A good example of the line of cases holding the second view is State v. John O'Neil.72 Here the action was a criminal prosecution for a violation of the liquor laws of the State of Vermont in selling liquor within the state. A in Vermont ordered liquor from B in New York, which was sent C. O. D. It was held that the parties did not intend any passing of title until the goods were delivered and paid for and that the express company was the agent of the seller, so that its possession was the possession of the seller and hence title did not pass until the goods were paid for by the buyer, and that therefore the laws of the state had been violated by the sale and passing of title to liquor within the state. 72 58 Vt. 140, LEADING ILLUStrative Cases. CHAPTER XII. FRAUD AND ITS EFFECT. 81. Effect on title.-The essential thing in the question of the passing of title is whether the parties intended that it should pass, and not what induced them to have this intention. Therefore if A really intended to pass title of certain property to B, B will get the title though he has been guilty of the grossest misrepresentation and fraud in bringing about the contract and inducing A to have this intention. Such conduct on B's part may place certain obligations and duties upon him, when he gets the title in this manner, and so also anyone who takes it from him without paying value for it, or with knowledge of the facts, may be bound in the same way, but it cannot be said that the title has not passed. 82. Contract vcidable.-One who has thus been induced by fraud to part with his title is not without remedy, for not only may he hold the wrongdoer in damages because of the fraud and deceit, but he may also rescind the contract and recover back the property.73 It seems that, in order to effect such rescission, nothing further is necessary than that the seller should demand back the property from the buyer, and upon his failure or refusal to deliver it, the seller may bring replevin and regain posses78 Barnard v. Campbell, 58 N. Y. 73, LEADING Illustrative Cases. sion of it. But until the seller has signified his intention to rescind, and thus revest himself with title, the property is in the buyer and if the goods were destroyed the loss would be upon him. The minds of the parties have met upon the subject matter of the contract and title has passed; rescission is merely allowing the seller to get it back, because he was trapped into parting with it in the first place. The right to rescind in such a case is given to the seller by the law, and the law allows him to get back the title merely by his own act, and without any formal action or aid of the law. He may also get back possession if he can, but if he cannot, the law will lend him its aid in doing so. 83. Contract void.-If the nature of the fraud was such as to prevent the meeting of the minds of the parties then in such a case there will be no passing of title at all, for intention to pass title is absolutely necessary, and is effective for that purpose, no matter how induced, but any fraud which operates to prevent the formation of the contract or the meeting of the minds of the parties, will absolutely prevent the title from passing.74 If A should fraudulently represent to B that he was the agent of C and as such induce B to ship goods, no title would pass in such case, for here the fraud has operated so that there is in fact no intention to pass title. B intended to pass title to C, and did not intend to pass title to A, therefore since no contract was in fact made with C because A did not really represent him, 74 Rodliff v. Dallinger, 141 Mass. 1, 4 N. E. 805, LEADING ILLUSTRATIVE CASES. there is no passing of title to C; on the other hand B never intended to pass title to A and did not purport to do so. The character of the fraud, therefore, was such as to prevent the actual passing of title to anyone and B therefore still has title to the goods.75 But if A should represent to B that he is a man of good credit when in fact he is insolvent, and therefore B should sell goods to A, the title in such case would pass, for the parties so intend, even though it was fraudulent representation which made the seller have such intention. Title in such case is in the buyer until the seller does some act to show that he rescinds the sale. 84. Election to hold fraudulent buyer. Since the title has actually passed, if the parties so intended, regardless of the fraud practiced by the buyer, the seller may treat the contract as binding if he so wishes or he may rescind the contract and take the title back. But since the title has actually passed the sale will stand until the seller signifies his intention to rescind, and this he must do within a reasonable time after the discovery of the fraud practiced him. The vendor may also by his conduct show that he ratifies the contract, as by suing for the price or taking security for its payment after learning of the buyer's fraudulent conduct. upon 85. What constitutes fraud.-"Fraud is a false representation of facts, made with a knowledge of its falsehood, or recklessly without belief in its truth, with the intention that it should be acted upon by the complaining party, and actually inducing him 75 Brunswick & Co. v. U. S. Express Co., 46 Iowa 677. to act upon it."76 It does not need to be by spoken or written words, but may consist of acts or conduct on the part of one party tending to mislead the other. Sometimes a nod of the head or shrug of the shoulders may be more expressive than any spoken words. The fraudulent representations, no matter how made, must be with reference to something materially connected with the sale, so as to have, to some degree at least, induced the defrauded party to enter into the bargain. Ordinarily mere silence will not amount to a fraud, for the parties are said to be dealing at arm's length, and there is no duty on the part of one party to give information to the other with reference to the value of the article which is the subject matter of their contract. Some courts, however, hold that if the seller knows that the article is materially defective and knows also that the buyer is laboring under an erroneous impression with reference to the property so that he would not buy if he knew the facts, then failure to disclose the truth under such circumstances will in itself amount to a fraud. It is also generally considered as fraudulent for one to purchase property with the intention of not paying for the same; but some courts do not consider that this amounts to fraud unless the buyer is in fact insolvent, so that he knows that he will not be able to pay. This is perhaps really in the nature of a concealment which in fact amounts to fraud, for the one thing which the seller has in mind is to get payment for his goods, and the very fact of purchasing is a 76 Anson, Contracts (7th ed.), p. 165. |