CH. XXI. s. 4. Bribery of Proof. Attwood v. No relief to plaintiff unable to restore defendant's posi tion. Time for rescission. adequate relief as the Court can give him (i). Therefore, in Shipway v. Broadwood, where horses were to be bought, if passed sound by a veterinary surgeon employed by the purchaser, and the surgeon passed them, and a cheque was sent for the price, the seller failed in an action upon the cheque (which had been stopped upon discovery that the horses were unsound) upon it being further discovered that the surgeon had accepted a bribe from the seller, and it was held to be immaterial to inquire what effect the bribe had on the mind of the surgeon (k). But a Court of Equity will not rescind a contract on the ground of fraud, without the clearest proof of such fraud; nor unless it appear that the contract was based on the misrepresentations complained of (l). Nor will this relief be granted, where the party seeking it is not able to put those against whom it is sought, into the same situation in which they stood when the contract was entered into (m). So if a party, with knowledge of all the facts, voluntarily act on a contract which is voidable on the ground of fraud, a Court of Equity will not afterwards rescind it at his instance (n). And where a joint stock company sued a shareholder for coals, and the defendant pleaded that he was induced to become a shareholder by the fraud of the plaintiffs: this plea was held bad, because it did not show that the defendant had, on discovering the fraud, avoided the contract by which he became shareholder (o). As to the time within which the party defrauded is at liberty to rescind the contract, it is said, that so long as he has made no election, he retains the right to elect, subject to this, that if, in the interval whilst he is deliberating, an innocent third party has acquired an interest in the subject-matter of the contract; or if, in consequence of his delay, the position even of the wrongdoer is affected, it will preclude him from exercising his right to rescind (p); and mere lapse of time, without rescinding, may (i) Per James, L.J., Panama, &c., (k) Shipway v. Broadwood, [1899] 1 232. (m) Urquhart v. Macpherson (1878), 3 (n) See Ormes v. Beadel (1860), 30 (0) Deposit Life Assurance v. Ayscough (1856), 6 E. & B. 761; and see Bwlch-yPlum Lead Mining Co. v. Baynes (1867), L. R., 2 Ex. 324. (p) Per Mellor, J., delivering the judgment of the Court of Exch. Chamb., Clough v. London and North Western Rail. Co. (1871), L. R., 7 Ex. 26, Ex. Ch.; per Lord Blackburn, Erlanger v. New Sombrero Phosphate Co. (1878), 3 App. Cas. 1218, 1278; Morrison v. Universal Marine Insurance Co. (1873), L. R., 8 Ex. 197, Ex. Ch. ; and see In re Cape Breton Co. (1885), 29 Ch. D. 795, C. A., and Ladywell Mining Co. v. Brookes (1887), 35 Ch. D. 400, C. A. furnish conclusive evidence that a party has determined to affirm CH. XXI. s. 4. his contract (q). The person who was guilty of the fraud, may not avoid the contract on the ground thereof (r); so that, where a contract is fraudulent, it may be valid as between the parties thereto, although void in so far as it affects the rights of others. Thus, where a man has executed a bill of sale of his goods, it is not competent to either of the parties thereto to impeach it on the ground that it was given to defeat the claims of creditors (s). Illegal, &c., Who may take advan tage of. Where a man put his name to a bill or note, intending thereby Bill or note. to become a party thereto, a person whose own title to the bill or note is defeasible on the ground of fraud, may still confer a title thereto on an innocent third party; and such party may, in his turn, confer a title to the bill or note, even on one who has notice of the original fraud, provided he was no party to such fraud (t). (b) Misrepresentation and Concealment. Fraud generally consists, either in the misrepresentation, or in In what the concealment of a material fact. But it is extremely difficult to lay down any general principle by which to apply this rule, inasmuch as what does or does not amount to fraud in any particular case, depends very much on the facts of the case itself, on the relative situation of the parties, and on their means of information. fraud may consist. In settling the law on this subject it has, on the one hand, been the aim of our Courts to repress dishonesty; whilst, on the other, they have required that, before relieving a party from a contract on the ground of fraud, it should be made to appear that, in entering into such contract, he exercised a due degree of caution (u) — for, Vigilantibus et non dormientibus succurrunt jura. Thus, if Patent defect. there be a patent defect in a manufactured article, and the purchaser has an opportunity for inspecting it, but neglects to do so; he cannot charge the manufacturer with fraud, because he did not point out such defect (x). So, if a purchaser, choosing to judge Caveat for himself, do not avail himself of the knowledge or means of emptor. (q) Per Mellor, J., Clough v. London and North Western Rail. Co. (1871), L. R., 7 Ex. 26, 35; Lindsay Petroleum Co. v. Hurd (1874), L. R., 5 P. C. 221, 240; and see Allcard v. Skinner (1887), 36 Ch. D. 145, C. A. (r) Per Lord Tenterden, C.J., Jones v. Yates (1829), 9 B. & C. 532, 538; and see Doe d. Roberts v. Roberts (1819), 2 B. & Al. 367; 20 R. R. 477; Philpotts v. Philpotts (1850), 10 C. B. 85. (s) Bessy v. Windham (1844), 6 Q. B. 163; and see Deady v. Harrison (1815), (t) Masters v. Ibberson (1849), 8 C. B. (u) See per Tindal, C.J., Shrewsbury Contracts CH. XXI. s. 4. knowledge open to him, or to his agent, he cannot be heard to Illegal, &c., say, that he was deceived by the vendor's representations—the (Misrepresen- rule in such cases being caveat emptor; and the knowledge of his tation). agent being as binding on him as his own knowledge (y). So where a person who had taken shares in a mining company, filed his bill to set aside the contract, on the ground that he had been induced to take the shares by false representations made by the defendants as to the character and value of the mine; but it appeared that he had been present at the first meeting of the company, that he had visited the mine, and that he had had as full an opportunity as the defendants of ascertaining the real state and prospects of the mine: the Court held that the bill must be dismissed (2). And where a man purchases shares in a company on the faith of the prospectus, and is thereby referred to any document which would show the untruth or inaccuracy of any of the statements contained in such prospectus, but chooses not to make use of his means of knowledge; he cannot afterwards be heard to complain that he has been deceived by the alleged misstatements (a). Misrepreser. tation or concealment of fact. Mere noncommunication. But wherever one person misrepresents a material fact-that is, a fact which is substantially the consideration for the contract —and which is peculiarly within his own knowledge (b); or conceals a material fact which it was his duty to communicate (c); and it is shown that the concealment or other deception was practised with respect to the particular transaction (d); such transaction will be voidable on the ground of fraud. So it is said that, when once it is established that there has been a fraudulent misrepresentation or wilful concealment, by which a person has been induced to enter into a contract; it is, in general, no answer to his claim to be relieved from such contract, to say that he might have discovered the truth by proper inquiry (e) though in cases of mere non-communication, the (y) Attwood v. Small (1838), 6 C. & F. 232. (z) Jennings v. Broughton (1853), 22 L. J., Ch. 585; affirmed by the Lords Justices, on appeal, 23 id. 999. (a) Per Lord Chelmsford, C., Hallows v. Fernie (1868), L. R., 3 Ch. 467. (b) Attwood v. Small (1838), 6 C. & F. 232; per Erle, J., Mallalieu v. Hodgson (1851), 16 Q. B. 689, 712; per Cur., Wilson v. Wilson (1838), 6 Scott, 540, 573; and see Evans v. Edmonds (1853), 13 C. B. 777; Canham v. Barry (1885), 15 id. 597; Geddes v. Pennington (1817), 5 Dow, 159. (c) Per Bramwell, B., Horsfall v. Thomas (1862), 1 H. & C. 90, 100. Semble, that one who enters into a contract, is bound to disclose anything which may disable him from performing his contract. Per Littledale, J., Rex v. Inhabitants of Taunton St. James (1829), 9 B. & C. 831. (d) Per Tindal, C.J., Green v. Gosden (1841), 3 M. & G. 446. But a contract for the sale of fixtures in a public-house, has been held to be avoided by a misrepresentation as to the amount of business done at the house, although the contract excluded the good-will; Hutchinson v. Morley (1839), 7 Scott, 341. (e) Per Lord Chelmsford, C., Central Rail. Co. of Venezuela v. Kisch (1867), L. R., 2 H. L. 99, 120; and see, per party not using such means of discovery are as open to him—as where goods are sold by sample of which the buyer mistakes the character, and the seller merely acquiesces in the mistake (ƒ)— may have no right to complain (g). And where one party has induced another to act on the faith of several representations made to him, any one of which he has made fraudulently; he cannot set up the transaction, by showing that every other representation was truly and honestly made (h). tation of instrument. Foster v. So a man may avoid a deed or other instrument, which he Misrepresen was induced to execute by a fraudulent misrepresentation of its contents (i), as was held in Foster v. Mackinnon, in which an old gentleman was induced to indorse a bill of exchange for 3,000l. Mackinnon. (of which he did not see the face) by a fraudulent misrepresentation that it was a guarantee. And if the party who executes an instrument in such circumstances has not been guilty of negligence in so doing, he may avoid it, not only as against him who made the fraudulent misrepresentation, but as against a third party who has acted innocently, on the faith of the instrument being genuine. Thus, where the defendant's signature to a bill of exchange was, without any negligence on his part, obtained by a fraudulent misrepresentation that he was signing a guarantee, and in the bonâ fide belief by him that this was the fact: it was held that he could set up this, as a defence to an action on the bill by an innocent holder for value (k). It is not quite settled whether a contract induced by misrepre- Misrepresensentation merely of its legal effect may be set aside on that tation of law. Hirschfield's ground (1). It is submitted, however, that the fraudulent induce- case. ment may be relied on as a defence, and that a contract so induced may be set aside (m). Legal without moral fraud—that is, that a statement false in fact, but not so to the knowledge of the party making it, and not made with intent to deceive-will not in general invalidate a contract (n). But if a party, for a fraudulent purpose, state a fact Turner, L.J., Kisch v. Central Rail. Co. of Venezuela (1865), 34 L. J., Ch. 545, 552. (f) Smith v. Hughes (1871), L. R., 6 Q. B. 597 (new oats mistaken for old). (g) New Brunswick, &c., Co. v. Conybeare (1862), 9 H. L. C. 711. (h) Per Lord Cranworth, L.J., Reynell v. Sprye (1852), 21 L. J., Ch. 633, 660, App. (i) Foster v. Mackinnon (1869), L. R., 4 C. P. 704; Com. Dig. Fait, B. 2; and see p. 435 (i), ante, and per Bayley, B., Edwards v. Brown (1831), 1 C. & J. 307. (k) Foster v. Mackinnon (1869), L. R., C.C. 4 C. P. 704; and see, per Mellish, L.J., (1) See Hirschfield v. London, Brighton Legal with out moral fraud will not in general vitiate. CH. XXI. s. 4. which is untrue, and, without knowing it to be untrue, he does Illegal, &e, not at the time believe it to be true, this is both a legal and a (Misrepresen- moral fraud (0). Contracts tation). Rule where a fact repre One party permitting the other to contract under a false impression. And where the representation expressly or impliedly forms part of the contract between the parties, or where a fact is concealed which is material to the contract, it is not essential, in order to render such contract invalid, that there should have been moral fraud in making such representation, or in concealing the fact (p). Thus, if the vendor or lessor of land knows of and conceals a fact, of which the purchaser or lessee has no knowledge, and such fact is material to the validity of the title, he will be relieved in equity against the lease or purchase (q). And so, in the case of insurances, the policy is made upon an implied contract, that everything material known to the assured should be disclosed by them (r); and the only question for the jury in such cases is, whether or not any particular fact was material, and not whether the assured thought or believed it to be so (8). So, if one party to a contract has made a representation to the other, on the faith of which he has agreed to enter into the contract; and before the contract is entered into the facts are materially altered to the knowledge of the party who made the representation, but not to that of the other party; and the latter stands by, and allows the former to enter into the contract in the belief that the facts continue to exist as represented, he may avoid the contract (t). So, if one of the negotiating parties has made a statement which is false in fact, but which he believes to be true, and which is material to the contract, and during the course of the negotiation he discovers the falsity of that statement, he is bound to correct it (u). So, where a creditor compounded with his debtor, (1842), 10 M. & W. 147; Taylor v. Ash- (0) Per Cur., Taylor v. Ashton (1843), (p) See per Parke, B., Moens v. Heyworth (1842), 10 M. & W. 147, 157. (q) Edwards v. McLeay (1818), 2 Swanst. 287; 19 R. R. 74; Mostyn v. West Mostyn Coal and Iron Co. (1876), 1 C. P. D. 145. (r) Ionides v. Pender (1874), L. R., 9 Q. B. 531 (marine insurance); London Assurance Co. v. Mansel (1879), 11 Ch. D. 363 (life insurance); Bawden v. London, &c., Co., [1892] 2 Q. B. 534 (accident insurance). (s) Westbury v. Aberdein (1837), 2 M. & W. 267; Lindenau v. Desborough (1828), 8 B. & C. 586. Any fact is material within this rule, which, if made known to the underwriter, would have affected his estimate of the character and degree of the risk. Per Kelly, C.B., Harrower v. Hutchinson (1870), L. R., 5 Q. B. 584, Ex. Ch.; and see Tate v. Hislop, 15 Q. B. D. 368, C. A. (t) Traill v. Baring (1864), 33 L. J., Ch. 521, App. (u) Per Fry, J., Davies v. London and Provincial Marine Insurance Co. (1878), 8 Ch. D. 469. |