Clarke v Dickson (1858) 120 E.R. 463
Contract law – Misrepresentation – Rescission of contract
Facts
The plaintiff claimed that he had been induced to invest in shares in a lead and copper mining company by the three defendants, who were directors of the company. The mine was operated by the mining company for three years, with dividends claimed each year. The following year, the company was in poor circumstances and it was registered as a limited liability company and was wound up. During this process, the plaintiff realised that the representations that were made by the defendants were fraudulent and the dividends that had been paid previously were false. He brought an action to have the deposits for his shares repaid.
Issue
A prominent issue for the judges to consider was that the shares that had been previously purchased by the plaintiff were now worthless as the lead and copper mining company had been closed down. Therefore, it would be unlikely that the plaintiff could recover the value of the shares that he invested as a result of the defendant’s misrepresentation.
Decision/Outcome
The judges held that the contract between the parties could not be rescinded as the shares were worthless, following the wrapping up of the company. In circumstances where a party wished to rescind an offer, they must be able to return to their original state that they had before the contract was agreed. The court subsequently found that the plaintiff was required to seek remedy by special action for deceit in which he could potentially recover damages for the misrepresentation, rather than trying to recover the original price of the shares.
Updated 19 March 2026
This case summary accurately reflects the decision in Clarke v Dickson (1858) 120 E.R. 463. The core principle described — that rescission requires the parties to be restored to their pre-contractual position (restitutio in integrum), and that rescission will be unavailable where this is impossible — remains good law. This principle has been consistently affirmed in subsequent case law, including Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218 and, more recently, Spence v Crawford [1939] 3 All ER 271. The courts have over time taken a somewhat more flexible approach to what constitutes practical restitution (particularly in equity), but the fundamental rule as stated in this case has not been overturned. The Misrepresentation Act 1967 is also relevant context for students: under s.2(2), courts now have a discretion to award damages in lieu of rescission where rescission would otherwise be available. However, that Act did not alter the rule in Clarke v Dickson regarding cases where rescission is already impossible. The article does not address the 1967 Act, which students should be aware of when considering the modern law of misrepresentation more broadly.
