Sec 276

A party (whether a corporation or a natural person) issuing a prospectus for a proposed business adventure, is bound to make no statements of facts that cannot be substantially sustained; and while latitude is allowed in the statement of opinion, if there be a material misrepresentation of facts shareholders contracting directly with the party making the misstatement, are entitled to have their contracts rescinded.2 - That a party buying in open market from one of the original stockholders, is not entitled to recover on such a prospectus, is settled in England;3 though in this country there are cases in which this limitation is not recognized.4

Sec 277

As has been just noticed, a corporation is liable for such misstatements of its agents as were made within the range of their authority, although such misstatements were not specifically authorized by it.5 A director or manager of such corporation, however, is not personally liable for such representations, unless he authorizes them specifically, either directly or by implication.6 But the agents, directors, and officers who personally express or indorse such false state-

Sharehold-ers may be released from contract on proof of false prospectus.

Corporation liable for agent's deceit, but not directors, unless personally interposing ments, are personally liable for the deceit.1 And in any view the corporation that takes advantage of its agent's deceit, becomes liable for it.2

1 Leake, 2d ed. 384, citing Brock-well's case, 4 Drew. 205; Ayre's case, 25 Beav. 513; New Brunswick, etc. R. R. v. Conybeare, 9 H. L. C. 711; Mackay v. Bank, L. R. 5 P. C. 394; Eagiesfield v. Londonderry, L. R. 4 Ch. D. 693; Swire v. Francis, L. R. 3 App. Cas. 106, and see cases cited supra, sec '130 et seq. 133.

2 New Brunswick R. R. v. Mug-geridge, 1 Dr. & Sm. 363; Central R. R. of Venezuela v. Kisch, L. R. 2 H. L. C. 113; Swift v. Winterbotham, L. R. 8 Q. B. 244; Paddock v. Fletcher, 42 Vt. 389; New Y. & N. H. R. R. v.

Schuyler, 34 N. Y. 30; Bruff v. Mali, 36 N. Y. 200; Suydam v. Moore, 8 Barb. 358; McClellan v. Scott, 24 Wis. 81; see fully, supra, sec 255.

3 Peek v, Gurney, L. R. 6 H. L. C. 377; supra, sec 237.

4 New Y. & N. H. R. R. v. Schuyler, 34 N. Y. 30; Bruff v. Mali, 36 N. Y. 200: Suydam v. Moore, 8 Barb. 358. See Eaton v. Avery, cited infra, sec 279.

5 Supra, sec 131.

6 Cargill v. Bower, L. R. 10 Ch. D. 502; Weir v. Barnett, L. R. 3 Ex. D. 32; aff. 3 Ex. D. 238, under name of Wier v. Ball, and cases supra, sec 131.

Sec 278

Agencycannotbe established by the agent's own declarations. There must be proof aliunde of the agency, in order to make the agent's declarations admissible.3 Thus, in an action against a railroad corporation for false representations, by which the plaintiff was induced to grant a right of way over his land, the representations of directors of the corporation cannot be put in evidence against the corporation until it is shown either that they were authorized to make these representations, or that these representations were made by them as incident to a negotiation authorized by the company.4