Leaf v International Galleries 01 Mar 1950 [1950] 2 KB 86, CA

A buyer purchased a painting which both parties mistakenly believed was by John Constable. Five years later he discovered the error and sought to rescind the contract. The court denied rescission, holding the delay was too long and the mistake was of quality, not identity.

Facts

In 1944, the plaintiff, Mr Leaf, purchased an oil painting from the defendants, International Galleries, for £85. The painting depicted Salisbury Cathedral, and during the sale, the sellers innocently represented that it was a work by the famous artist J. Constable. Both parties believed this to be true. Five years later, in 1949, when the plaintiff tried to sell the painting at Christie’s, he was informed that it was not, in fact, painted by Constable. The plaintiff then sought to return the painting and reclaim the purchase price, effectively seeking rescission of the contract. The defendants refused, and the plaintiff sued, claiming rescission and, alternatively, damages for breach of warranty. The county court judge held that the claim for damages was statute-barred and dismissed the claim for rescission. The plaintiff appealed to the Court of Appeal.

Issues

The Court of Appeal considered several key legal issues:

Condition or Warranty

Was the statement that the painting was by J. Constable a condition of the contract, the breach of which would entitle the buyer to reject the painting, or was it a mere warranty, the breach of which would only entitle him to damages?

Acceptance and Lapse of Time

If the statement was a condition, had the plaintiff ‘accepted’ the painting under the Sale of Goods Act, 1893, by keeping it for five years? If so, would this mean he lost the right to reject the goods and could only treat the breach of condition as a breach of warranty?

Mutual Mistake

Did the mutual mistake regarding the artist’s identity render the contract void from the beginning (ab initio)?

Rescission for Innocent Misrepresentation

Could the plaintiff rescind the contract on the grounds of an innocent misrepresentation after a significant lapse of time?

Judgment

The Court of Appeal unanimously dismissed the appeal, holding that the plaintiff’s claim for rescission was barred.

Lord Justice Denning’s Reasoning

Denning LJ analysed the case on three grounds: the representation as a condition, the effect of mistake, and the right to rescind for innocent misrepresentation.

On the first point, he held that the representation was a condition of the contract. However, he found that the buyer had lost his right to reject the painting for breach of condition by accepting it. He stated:

In this case the buyer took the picture into his house and hung it there for five years. That amounts to an acceptance of the goods within s. 35 of the Sale of Goods Act, 1893… He cannot then reject it for breach of condition. He is relegated to his claim for damages for breach of condition… and that claim is barred by the Limitation Act.

On the issue of mistake, Denning LJ concluded that the mistake was not fundamental enough to void the contract. The contract was for a specific painting of Salisbury Cathedral, which the buyer received. The mistake was as to a quality or attribute of the painting (its painter), not its essential subject-matter.

This was a contract for the sale of goods. There was a mistake about the quality of the subject-matter, because both parties believed the picture to be a Constable; and that mistake was in one sense essential or fundamental. But such a mistake does not avoid the contract: there was no mistake at all about the subject-matter of the sale. It was a specific picture, ‘Salisbury Cathedral’.

Finally, regarding innocent misrepresentation, he held that the right to rescind must be exercised within a reasonable time, and five years was far too long. He reasoned that certainty in commercial transactions was paramount and that an indefinite right to rescind would be unfair to the seller.

Lord Justice Jenkins’ Reasoning

Jenkins LJ agreed, focusing heavily on the distinction between a mistake as to the subject-matter and a mistake as to its qualities. He concluded that the parties were agreed on the subject-matter, which was the specific physical painting. The mistake as to its authorship was a mistake as to quality which did not prevent the formation of a valid contract.

As I see it, it is of the first importance to distinguish between a mistake as to the subject-matter of the contract and a mistake as to a quality or attribute of that subject-matter… The parties were agreed in the same terms on the same subject-matter, and that is sufficient to make a contract.

He affirmed that the plaintiff’s only remedy could have been damages for breach of warranty, a claim now barred by statute. He also agreed that the right to rescind for innocent misrepresentation was lost by a wholly unreasonable delay.

Implications

The decision in Leaf v International Galleries is a landmark case in contract law. Its primary significance is the clear distinction it draws between a mistake that nullifies a contract (mistake as to identity or subject-matter) and a mistake that does not (mistake as to quality or attributes). It establishes a high bar for a contract to be declared void for common mistake. Furthermore, it sets an important precedent that the equitable remedy of rescission for innocent misrepresentation is not available indefinitely and will be barred by a significant lapse of time (laches), even where the claimant was unaware of the misrepresentation. The case reinforces the principle of finality in contractual dealings and the importance of buyers acting promptly if they wish to reject goods.

Verdict: Appeal dismissed.

Source: Leaf v International Galleries 01 Mar 1950 [1950] 2 KB 86, CA