Government of Zanzibar v British Aerospace (Lancaster House) Ltd [2000]

Court: High Court

Facts: The Government of Zanzibar (C) entered into a contract with British Aerospace (D) for the purchase of an executive jet. The finance company, acting as an intermediary, bought the plane and leased it back to Zanzibar. The jet, however, had persistent faults, leading Zanzibar to stop lease payments. The finance company subsequently sold the plane, making rescission of the contract impossible. Zanzibar sought either rescission of the contract or damages under Section 2(1) or Section 2(2) of the Misrepresentation Act 1967, claiming misrepresentations were made about the plane’s airworthiness and condition. The contract included an entire agreement clause, an exemption clause excluding D from liability for representations, and a non-reliance clause stating that Zanzibar had not relied on any representations made by D.

Issue: Whether rescission was possible given that the jet had been sold and, consequently, whether damages under Section 2(2) could be awarded if rescission was not available. Also, whether the exemption clause in the contract barred claims under Section 2(1) of the Misrepresentation Act 1967.

Held: The High Court held that rescission was impossible because the jet had been sold, and therefore, damages under Section 2(2) were unavailable. The court found that Section 2(1) provides a right to damages for non-fraudulent misrepresentation but was subject to a defense if the representor had reasonable grounds to believe the representation was true. Section 2(2) allows the court to award damages when it is more equitable than ordering rescission or upholding a prior rescission.

💡 Leveluplaw: This case highlights the limitation on remedies for misrepresentation when rescission is not feasible due to the sale of the asset. It also underscores the importance of contractual clauses in determining the scope of liability under the Misrepresentation Act 1967, especially in terms of their reasonableness.