claiming rescission of the contract on the ground of misrepresentation. The Court also had to consider whether the misrepresentation amounted to fraud or whether it was merely innocent in nature.
Redgrave v Hurd Judgement
The Court of Appeal, consisting of Sir George Jessel MR, Baggallay LJ, and Lush LJ, reversed the decision of Fry J and held that Mr Hurd was entitled to rescind the contract on the basis of innocent misrepresentation.
The Court found that although Mr Redgrave’s misrepresentation was not fraudulent — since there was no evidence that he knew his statement was false — it was nonetheless innocently false and had induced Mr Hurd to enter into the contract. The Court therefore held that Mr Hurd was not bound to complete the transaction and could rescind the agreement.
In delivering his judgement, Sir George Jessel MR made an important distinction between the doctrines of law and equity. He stated that even if a representation is made innocently, the representee who relied upon it is entitled to rescind the contract in equity. He explained that a person making a representation cannot later claim that they did not know it was false; the law expects them to ensure its accuracy before making such a statement.
Sir George Jessel MR observed:
“A man is not to be allowed to say… that when he made it he did not know it to be false; he ought to have found that out before he made it. No man ought to seek to take advantage of his own false statements.”
He further stated that:
“If a man is induced to enter into a contract by a false representation it is not a sufficient answer to him to say, ‘If you had used due diligence you would have found out that the statement was untrue. You had the means afforded you of discovering its falsity, and did not choose to avail yourself of them.’ If it is a material representation calculated to induce him to enter into the contract, it is an inference of law that he was induced by the representation to enter into it.”
The Court therefore concluded that Mr Hurd had been misled by the representation and that his failure to check the papers did not amount to negligence that would deprive him of his right to rescind the contract.
Baggallay LJ and Lush LJ both agreed with the reasoning of Sir George Jessel MR and concurred with the decision to grant rescission.
Legal Principle
The judgement in Redgrave v Hurd (1881) 20 Ch D 1 established several key principles in the law of misrepresentation:
- Innocent Misrepresentation Allows Rescission: A contract may be rescinded for innocent misrepresentation, even if the misrepresentation was made without fraudulent intent. Equity allows rescission where a false representation induced one party to enter into the contract.
- No Duty to Verify: The representee is not under a legal obligation to investigate or verify the truth of a representation. The fact that the representee could have discovered the truth by due diligence does not bar them from claiming relief.
- Reliance on Representation Presumed: Where a representation is material and calculated to induce a person to enter into a contract, the law presumes that the person did rely on it. The burden lies on the representor to prove otherwise.
- Difference Between Fraudulent and Innocent Misrepresentation: The case distinguished between fraudulent misrepresentation, which gives rise to damages, and innocent misrepresentation, which entitles the representee to rescission in equity.
These principles have since been followed and applied in numerous subsequent cases, shaping the modern understanding of misrepresentation in contract law.
Conclusion
The ruling in Redgrave v Hurd (1881) 20 Ch D 1 established that contracts entered into under innocent misrepresentation may be rescinded, regardless of whether the representee had the opportunity to discover the falsity of the statement. The decision is a key authority for the principle that reliance on a material misrepresentation is sufficient to set aside a contract, and that there is no duty on the representee to verify statements made by the other party.
By distinguishing between law and equity, the Court of Appeal ensured that equitable principles continue to protect those induced by false representations. Redgrave v Hurd (1881) 20 Ch D 1 thus stands as a lasting statement of fairness and integrity in English contract law, upholding the principle that one cannot profit from one’s own misrepresentation, however innocently made.