(k) See last note but one.

In order to give rise to a right to rescind a contract for misrepresentation, whether innocent or fraudulent, it appears that the following facts must be established:-There must have been a false representation made as to some material fact by one party to the contract, or his agent, to the other, as a part of the transaction ending in the formation of the contract; and the other must have entered into the contract on the faith of that representation, not knowing that it was false and reasonably believing it to be true (n). Let us make a further analysis of this statement. First, falsity is essential; there is no cause of action if the representation be true (o). Secondly, there must be a representation, that is, a statement of fact (p), either in words or by conduct (as in the case of active concealment of a defect) (q).

To be fraudulent, a false representation must be made knowingly or recklessly.

No obligation to take pains to ascertain the truth.

What must be proved to give rise to the right to rescind a contract for misrepresentation.

1. Falsity essential.

2. There must be a representation.

(0 Above, pp. 723, 728, 729.

(m) Derry v. Peek, 14 App. Cas. 337; Angus v. Clifford, 1891, 2 Ch. 449; Le Lievre v. Gould, 1893, 1 Q. B. 491. This law has been altered with respect to statements made by directors or promoters of companies in prospectuses inviting subscriptions for shares or debentures; stat. 53 & 54 Vict.

C. 64.

(n) See Pollock on Contracts, 561 sq. 7th ed.

(o) See Smith v. Chadwick, 20 Ch. D. 27, 9 App. Cas. 187; Bellairs v. Tucker, 13 Q. B. D. 562.

(p) Above, p. 686.

(q) Above, p. 686.

As has been already shown, mere silence is not sufficient to confer the right to rescind (r); except in the case of contracts uberrima fidei, which may be avoided for nondisclosure of a material fact (s). And there must be a definite assertion of some fact as distinguished from a mere expression of the party's opinion or belief as to some circumstance relating to the contract, or a vague affirmation of the excellence of the property to be sold (t). For example, a distinct statement by a vendor of land that limestone embedded therein is capable of producing lime of first-rate quality fit for the London market (u), or that a house erected thereon is not damp (x), or that the property is let to a most desirable tenant (y), amounts to a representation sufficient, if false, to avoid the contract (y). But the incorrect description of renewable leaseholds as nearly equal to freehold (z) or of a small house as a desirable residence for a family of distinction (a) has been held not to amount to a representation affecting the contract (b). With regard to statements, which are ambiguous, being true if accepted in one sense, but false if taken in another, it must be shown, in order to found a right to rescission upon thorn, that the party, to whom they were made, understood them in the sense in which they were untrue (c). And it may be observed that a collateral promise to do some act, though it may effectively induce the promisee to enter into a contract (d), is not, properly speaking, a representation at all(e). Thirdly, the false representation must be of some fact (f) and not, it appears, of law (g). But for this purpose any representation as to a matter of private right is a representation of fact; such as a statement that one is the owner of some property which he offers for sale, or is invested with some power or authority under the particular constitution of some corporation or company or by virtue of some private Act of Parliament (h), or that the property is free from restrictive covenants (i). And it seems that misrepresentation as to some proposition of general law may give rise to a right of action, if made in deliberate fraud (k). Fourthly, the representation must be of some material fact, having relation to the proposed contract (l). But if the fact asserted relate to the contract and did actually induce the party, to whom the statement was made, to enter into the contract (m) it is a material fact (n); unless the circumstance alleged were such that no reasonable person would allow his judgment to be influenced by the statement (o). Fifthly, the representation must be made by some party to the contract or his agent; not by a third person (p). For the purposes of the rescission of the contract before completion, a false representation made by the party's authorised agent within the scope of his general authority has exactly the same effect as if it were made by the principal himself; it is immaterial whether the principal did or did not give any express authority for the statement to be made, and whether it was made fraudulently or innocently (q). And it is within the general authority of an agent employed to sell or to find a purchaser for any property to make statements as to its quality (r) or otherwise as to matters affecting its value (s). If, however, it be sought on the ground of misrepresentation to rescind a contract for the sale of land after completion, it appears that, as this relief is then only granted on account of a fraudulent misrepresentation (t), the plaintiff must establish a false representation made by the agent in such circumstances as to give rise to a good cause of action of deceit against the principal (u).

Ambiguous statements.

(r) Above, pp. 682 - 684.

(s) Above, pp. 684, 724.

(t) Teuton v. Browne, 14 Ves. 144: Trower v. Newcome, 3 Mer. 704; Scott v. Sanson, 1 Sim. 13, 15; Tower v. Barham, 4 A. & E. 473; Benjamin on Sale, 500, 2nd ed.; Bellairs v. Tucker, 13 Q. B.D. 562.

(u) Higgins v. Samels, 2 J. & H. 460. The actual decision was that the statement was a misrepresentation sufficient to bar the vendor from enforcing specific performance. The question whether the misrepresentation was sufficient to avoid the contract was not decided: though it was referred to as a difficult point. But at that time the equitable jurisdiction to rescind a contract for innocent misrepresentation was barely established; see above, p. 730. There can be no doubt at the present time that such a misrepresentation would be sufficient to avoid the contract.