Sec 214

Misrepresentation is distinguishable from fraud in the fact that a misrepresentation may be innocently made by the party to whose advantage it enures, and, honest misrepresentation may be rescinded, though no action for deceit may be maintained.

There must be causal relation between the misrepresentation and the contract, to set contract aside.

Contract induced by consequently, while it may invalidate the contract, does not give ground to an action ex delicto ; whereas, a fraudulent misstatement, by stress of which a contract is obtained, not only invalidates the contract, but is the basis of an action ex delicto, i. e., the action for deceit.1 Misrepresentation is also to be distinguished from reckless misstatement. As is elsewhere shown, a party is as responsible, in an action for deceit, for a reckless misstatement of a matter of which he had no knowledge, as he would be for a deliberate statement which he knew to be false.2 But the misrepresentations now before us are neither fraudulent nor reckless, but are honest misstatements, which the party making believed to be true. They do not expose him, therefore, to an action for deceit,3 though they avoid a contract to which they led.4 On this topic, therefore, we may hold to the following position : A contract assented to by one party on the faith of material misrepresentations by the other party, will be rescinded at the option of the party injured, although the misrepresentations were made neither fraudulently nor negligently.5 But the evidence, under such Mount, 7 Vroom, 262; Borrekins v. Bevan, 3 Rawle, 25 ; Osgood v. Lewis, 2 Har. & G. 49 ; Foos v. Sabin, 84 111. 564.

1 Infra, sec 242.

2 That good motives are no defence, see infra, sec 236.

3 See the question of causal relations discussed in Wh. Cr. Law, 8th ed. sec 153, 1176. That the rule of the text applies to prosecutions for obtaining goods on false pretences, see R. v. Hew-gill, Dears. 315 ; R. v. English, 12 Coc. C. C. 171; Com. v. Coe, 115 Mass. 481;.

People v. Haynes, 14 Wend. 546; Thomas v. People, 34 N. Y. 351.

4 MoCormick v. Kelly, Sup. Ct. Minn. 188, 24 Alb. L. J. 213, citing Oneida Co. v. Lawrence, 4 Cow. 440; Adams v. Johnson, 15 111. 345; Lindsey v. Lindsey, 34 Miss. 432; Blythe v. Speake, 23 Tex. 429.

5 See infra, sec 245.

6 Pollock, 3d ed. 517, citing Jones v. Rimmer, L. R. 14 Ch. D. 588. See Broad v. Munton, L. R. 12 Ch. D. 131.

7 McCulloch v. Gregory, 1 K. & J. 286.

1 See infra, sec 282. 2 See infra, sec 241.

3 Collins v. Evans, 5 Q. B. 820 ; Raw-lings v. Bell, 1 C. B. 951; Ormrod v. Huth, 14 M. &W. 651; Cabot v. Christie, 42 Vt. 126 ; Fisher v. Mellon, 103 Mass. 503; Taylor v. Leith, 26 Oh. St. 428 ; Botsford v. Wilson, 75 111. 132; Brooks v. Hamilton, 15 Minn. 26 ; Kerr on Fraud and Mist. 54. And see to same effect Tucker v. White, 125 Mass. 344; Weed v. Case, 55 Barb. 534; Marsh v. Falker, 40 N. Y. 562; Kennedy v. McKay, 43 N. J. L. 288; Wheeler v. Randall, 48 111. 182 ; Wharf v. Roberts, 88 111. 426; Dwight v. Chase, 3 111. Ap. 67 ; McKown v. Ferguson, 47 Iowa, 636, and cases cited infra, sec 232 a, 282.

4 Infra, sec 232a, 282.

5 Infra, sec 279, 282, 559; Rawle, Covenants of Title, 573; Bispham's.

Eq. sec 214 ; Leake on Cont. 187•; Story's Eq. sec 142, 193; Bigelow on Fraud, 61; Behn v. Burness, 3 B. & S. 751 ; Polhill v. Walter, 3 B. & Ad. 114; Denny v. Hancock, L. R. 6 Ch. 1; Pulsford v. Richards, 17 Beav. 94; Taylor v. Ashton, 11 M. & W. 401; Doggatt v. Emerson, 3 Story, 733; Warner v. Daniels, 1 Wood. & M. 90; Smith v. Babcock, 2 Wood. & M. 246; Collins v. Denison, 12 Met. 549 ; Far-nam v. Brooks, 9 Pick. 233 : Fisher v. Mellen, 103 Mass. 503 ; Rosevelt v. Fulton, 2 Cow. 139 ; Marsh v. Falker, 40 N. Y. 562; Best v. Stow, 2 Sandf. Ch. 298 ; Kenney v. Hoffman, 31 Grat. 442; Lockridge v. Foster, 4 Scam. 569; Allen v. Hart, 72 111. 104; Allen v. Yeater, 17 W. Va. 128; Converse v. Blumrich, 14 Mich. 109 ; Thomas v. McCann, 4 B. Mon. 601 ; Brooks v. Hamilton, 15 Minn. 26; Sledge v. Scott, 56 Ala. 202; circumstances, to sustain a decree for rescission, should be strong and plain.1-A concurrence of minds as to one particular thing being essential to a contract, it is admissible, therefore, for a party to show that he was misled, when he gave his assent, by the misrepresentations of the other party, and that what he assented to was, therefore, something different from that which the proposition on its face indicates. It is true that the terms of a contract cannot be varied by parol. But it is competent for a party to show by parol that no contract was made. It is a petitio principii to say that a contract, which parol cannot vary, exists between the parties, when whether a contract exists is the very question at issue.1 While, therefore, an action for deceit cannot be sustained unless there be proof of fraud or reckless misstatement,2 such proof is not essential to sustain an action to rescind a contract, or to defend a suit for specific performance. As was well said by Judge Story, in a case where a suit was brought to rescind a contract of this class on the ground of misrepresentation, "the question is not whether he (the defendant) acted basely and falsely, but whether the plaintiff purchased on the faith of the truth of his representations."3- It was at one time thought in England that a court of equity would not set aside an executed conveyance on the ground of misrepresentation or concealment unless there be fraud;4 and it is clear that, if fraud be alleged as a ground for setting aside a transaction, fraud must be proved.5 But the prevalent opinion in England now is that misrepresentation without fraud will be sufficient ground to set aside a contract induced by the misrepresentation;6 and this rule was applied in a case where copyhold had been sold, apparently in good faith, as freehold.7 At the same time "there may be a want of diligence on the purchaser's part, which, although not such as to deprive him of the right of rescinding the contract before completion, would preclude him from having the sale set aside after conveyance."8 - The principles above stated were reaffirmed by the English Court of Appeals in December, 1881, on the following state of facts: An advertisement was inserted in the Law Times by Mr. Redgrave, the plaintiff, a solicitor with a practice of 200/. a year, stating that he was elderly, and "of moderate practice," contemplated retiring, had no successor, and would take a partner "who would not object to purchase advertiser's suburban residence, value 1600/." It was added "no premium required for business and introduction. A large field is here open for an efficient man." Mr. Hurd, the defendant, another solicitor, attracted by the advertisement, entered into negotiations with the plaintiff", who stated that his business was worth 300l. a year, and that he had a large connection. On the defendant's request for details, the plaintiff allowed him to inspect a bundle of papers which showed a gross business of 200/. a year for the last three years. The plaintiff added, in answer to other inquiries, that there was other business not entered on the papers submitted, and offered a second bundle of papers (which showed other business of 5/. or 6/. value) for the inspection of the defendant, who did not examine them, upon which the defendant agreed to purchase the house for 1600/., and took possession of the house and entered on the business, which was not referred to in the written agreement.-The defendant having afterwards given up possession and refused to complete the purchase of the house, an action for specific performance was brought by the plaintiff", and the defendant counter-claimed for rescission of the agreement. It was held, on appeal (reversing the decision of Fry, J.), that the defendant did not act exclusively on the faith of the representation of the 300/. value, but that he did not give up his reliance on it; that, having seen the first bundle of papers, he also relied on the plaintiffs statement as to the difference between 200/. and 300/. a year being shown by the second bundle; and that his mere negligence to inquire (even if he had the materials before him) was not sufficient to disentitle him from being relieved from the contract. No fraud was alleged in the case; the issue being misrepresentation.-"According to the decisions of courts of equity," said Jessel, M. R., "it was not necessary, in order to set aside the contract, to prove that the person who obtained the contract, and who sought to keep it, if he obtained it by material false representation, knew at the time the representation was made that such representation was false. It was put in two ways, either of which was to be sufficient to allow a court of equity to rescind. It was said: 'A man is not to be allowed to get a benefit from a false statement which he now admits to be false. He is not to be allowed to say for the purpose of civil jurisdiction that he did not know it to be false ; he ought to have found that out before he made the representation.' That is one way of putting it, and the other way of putting it was this: 'Even assuming that you want moral fraud (this was the doctrine of common law) in order to set aside a contract, you have it where a man, having obtained a beneficial contract by a statement which he now knows to be false, insists upon keeping that contract.' That, of course, is a moral delinquency ; no man ought to seek to take advantage of his own falsity. It does not matter which way it is put, but that was the rule in equity. As regards the rule of common law, there is no doubt it was not quite so wide. There were cases in which, even at common law, you could rescind a contract, although you could not show that the man knew the statement or the representation to be false. The cases are variously stated, but I think, according to the later decisions, the statement must have been made recklessly and without care whether it was true or false, and not, of course, at the time with the belief that it was actually true. I think the doctrine in equity was really settled beyond controversy, and, if it were necessary to refer to the authorities, I should content myself with referring to the judgment of Lord Cairns, when Lord Justice, in the case of Re Reese River Silver Mining Company, Smith's case,1 in which he states the doctrine of equity in the way in which I have stated it."2-But though a contract may be rescinded on the ground that it was made by one party under a mistake of facts caused by the other's misrepresentations, no action of deceit can be maintained on such misrepresentations if the party making them honestly believed them to be true.1 But it is otherwise if the misrepresentation was reckless or negligent. In such case an action "might be sustained upon an allegation that the representation was false, although the party making it did not know at the time he made it that it was so."2-As we will hereafter see,3 though a contract may be rescinded on account of an agent's misrepresentations, no action of deceit can be maintained against the principal unless he was cognizant of the fraud.