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in value before discovery of the fraud will not defeat the right to rescind.
108. Undue influence.—Undue influence is akin to fraud. The term has a wide meaning and is hard to define. It consists in taking an unfair advantage of another's weakness of mind, his necessities or distress, or of a confidence reposed in the wrong-doer.
To affect the validity of a contract the influence must be such as the law condemns as untrue. As said in a Michigan case:
Influence obtained by modest persuasion, and arguments addressed to the understanding, or by mere appeals to the affections, cannot properly be termed "undue influence" in a legal sense; but influence obtained by flattery, importunity, superiority of will, mind, character, or by what art soever that human thought, ingenuity, or cunning may employ, which would give dominion over the will to such an extent as to destroy the free agency or constrain him to do against his will what he is unable to refuse, is such an influence as the law condemns as undue.
The effect of undue influence is to render the contract voidable at the option of the injured party.
109. Duress.-Duress consists in actual or threatened violence or imprisonment reasonably sufficient to induce a person to enter into a contract. At the old common law, to constitute duress by threat there must have been fear of loss of life or limb or fear of mayhem or imprisonment. Many English cases, as well as some American ones, follow this rule. Others, however, approve a more liberal view. These hold that a threatened assault and battery may constitute duress. Moreover, by the weight of modern American decisions, 1 Schofield v. Walker, 58 Mich. 96, 24 N. W. R. 624.
threatened destruction of another's goods, or unlawful detention of them under oppressive circumstances, may constitute duress. Imprisonment, to be duress, must, under the old rule, have been illegal. Under the modern rule, however, this is not essential. A lawful imprisonment founded upon a process sued out maliciously and without probable cause is duress.
The effect of duress is, as in the case of undue influence, to render the contract voidable at the option of the injured party.
86. A sells B a cargo of tea which left China a week ago. The day after the ship left port she was shipwrecked and the cargo of tea was destroyed. There is no contract. Its subject-matter has ceased to exist.
87. A offers to sell to B residence No. 200 Church St., Champaign, Ill. A has in mind residence No. 200 East Church St. and B has in mind residence 200 West Church St. B accepts A's offer. There is no contract owing to the mistake of identity.
88. A finds a very valuable uncut diamond and sells it to B for a small sum, both believing that it is a stone of little value. The contract is valid and A is bound.
89. A sells his farm to B. B knows there is a very valuable coal mine in it, but A does not. A is bound.
90. A is the holder of B's negotiable note. Learning that B has become insolvent he sells the note to C, who is ignorant of B's insolvency and who has had no reasonable opportunity of finding it out. A's concealment is fraudulent and C is not bound.
91. A contracts with B for a cargo of goods "to arrive ex Peerless from Bombay.” There are two ships of that name which sail from Bombay with a cargo of goods for the same port. A is thinking of one of them and B of the other. There is no contract.
92. A sells B a china tea-pot. B thinks it is Dresden china and thinks that A intends to sell it as Dresden china. A knows that B thinks he is getting Dresden china, but A delivers to him a cheaper grade of china. B is not bound.
93. A, who has been buying his groceries of B, sends him an order for a pound of tea. C, who has bought out B, fills the order unknown to A. A uses the tea but refuses to pay for it. C cannot compel him to do so.
94. A sells B a horse which A represents as sound. A knows that the horse has the heaves, but B is ignorant of this fact. B may rescind the contract and recover the purchase price, or keep the horse and recover damages for the deceit.
95. A is B's guardian. When B comes of age A buys his farm at much less than its real value. B may rescind the contract on the ground of undue influence.
96. A, B's husband, threatens to separate from her and not support her unless B deeds her house and lot to him. In consequence of A's threat B deeds the house and lot to him. may have the deed set aside on the ground of duress.1
97. A, by means of a trick, induces B to sign a negotiable note which B is led to believe is merely a receipt. B may have the note rescinded. If, however, the note passes into the hands of a bona fide purchaser, B may be bound. This depends upon whether B in signing the note is guilty of sufficient
negligence to estop him from setting up A's fraud. Whether he is or not is a fact for the jury to determine. 1 Tapley v. Tapley, 10 Minn. 448, 83 Am. Dec. 76.
OPERATION AND INTERPRETATION OF CONTRACTS
110. Rights and liabilities of third parties.-As a rule, a contract confers rights and imposes liabilities only upon the parties to it. This is owing to the fact that agreement, or a meeting of the minds, is the basis of contract.
To this rule, however, there is at least one exception. When an agent makes a contract for his principal, within the scope of the agency, and does not disclose to the third party the fact that he is acting for a principal, the third party, as a rule, may hold either the agent or the principal, at his option. This rule, however, does not apply to contracts under seal or to negotiable instruments.
When the third party makes an election he is bound by it and may not thereafter look to the other party. Not only may the principal be held liable on a contract made by his agent, but, on the other hand, the principal may claim the benefits of it.
Although a contract cannot, as a rule, impose a liability upon one who is not a party to it, a third party may render himself liable in tort by maliciously interfering with its performance. Thus, where a third party maliciously induces a servant to commit a breach of contract with the master the third party renders himself liable in tort to the master. Some courts hold that this doctrine is applicable only to contracts between master and servant, but by the great weight of authority it
is applicable to contracts in general; and this view obtains in England.
111. Contracts made for the benefit of a third party. In most of the states, when one party makes a contract with another for the direct benefit of a third party, the last may recover upon it. This rule, however, does not obtain in England. In New York and many other states, not only must the promise be for benefit of the third party, but in addition to this there must be such a relation between him and the promisee that the promisor's obligation constitutes a satisfaction of some duty of the promisee to the third party. A New York case holds: 1
It is not sufficient that the performance of the promise may benefit the third person. It must have been entered into for his benefit, or at least such benefit must be the direct result of performance, and so within the contemplation of the parties; and, in addition, the promisee must have a legal interest that the promise be performed in favor of the party claiming perform
A Massachusetts decision follows the same idea:2
The general rule of law is that a person who is not a party to a simple contract, and from whom no consideration moves, cannot sue on the contract; and, consequently, that a promise made by one person to another for the benefit of a third person, who is a stranger to the consideration, will not support an action by the latter. 3
EXAMPLES 98. A, acting as the agent of B, his undisclosed principal, makes a contract with C. When C learns of the agency
may hold A or B at his option.
99. A owes B $100; without A's corisent, C gives his promis1 Durnherr v. Rau, 135 N. Y. 219, 32 N. E. R. 49. 2 Exchange Bank v. Rice, 107 Mass. 37, 9 Am. Rep. 1.
3 See also Lawrence v. Fox, 20 N. Y. 268; Buchanan v. Tilden, 158 N. Y. 109, 52 N. E. 724, 70 Am. St. Rep. 454, 44 L. R. A. 170.