by a meeting and "industriously circulated," must be treated as the representations of the company to the public, and as such will bind it (a). Statements in a prospectus issued by promoters before the company is in existence. cannot indeed be said with accuracy to be made by agents for the company: for one cannot be an agent even by subsequent ratification for a principal not in existence and capable of ratifying at the time (b). But such statements also, if afterwards expressly or tacitly adopted, become the statements of the company. It is a principle of general application, by no means confined to these cases, that if A. makes an assertion to B., and B. repeats it to C. in an unqualified manner, intending him to act upon it, and C. does act upon it, B. makes that assertion his own and is answerable for its consequences. If he would guard himself, it is easy for him to say: "This is what A. tells me, and on his authority I repeat it; for my own part I believe it, but if you want any further assurance it is to him you must look" (c). personal It is to be borne in mind that in a case of actual fraud Agent always on the part of an agent the responsibility of the principal liable for does not in any way exclude the responsibility of the his own agent. "All persons directly concerned in the commission fraud. of a fraud are to be treated as principals"; and in this sense it is true that an agent or servant cannot be authorized to commit a fraud. He cannot excuse himself on the ground that he acted only as agent or servant (d). D. The representation must be made as part of the The represame transaction. sentation must be in the same transac It is believed that the statement of the rule in this form, though at first sight vague, is really more accurate than tion. (a) Per Lord Westbury, New Brunswick, &c. Co. v. Conybeare, 9 H. L. C. 711, 725. (b) P. 118 above. (c) Smith's ca. 2 Ch. 604, 611; p. 530 above; and further, as to the application of the doctrines of agency to partners and directors on (d) Per Lord Westbury, Cullen v. NN Bank of Scotland v. Addie. that which presents itself as an alternative, but is in fact included in this-namely that the representation must be made to the other party or with a view to his acting upon it. The effect of the rule is that the untruth of a representation made to a third person, or even to the party himself on some former occasion, in the course of a different transaction and for a different purpose, cannot be relied on as a ground either for rescinding a contract or for mainWestern taining an action of deceit. Thus in Western Bank of Scotland v. Addie (a) the directors of the bank had made a series of flourishing but untrue reports on the condition of its affairs, in which bad debts were counted as good assets. The shareholder who sought relief in the action had taken additional shares on the faith, as he said, of these reports. But it was not shown that they were issued or circulated for the purpose of inducing existing shareholders to take more shares, or that the local agent of the bank who effected this particular sale of shares used them or was authorized to use them for that purpose. Thus the case rested only on the purchaser having acted under an impression derived from these reports at some former time; and that was not such a direct connexion between the false representation and the conduct induced by it as must be shown in order to rescind a contract. This, however, was not the only ground of the decision: its main principle, as explained in a later case in the House of Lords, being that a person who remains a shareholder, either by having affirmed his contract with the company or by being too late to rescind it, cannot have a remedy in damages against the corporate body for representations on the faith of which his shares were taken (b). Peek v. In Peek v. Gurney (c) the important point is decided that the sole office of a prospectus is to invite the public to take shares in the company in the first instance. Those (a) L. R. 1 Sc. & D. 145. (c) L. R. 6 H. L. 377, 395; and see the case put by Lord Cairns as an illustration at p. 411. 4 who take shares in reliance on the prospectus are entitled to their remedy if the statements in it are false. But those statements cannot be taken as addressed to all persons who may hereafter become purchasers of shares in the market; and such persons cannot claim any relief on the ground of having been deceived by the prospectus unless they can show that it was specially communicated to them by some further act on the part of the company or the directors. Some former decisions the other way (a) are expressly overruled. The proceeding there in hand. was in the nature of an action of deceit, but the doctrine must equally apply to the rescission of a contract. Hearn. In Way v. Hearn (b) the action was on a promise by Way v. the defendant to indemnify the plaintiff against half of the loss he might sustain by having accepted a bill drawn by one R. Shortly before this, in the course of an investigation of R.'s affairs in which the defendant took part, R. had at the plaintiff's request concealed from the accountant employed in the matter the fact that he owed a large sum to the plaintiff; the plaintiff said his reason for this was that he did not wish his wife to know he had lent so much money upon bad security. At this time the bill which was the subject of the indemnity was not thought of; it was in fact given to get rid of an execution afterwards put in by another creditor. Here a misrepresentation as to R.'s solvency was made by R. in concert with the plaintiff, and communicated to the defendant; but it was in a transaction unconnected with the subsequent contract between the plaintiff and the defendant, and the defendant was therefore not entitled to dispute that contract on the ground of fraud. 2. As to the right of the party misled. This right is As to (a) Bedford v. Bagshaw, 4 H. & N. 538, 29 L. J. Ex. 59; Bagshaw v. Seymour, 18 C. B. 903, 29 L. J. Ex. 62, n. The authority of Gerhard v. Bates, 2 E. & B. 476, 22 L. J. Q. B. 364, is saved by a rather rights of party misled: general statement. Of affirmation and rescission in general. one which requires, and in several modern cases of importance has received, an exact limitation and definition. It may be thus described: The party who has been induced to enter into a contract by fraud, or by concealment or misrepresentation in any matter such that the truth of the representation made or the disclosure of the fact is by law or by special agreement of the parties of the essence of the contract, may affirm the contract, and insist, if that is possible, on being put in the same position as if the representation had been true: Or he may at his option rescind the contract within a reasonable time (a) after discovering the misrepresentation, unless it has become impossible to restore the parties to the position in which they would have been if the contract had not been made, or unless any third person has in good faith and for value acquired any interest under the contract. It will be necessary to dwell separately on the several points involved in this. And it is to be observed that the principles here considered are not confined to any particular ground of rescission, but apply generally when a contract is voidable, either for fraud or on any other ground, at the option of one of the parties; on a sale of land, for example, it is constantly made a condition that the vendor may rescind if the purchaser takes any objection to the title. which the vendor is unable to remove; and then these rules apply so far as the nature of the case admits. A. As to the nature of the right in general, and what is an affirmation or rescission of the contract. A contract induced by fraud is not void, but voidable only at the option of the party defrauded;" in other words, valid until rescinded (b). (a) But qu. whether time is in itself material: see L. R. 7 Ex. 35, 8 Ex. 205. (b) Oakes v. Turquand, L. R. 2 H. L. 346, 375-6. Where the nature of the case admits of it, the party misled may affirm the contract and insist on having the representation made good. If the owner of an estate sells it as unincumbered, concealing from the purchaser the existence of incumbrances, the purchaser may if he thinks fit call on him to perform his contract and redeem the incumbrances (a). If promoters of a partnership undertaking induce persons to take part in it by untruly representing that a certain amount of capital has been already subscribed for, they will themselves be put on the list of contributories for that amount (b). party defrauded to avoid or It is to be remembered that the right of election, and Election the possibility of having the contract performed with com- affirm. pensation, does not exclude the option of having the contract wholly set aside. "It is for the to elect whether he will be bound" (c). affirm the contract, he must affirm it in all its terms. Thus a vendor who has been induced by fraud to sell goods on credit cannot sue on the contract for the price of the goods before the expiration of the credit: the proper course is to rescind the contract and sue in trover (d). When the contract is once affirmed, the election is com- What shall pletely determined; and for this purpose it is not necessary election. that the affirmation should be express. Any acts or conduct which unequivocally treat the contract as subsisting, after the facts giving the right to rescind have come to the knowledge of the party, will have the same effect (e). Taking steps to enforce the contract is a conclusive election not to rescind on account of anything known at the time (ƒ). A shareholder cannot repudiate (a) Per Romilly, M. R. in Pulsford v. Richards, 17 Beav. 96. Cp. Ungley v. Ungley, 5 Ch. D. 887. (b) Moore and De la Torre's ca. 18 Eq. 661. (c) Rawlins v. Wickham, 3 De G. & J. 304, 322. (d) Ferguson v. Carrington, 9 B. & C. 59. This is unimportant in practice now that the old forms of (e) Clough v. L. & N. W. Ry. Co. (f) Gray v. Fowler (Ex. Ch.), L. R. 8 Ex. 249, 280. determine |