Facts: There was a contract for the sale of a Jaguar car by Caldwell to a rogue buyer, who paid with a small cash deposit and the rest by cheque. The next day Caldwell presented the cheque at the bank and it was dishonoured. Caldwell immediately informed the police of the fraudulent transaction. The rogue buyer then sold the car to an innocent third party (who bought it in good faith and without notice of any defect in title) and disappeared.
Held: The buyer had no good title to the car as Caldwell had attempted to rescind the contract by immediately reporting the fraudulent transaction to the police. Caldwell was entitled to recover the car.
Although communication of rescission to the other party is generally necessary, where one party prevents the other from communicating rescission by absconding, neither he nor those who acquire their title through him can insist on actual notification.
Question: Was the contract effectively rescinded by Caldwell?
Yes. The general rule is that communication is needed. However, in this case, the rogue buyer absconded. Caldwell had made a report to police immediately, and this was enough to effectively rescind the contract. It was not a bar to rescission because it occurred before the subsequent sale of the car.
However, the Court said that it could be a bar to rescission if it occurred after the rogue buyer had already sold on the car to an innocent third party.