King’s Norton Metal Co v Edridge Merrett & Co (1897) 14 TLR 98
Contract - Fraud - Misrepresentation
A fraudster ordered goods from a metal manufacturer. He told the manufacturer that he was a well known business man and provided him with false details which matched the description of a wealthy business man, leading the manufacturer to believe he had multiple factories and agents. The fraudster set up an account with the manufacturer and paid nothing for the goods upfront. The fraudster then sold the goods to Edridge Merritt.
Whether there was a contract between the fraudster and Edridge Merritt.
Judgment was awarded to Edridge Merritt. The court held that the fraudster had made a contract with Edridge Merritt in his own capacity and identity. He had not fraudulently taken on another identity when selling the goods to Edridge. Although the contract was voidable, possessory title was held to pass from a fraudster to an innocent person, because they were led to believe the purchase they were making was bona fide. The case of Cundy v Lindsay (1877) App Cas 459 was distinguished as the court held that Cundy had contracted with the fraudster under the guild of a separate identity. A good title was said to pass from the fraudster to the innocent party, deeming them the new rightful owner. Cundy v Lindsay is now held to be the correct approach to fraud and sale of goods to an innocent third party, in that there is no possessory title to be passed on to the innocent third party. However, the court held that King’s Norton was unable to recover the goods or their value from Edridge Merritt.