law of contract. A false statement may be the inducement to a contract, or may be part of a contract, and in these capacities may give rise to a claim for the rescission

tracting parties are bound to deal honestly and act in good faith with each other. There should be a reciprocity of candor and fairness. Both shall have equal knowledge concerning the subject-matter of the contract; especially ought all the facts and circumstances which are likely to influence their action to be made, known. If they have not mutually this knowledge, nor the same means of obtaining it, it is then a duty incumbent on the one having the superior information to disclose it to the other. In making the disclosure, he is bound to act in good faith and with regard to truth. If he makes false representations regarding material facts, or intentionally conceals or suppresses them he acts fraudulently, and renders himself responsible for the consequences which may result." Mitchell v. McDougall, 62 Ill. 501.

And it is also true, that "The misrepresentation in order to affect the validity of the contract must relate to some matter of inducement to the making of the contract, in which from the relative position of the parties and their means of information, the one must necessarily be presumed to contract upon the faith and trust which he reposes in the representations of the other, on account of his superior information and knowledge in regard to the subject of the contract; for if the means of information are alike accessible to both, so that with ordinary prudence or vigilance the parties might rely upon their own judgment they must be presumed to have done so; or if they have not so informed themselves, must abide the consequences of their own inattention and carelessness. Such representations, therefore, to amount to fraud must have a decided and reliable character, holding out inducements to make the contract, calculated to mislead the purchaser and induce him to buy on the faith and confidence of the representations, and in the absence of such means of information to be derived from his own observation and inspection, and from which he could draw conclusions to guide him in making the contract independent of the representations of the vendor." Mr. Justice Walker in Yeates v. Pryor, 11 Ark. 58. See Mooney v. Miller, 102 Mass. 220; Morse v. Dearborne, 109 Mass. 593; Melville v. Gary, 76 Md. 221; 24 A. Rep. 604; Dargan v. Ellis, 81 Tex. 194; Wimer v. Smith, 22 Oreg. 469; 30 Pac. Rep. 416; Davidson v. Wheeler, 17 R. I. 433; 22 At. Rep. 1022; 2 Kent's Com. 482; Hobbs v. Parker, 31 Me. 143; Stanhope v. Swafford, 80 Ia. 45; 45 N. W. Rep. 403; Phelps v. James, 79 Ia. 262; 47 N. W. Rep. 543.

By the civil law the seller, by the very nature of the contract of sale, became bound in an implied warranty that the thing sold was exempt from defects, without any reference to his knowledge of them. But the common law of sales is different. "Here there is no implied warranty

of the contract obtained by its means, or for compensation for breach of the contract or of a collateral warranty. A false statement unconnected with any contract may like

against defects unless there be fraud by some false representation or undue concealment." McAdams v. Cates, 24 Mo. 224. "If a seller of . goods deceives the buyer as to their quality, the buyer cannot avail himself of the deceit in defence against an action for their price, or, reduction of damages therein, if the quality was open to his own observation and with ordinary diligence and prudence he could have ascertained it. Brown v. Leach, 107 Mass. 364. On the other hand, "It is the duty of a vendor to disclose any defect in the article which he is vending, unless it is palpable to the purchaser." Singleton v. Kennedy, 9 B. Mon. 225. See Lobdell v. Baker, 1 Metc. 193. The fraudulent concealment by the vendor of a secret defect in an article sold by him, wholly unknown to the vendee, may be the foundation of an action for damages by him against the vendor, and perhaps authorize the vendee to rescind the contract on discovery of the fraud; because the law implies a warranty that the goods or articles sold are of a merchantable quality." Cross v. Peters, 1 Me. 393; Hazard v. Irwin, 18 Pick. 105. See Tyre v. Causey, 4 Harr. (Del.) 425; Fisher v. Mellen, 103 Mass. 503; Rice v. Barrett, 116 Id. 312; Hillman v. Wilcox, 30 Me. 170; McGregor v. Penn, 9 Yerg. 74; Tewkesbury v. Bennett, 31 Ia. 83; Iron Works v. Moore, 78 Ill. 65; Stone v. Covell, 29 Mich. 359; Hawkins v. Pemberton, 51 N. Y. 198; Morrill v. Wallace, 9 N. H. 111; Chapman v. Murch, 19 Johns. 290; Hubbell v. Meigs, 50 N. Y. 491; Lomerson v. Johnston, 47 N. J. Eq. 312; 20 At. Rep. 675.

"In the case of sale of property, the law presumes that the purchaser reposes confidence in the vendor, as to all such defects as are not within the reach of ordinary observation and therefore it imposes the duty on the vendor to disclose fully and fairly his knowledge of all such defects. But in ordinary cases, the vendor reposes no such confidence in the purchaser. The former does not look to the latter for information in regard to the qualities or condition of the thing sold, and is not deceived or misled by any information the latter may have in regard to it. And hence it has been held, that a purchaser may use any information he may have in regard to property, for his own advantage, without disclosing it, provided he does nothing to mislead or deceive." Likewise, it is true that the vendee is not, in general, bound to communicate to the vendor, intelligence of extrinsic circumstances, exclusively within the knowledge of the vendee, which may affect the price of the goods transferred. Laidlaw v. Organ, 2 Wheat. 178. See Kintzing v. McElrath, 5 Pa. St. 467. It is a rule of law no doubt as long established as the existence of fraud itself that fraudulent representation of material facts relating to subject of a contract render it invalid. Bond v. Ramsey, 89 Ill. 29; Durkin

wise create, by way of estoppel, an obligation analogous to contract. And a statement capable of being regarded in one or more of these ways may at the same time afford a cause of action in tort for deceit. "If, when a man thinks it highly probable that a thing exists, he chooses to say he knows the thing exists, that is really asserting what is false: it is positive fraud. That has been repeatedly laid down. . . . If you choose to say, and say without inquiry, I warrant that,' that is a contract. If you say, I know it,' and if you say that in order to save the trouble of inquiry, that is a false representation-you are saying what is false to induce them to act upon it" (d).

The grounds and results of these forms of liability are largely similar, but cannot be assumed to be identical. The authorities establishing what is a cause of action for deceit are to a large extent convertible with those which define the right to rescind a contract for fraud or misrepresentation, and the two classes of cases used to be cited without any express discrimination. We shall see however that dis

crimination is needful.

(d) Lord Blackburn, Brownlie v. Campbell (1880), 5 App. Ca. (Sc.) at p. 593.

v. Cobleigh, 156 Mass. 108; 30 N. E. Rep. 474; High v. Berrett, 148 Ps. St. 261; 23. At. Rep. 1004; 30 W. N. C. 31; Winter v. Bandel, 30 Ark. 372. But fraudulent representations, relating not to the subject-matter of the contract, but to mere matters of collateral inducement, will not justify the setting aside of a contract or conveyance. Hill v. Bush, 19 Ark. 322. It has been held that misrepresentations in insurance cases, made by the insured, innocently, will not avoid the policy. "In order to defeat the contract the representations or answers to questions must be known to be false by the insured." Mut. Ben. Life Ins. Co. v. Robertson, 59 Ill. 123. But the general rule seems to be to the contrary. Aetna Life Ins. Co. v. France, 91 U. S. 510; Vose v. Eagle Life Ins. Co., 6 Cush. 42; Mut. Ben. Life Ins. Co. v. Cannon, 48 Ind. 264. "Thus, the answers contained in the application being in the nature of representations only, the question is of their substantial and not their literal truth. To defeat the policy they must be shown to be materially untrue, or untrue in some particular material to the risk." Campbell v. N. E. Mut. Life Ins. Co.,

98 Mass. 395.

Questions of fraudulent intent.

Secondly, there are

difficulties as to the amount of actual fraudulent intention

that must be proved against a defendant. A man may be,

Fraudulent intent. In general it may be said that fraudulent intent is essential to sustain an action of deceit. "Fraudulent intent is the gist of the action." Kootz v. Kaufman, 31 Mo. App. 420. Such intent may be proved by evidence. This, however, is often difficult, or presumed by law. "In order to sustain an action for deceit, the fraudulent intent must be established; but it may be inferred from the fact that the false statements are made with knowledge of their falsity. And where a party who may be presumed to know, or who is in a position to know, the truth, deliberately makes unqualified representations in respect to a material matter, in such manner as to import knowledge by him of their truth, for the purpose of inducing another to act upon them, a similar inference may arise and, in such case, if a party has acted in reliance on such representations, he is entitled to maintain an action for the injury sustained thereby." Haven v. Neal, 43 Minn. 316. See Hubbard v. Weare, 79 Ia. 678; 44 N. W. Rep. 915; First Nat. Bank v. North (S. Dak.), 51 N. W. Rep. 96; McIntyre v. Buell, 132 N. Y. 192; 30 N. E. Rep. 396; Marshall v. Hubbard, 117 U. S. 415; Barnett v. Stanton, 2 Ala. 187; Edick v. Crim, 10 Barb. (N. Y.), 445

On the other hand, where one innocently makes a representation to another which results in that other's deception and injury it is obviously unfortunate for both and the damage done cannot be adjusted without working a hardship on one or both of them, but as the policy of the law is to make persons responsible for their acts and utterances the majority of the decisions are to the effect that such injuries must be compensated. "A misrepresentation of a material fact, innocently made, but which acts as an inducement to the act of another, who is thereby injured, is a fraud which can be relieved in equity." Davis v. Heard, 44 Miss. 477. "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 consequences to the plaintiff being as serious as though it had proceeded from a vicious purpose, he would have a right of action for the damage caused thereby either at law or in equity." Holcomb v. Noble, 69 Mich. 396; 37 N. W. Rep. 497; citing Baughman v. Gould, 45 Mich. 483; 8 S. W. Rep. 73; Converse v. Blumrich, 14 Mich. 109; Steinback v. Hill, 25 Id. 78; Webster v. Baily, 31 Id. 36; Starkweather v. Benjamin, 32 Id. 305; and followed in Totten v. Burhans, 91 Mich. 495; 51 N. W. Rep. 1119. So in Missouri. Ring v. Vogel Paint & Glass Co., 44 Mo. App. 111; but see Dunaley v. Rogers, 64 Mo. 203. So in Wisconsin: Burke v. Milwaukee etc. Ry. Co., 83 Wis. 410; 53 N. W. Rep. 692.

The question of fraudulent intent is usually one for the jury. Meyer

to all practical intents, deceived and led into loss by relying on words or conduct of another which did not proceed from any set purpose to deceive, but perhaps from an unfounded expectation that what he stated or suggested would be justified by the event. In such a case it seems hard that the party misled should not have a remedy, and yet there is something harsh in saying that the other is guilty of fraud or deceit. An over-sanguine and careless man may do as much harm as a deliberately fraudulent one, but the moral blame is not equal. Again, the jurisdiction of courts of equity in these matters has always been said to be founded on fraud. Equity judges, therefore, were unable to frame a terminology which should clearly distinguish fraud from culpable misrepresentation not amounting to fraud, but having similar consequences in law; and on the contrary they were driven, in order to maintain and extend a righteous and beneficial jurisdiction, to such vague and confusing phrases as "constructive fraud," or "conduct fraudulent in the eyes of this Court." Thus they obtained in a cumbrous fashion the results of the bolder Roman maxim culpa lata dolo aequiparatur. The results were good, but, being so obtained, entailed the cost of much laxity in terms and some laxity of thought. Of late years there has been a reaction against this habit, wholesome in the main, but not free from some danger of excess. "Legal fraud" is an objectionable term, but it does not follow that it has no real meaning (e). One might as well say that the "common counts for money had and received, and the like, which before the Judicature Acts were annexed to most declarations in contract, disclosed no real cause of action, because the "contract implied in law"

(e) See per Lord Bramwell, Weir v. Bell, 3 Ex. D. at p. 243; Derry v. Peek, 14 App. Ca. at p. 346.

v. Amidon, 23 Hun, 533; Hazard v. Irwin, 18 Pick. 95; Salisbury v. Howe, 27 N. Y. 128; Page v. Bent, 2 Metc. 371; Cowley v. Smith, 46 N. J. L. 280; Humphrey v. Merriam, 32 Minn. 197; 20 N. W. Rep. 138.