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1These are contracts of marine, life and fire insurance, contracts for the sale of lands, for family settle ments, for the allotment of shares in companies, and, according to some authorities, contracts of suretyship and partnership. See Anson on Contract (7th ed.), 157; Pollock on Partnership (4th ed.), 486.

2 Anson on Contract (7th ed.). 150. On the contrary, see Holcomb v. Noble (1888), 69 Mich. 396, 37 N. W. R. 497. The action here was an action on the case for misrepresentation of the value and quality of certain lands. The representations were made by defendant Noble as the judgment of a third person whom he had employed to examine the lands. The representations were not true in fact, but the defense was that they were made in good faith in ignorance of their untruth. Two of the judges held this no defense, and the two others concurred grudgingly on the ground that it was the settled rule in Michigan. Speaking for these two, Morse, J., said: “I was strongly impressed upon the argument of this case with the theory of the defendant, supported by abundant authority outside of our own State, that unless the jury found that the representations relied upon by the plaintiff as false were made by the defendant knowing them to be false, or he made the statements as facts within his own knowledge when he was ignorant of the truth or falsity of

them, he could not be held liable in this action; that if he told plaintiff that he had never seen the land, but that he had had the same examined by a competent land-looker, who said that there were five million feet of pine on the land, and made no representations as of his own knowledge, the plaintiff could not recover.

"A subsequent careful examination of the case, and the authorities cited by defendant's counsel, has but confirmed me in the correctness and justness of his claim. I am satisfied that the law ought not to make a different contract for the seller than he sees fit to make for himself, and hold him, in effect, for warranties that he never made.

"But an equally careful examination of the cases adjudicated in this State satisfies me that the doctrine is settled here, by a long line of cases, that if there was in fact a misrepresentation, though made innocently, and its deceptive influence was effective, the consequence to the plaintiff being as serious as though it had proceeded from a vicious purpose, he would have a right of action for the damages caused thereby either at law or in equity. Baughman v. Gould, 45 Mich. 481, 8 N. W. R. 73; Converse v. Blumrich, 14 Mich. 109; Steinbach v. Hill, 25 Mich. 78; Webster v. Bailey, 31 Mich. 36; Starkweather v. Benjamin, 32 Mich. 305; Beebe v. Knapp, 28 Mich. 53."

See also the fuller discussion of

this question in the following chapter on Avoidance of the Contract for Fraud.

He

1 Anson on Contract (7th ed.), 150, citing as illustration, Bannerman v. White, 10 C. B. (N. S.) 844. Of this case Mr. Anson says: "Bannerman offered hops for sale to White. White asked if any sulphur had been used in the treatment of that year's growth. Bannerman said 'no.' White said he would not even ask the price if any sulphur had been used. They then discussed the price, and White ultimately purchased by sample the growth of that year; the hops were sent to his warehouse, were weighed, and the amount due on their purchase was then ascertained. afterwards repudiated the contract on the ground that sulphur had been used in the treatment of the hops. Bannerman sued for their price. It was proved that he had used sulphur over five acres, the entire growth consisting of three hundred acres. He had used it for the purpose of trying a new machine, had after wards mixed the whole growth to gether, and had either forgotten the matter or thought it unimportant. The jury found that the representation made as to the use of sulphur was not wilfully false, and they further found that 'the affirmation that no sulphur had been used was intended by the parties to be part of the contract of sale, and a warranty by the plaintiff.' The court had to consider the effect of this finding, and came to the conclusion that the

representation of the plaintiff was a part of the contract and a preliminary condition, the breach of which entitled the defendant to be discharged from liability.

"Erle, C. J., said: 'We avoid the term warranty because it is used in two senses, and the term condition because the question is whether that term is applicable. Then, the effect is that the defendants required, and that the plaintiff gave his undertak ing, that no sulphur had been used. This undertaking was a preliminary stipulation; and, if it had not been given, the defendants would not have gone on with the treaty which resulted in the sale. In this sense it was the condition upon which the defendants contracted, and it would be contrary to the intention expressed by this stipulation that the contract should remain valid if sulphur had been used.

"The intention of the parties governs in the making and in the construction of all contracts. If the parties so intend, the sale may be absolute, with a warranty superadded; or the sale may be conditional, to be null if the warranty is broken. And upon this statement of facts, we think that the intention appears that the contract should be null if sulphur had been used; and upon this ground we agree that the rule should be discharged.'

"It should be noted that in this case the representation was made before the parties commenced bargaining; whereas the representation

in Behn v. Burness was actually a term in the charter-party.

"It should further be noted that the actual legal transaction between the parties was an executory contract of sale by sample of a quantity of hops, a contract which became a bargain and sale, so as to pass the property when the hops were weighed and their price thus ascertained. There was nothing in the contract of sale to make the accept ance of the hops conditional on the absence of sulphur in their treatment; and the language of Erle, C. J., shows that he felt it difficult to apply the terms 'condition' or 'warranty' to the representation made by the plaintiff.

"The undertaking,' he says, was a preliminary stipulation;' and clearly the court felt that its introduction into the contract was only to be effected by an extension of the terms of the contract so as to include the discussion preliminary to the bargain. What really happened was that Bannerman made a statement to White, and then the two made a contract which did not include this statement, though but for the statement the parties would never have entered on a discussion of terms. The truth was that the consent of the buyer was obtained by a misrepresentation of a material fact, and was therefore unreal, but the common-law courts had precluded themselves from giving any

effect to a representation unless it was a term in the contract, and so in order to do justice, they were com. pelled to drag into the contract terms which it was never meant to contain."

1 Per Bramwell, J., in Derry v. Peek (1889), L. R. 14 App. Cas. 337, 347. Equity may rescind contract of sale of chattel for material false representation by buyer, though he was not aware that his statement was false. Newman v. Claflin (1899), 107 Ga. 89, 32 S. E. R. 943.

In Grosh v. Ivanhoe Land Co. (1897), 95 Va. 161, 27 S. E. R. 841 (a land case), it is said: "A false representation of a material fact constituting an inducement to the contract, on which the party had a right to rely, is a ground for rescission of the contract by a court of equity, although the party making the representation was ignorant whether it was true or false. The real inquiry is not whether the party making the representation knew it to be false, but whether the other party believed it to be true, and was misled by it in making the contract; and, whether the misrepresentation is made innocently or knowingly, the effect is the same.”

In Brooks v. Hamilton (1870), 15 Minn. 26 (a land case), it is said: "It is true that 'an innocent misrepresentation by mistake can never be made the ground of a personal action for fraud,' but it may operate upon the contract itself to such an extent

1

that a court of equity will rescind the contract; but that will only be the case when the error between the parties is of such a nature and character as to destroy the consent necessary to the validity of the contract, and the rule is further qualified so that it embraces only cases to which the rule caveat emptor does not apply."

In Wilcox v. Iowa Wesleyan University (1871), 32 Iowa, 367 (a land case), it is said that "even if by mistake, and innocently, a party misrepresents a material fact, upon which another party is induced to act, it is as conclusive a ground of relief in equity as a wilful and false assertion."

In Frenzel v. Miller (1871), 37 Ind. 1 (a case of the sale of a chattel), it is said, speaking of the rules prevailing before the adoption of the code of procedure: "The courts of equity would afford relief by reforming or rescinding a contract founded upon a mutual mistake of fact upon a material matter, although the representation was innocently made by mistake; while the courts of law would afford no remedy, in the absence of a warranty, unless there was either positive or constructive fraud." But since the code, it is said, this distinction no longer prevails and the equitable defenses may be availed of in actions which formerly would have been legal in form.

In Redgrave v. Hurd (1881), 20 Ch. Div. 1 (an action for specific performance), the same distinction between the rules at law and in equity, and

the effect of the Judicature Act, were stated by Jessel, M. R., as follows: "As regards the rescission of a contract, there was no doubt a difference between the rules of courts of equity and the rules of courts of common law- -a difference which of course has now disappeared by the operation of the Judicature Act, which makes the rules of equity prevail. According to the decisions of courts of equity it was not necessary, in order to set aside a contract obtained by material false representation, to prove that the party who obtained it knew at the time when the representation was made that it was false. ... As regards the rule of common law there is no doubt it was not quite so wide. There were, indeed, cases in which, even at common law, a contract could be rescinded for misrepresentation, although it could not be shown that the person making it knew the representation to be false. They are variously stated, but I think, according to the later decis ions, the statement must have been made recklessly and without care whether it was true or false, and not with the belief that it was true."

1 Prewitt v. Trimble (1891), 92 Ky. 176, 17 S. W. R. 356, 36 Am. St. R. 586. But in this case the court held that the defendant had at least constructive knowledge of the falsity of his statements. It was an action for the rescission of a sale of bank stock induced, as plaintiff claimed, by false representations concerning its condition made by the defendant, who was