Of course, the case is very different and free from all difficulty where a right to make such bidding is openly reserved by the vendor as one of the conditions of the sale. The whole subject has been recently regulated by statute in England, and similar statutes are found in some of the American states. In the absence of special legislation, three difierent conditions of circumstances may exist, giving rise to those separate rules.

SEC. 273. 1. Ordinary sale, with no preliminary announcement.— Where an auction sale is made, in the absence of any preliminary announcement that "the sale will be without reserve," nor any equivalent statement, the rule is settled at law, in England and generally in this country, that any "puffing" is fraudulent, and renders the sale voidable at the option of the purchaser.(1) But the rule is also settled in the courts of equity, that one puffer may then be employed on behalf of the vendor, and although his agency is unknown to the bystanders and to the actual purchasers, the contract of sale is nevertheless valid and binding. In other words, "puffiing," to this limited extent of one person to make bids—is not fraudulent.(2)

SEC. 274. 2. If at a sale, such as described in the last paragraph, where no announcement is made that the sale is without reserve, two or more puffers are employed for the vendor, and take a part in the bidding, the sale is thereby rendered fraudulent in equity, as well as at law, it will be set aside at the suit of the purchaser, and a performance of the contract cannot be enforced against his objection. Equity had reluctantly admitted the use of one puffer to protect the interests of the vendor, and prevent a ruinous sacrifice; as one must always be enough for this purpose, the effect of two or more bidding against each other would necessarily be to enhance the price by means of a pretended and deceiving competition.(3)

(1) Thornett v. Haines, 15 M. & W. 372, per PARKE, B.; Crowder v. Austin, 3 Bing. 368; Wheeler v. Collier, 1 Mood. & Walk. 123; Fuller v. Abrahams, 3 Brod. & Bing. 116; 6 Moore, 316. This rule is approved by Ch. KENT, in Comm. 2 Vol., pp. 538, 539 (5th ed.), and by STORY, in Eq. Jur. § 293.

(2) Bramley v. Alt, 3 Ves. 620; Smith v. Clarke, 12 Ves. 477; Woodward v. Miller, 2 Coll. C. C. 279; Flint v. Woodin, 9 Hare, 618. In Woods v. Hall, 1 Dev. Eq. 415, a puffer was employed where no announcement seems to have been made, but the vendor represented that the bidding by such puffer was made on his own (the puffer's) account; and the sale was held fraudulent and set aside. Here the express false representation supplied the positive element of fraud, and distinguishes the case from those described by the text.

(3) Bramley v. Alt, 3 Ves. 620; Thornett v. Haines, 15 M. & W. 372, per PARKE, B.; Conolly v. Parsons, 3 Ves. 625; Meadows v. Tanner, 5 Madd. 34; Robinson v. Wall, 10 Beav. 61; 2 Ph. 372. In Mortimer v. Bell, L. R. 1 Ch. 10, a sale at

SEC. 275. 3. Sale without reserve.-Finally, where a preliminary announcement is made, or it is stated as one of the conditions, that "the sale will be without reserve," or words having substantially the same import, this is construed, both in equity and at law, as a pledge on the part of the vendor, that the competition shall be absolutely free, that no means shall be used to enhance the price, and that the property will be knocked off to the highest bidder, whatever be the amount of the bid, whether large or small. The employment of even one puffer, and a fortiori of more than one, is a fraudulent act, and renders the sale voidable in equity, as well as at law, and is, of course, a ground for refusing a specific performance.(1)

SEC. 276. 4. Legislation on this subject.-The English statute recites the fact, that different rules have prevailed in equity and in law, and declares it to be expedient that the same rule should regulate both jurisdictions. It thereupon enacts that the employment of puffer or puffers shall be unlawful in every case, unless the right to employ such a means of enhancing the price shall be expressly reserved.(2) SEC. 277. As a secret arrangement between the vendor and his

auction, one of the conditions being that "the highest bidder shall be purchaser," no announcement that the sale would be without reserve, nor that any one would bid for the vendor. An agent of the vendor bid 2,500l.; the auctioneer then bid 2,6007., and the agent and the auctioneer continued bidding against each other until the price reached 3.6001.-defendant then bid 3,6507., and the property was struck off to him. Here were, therefore, two puffers for the vendor. Held, that the vendor could not enforce the contract. The court disapproved, and even questioned the rule allowing one puffer.

(1) Robinson v. Wall, 2 Phil. 375, per Lord COTTENHAM; Thornett v. Haines, 15 M. & W. 367, and cases therein cited; Meadows v. Tanner, 5 Mad. 34. In Robinson v. Wall, supra, and 10 Beav. 61, the assignees of an insolvent offered his life interest in certain land for sale at auction" without reserve;" they had previously made a secret arrangement with a person interested in the remainder, that he should bid 35,000l., and the property would be struck off to him unless higher price was offered. The defendant, ignorant of the arrangement, bought the property, bidding 50,000l. for it. The sale to him was held to be vitiated by the vendors' fraudulent practice. Gilliat v. Gilliat, L. R. 9 Eq. 60, arose under the late statute, 30 & 31 Vict., ch. 48, but still illustrates the rule stated in the text. Land was sold at auction, one condition being that the sale was "subject to a reserve bidding," which was 29 0007.; no other reservation or statement was made on the subject. A puffer was employed who ran the property up by several bids to nearly 29,000l., when the purchaser bid that sum, and the land was struck off to him. Held, an illegal sale under the statute; that the statute "makes a distinction between reserved bidding and a reserved right to bid." Also that, under the statute, any sale is illegal when a puffer has been employed, unless the right to employ him was expressly reserved, and a "reserved bidding" is not reserved right to employ a puffer.

(2) 30 and 31 Vict., ch. 48.

agents for the purpose of enhancing the price may be a fraud on the purchaser, so, on the other hand, secret agreements between persons desiring to purchase property for less than its value at a public sale, that they will not bid against each other, and that the purchase made by one of the parties at a low price, consequent upon such arrangement, shall enure to the benefit of the other parties, are fraudulent as against the vendor, and a sale made under the operation thereof will be rescinded at his suit.(1) An agreement or understanding among bidders, whose interests are antagonistic, for the purpose of preventing competition and thereby procuring the property to be sold at less than its fair value, is clearly a fraud upon the vendor. (2)

SEC. 278. Fraud by agents.-Since a corporation must act through agents, and since it is regarded as a legal entity incapable of fraud as it is incapable of intention, the fraud of those classes of agents which must be considered as its immediate representatives, in whom its corporate powers are primarily lodged, is necessarily imputed to the corporation itself, and produces the same effects as though committed by it. Contracts, therefore, to which a corporation is a party, and from which it would derive a benefit or obtain a right against the other party, are affected by the frauds, whether false representations or concealments, of its agents by whom they were negotiated and concluded, in the same manner and to the same extent as though such agents had entered into the agreements on their own behalf as the principals; the agent's fraud either vitiates the contract, rendering it liable to be rescinded, or constitutes a ground for refusing to enforce it at the suit of the corporation.(3) How far the fraud of an agent generally renders the principal liable, and exposes such principal either to an action at law for deceit, or to a suit in equity for a rescission, or furnishes a defense to a suit at law brought upon the contract by the principal, are questions which have given rise to much discussion and

(1) Jones v. Caswell, 3 Johns. Cas. 29; Doolin v. Ward, 6 Johns. 194; Wilbur v. Howe, 8 Johns. 444; Thompson v. Davies, 13 Johns. 112; Dudley v. Little, 2 Ham. 505; Piatt v. Oliver, 1 McLean, 295; Gulick v. Ward, 5 Halsted, 87. Such arrangements may, however, be made with a worthy and legal, and not a fraudulent, intent; and if done in good faith, and to promote the interests of all the parties, they are not open to objection, and do not invalidate the sale. Wolfe v. Luyster, 1 Hall, 146; Smith v. Greenlee, 2 Dev. 126; Smull v. Jones, 1 Watts & Serg. 128; Phippen v. Stickney, 3 Metc. 384, and cases cited.

(2) Smith v. Greenlee, 2 Dev. 126; Morehead v. Hunt, 1 Dev. Eq. 35; Moncrief v. Goldsborough, 4 Har. & McHen. 281; Troughton v. Johnston, 2 Hayw. 328. (3) Ranger v. Great Western Ry. Co. 5 H. L. Cas. 72; National Exchange Co. v. Drew, 2 McQueen, 103; Angell & Ames on Corp. §§ 310, 311.

great conflict of opinion ;(1) but it does not come within the province of this work to attempt their answer. There can be no doubt, however, that in accordance with the general principles upon which equity administers this, its peculiar remedy, such fraud is a sufficient ground for refusing to decree a specific performance.

SEC. 279. Waiver.-Since fraud, whether consisting of false representations or of intentional concealments, or of any other deceptive practices, does not render a contract absolutely void, but merely voidable at the option of the injured party, such party may always waive the objection which might otherwise be taken in his behalf, and thereby ratify the agreement and make it as binding as though it had been originally free from all vitiating incidents or elements. The waiver may be express, or it may consist in acts whereby the party shows an intention to adopt the contract, or whereby he claims and enjoys in whole or in part the benefits which it confers. Such acts, however, in order to constitute a waiver must be done with a full knowledge of all the facts; for a person cannot be held to have waived, by his conduct, a fraud of which he was at the time wholly ignorant. (2) The doctrine of waiver applies in the same manner and extent to the case of mistake.

SECTION XV.

The contract must be free from illegality.

SECTION 280. An illegal contract is, as a rule, void-not merely voidable--and can be the basis of no judicial proceeding. No action can be maintained upon it, either at law or in equity. This impossibility of enforcement exists, whether the agreement is illegal in its inception, or whether, being valid when made, the illegality has been created by

(1) See Cornfoot v. Fowke, 6 M. & W. 358; Fuller v. Wilson, 3 Q. B. 58, 68; National Exch. Co. v. Drew, 2 McQueen, 103; Wilde v. Gibson, 1 H. L. Cas. 605, 615; Attwood v. Small, 6 Cl. & Fin. 413, per Lord LYNDHURST; Hern v. Nichols, 1 Salk. 289.

(2) See Atwood v. Small, 6 Cl. & Fin. 432, per Lord LYNDHURST. In Macbryde v. Weeks, 22 Beav. 533, the defendant, with complete knowledge of all the facts, notified the plaintiff that the contract would be rescinded unless the plaintiff should perform on his part by a certain day specified, but in this notice he (the defendant) offered to perform his own part of the contract—he was held by this notice and the offer made in it, to have waived an objection which might have been raised on account of any false representations made by the plaintiff. Allen v. Cerro Gordo Co., 40 Iowa, 349.

a subsequent statute.(1) The illegality here spoken of, although analogous to some kinds of constructive fraud, is, of course, to be carefully distinguished from fraud. Agreements are often loosely spoken of as illegal, when they are merely fraudulent, or even when the parties simply lacked the capacity to enter into a binding engagement. Illegality is an element which wholly vitiates the contract between the immediate parties, as well as in respect to third persons, and still it is an element with which society and the state, as represented by the courts, are more immediately concerned than even the parties themselves. If a contract is tainted with the vice of illegality, it is held to create no obligation, not from any concern for the individual rights of the parties who may be equally in fault, but from a regard for the public. In the case of fraud, or mistake, the wrong is personal, and may be waived by the injured party; in the case of illegality the wrong is done to society, and the state, through its judicial officers, must control the penalty. The illegality may inhere either in the consideration or in the very promises and stipulations of the agreement. Again, if the illegality is confined to the consideration, that consideration may consist of two distinct and separable parts, one of which is legal, while the other is alone tainted with the defect. Or, finally, if the illegality is found only in the promises and stipulations, these may consist of separate and divisible terms, some of which are valid and the others invalid. Various special rules are based upon these distinctions, but their discussion belongs rather to a treatise upon the general law of contracts.

(1) Atkinson v. Ritchie, 10 East, 530, 534; Barker v. Hodgson, 3 M. & S. 267; Esposite v. Bowden, 4 El. & Bl. 963. In the case where a contract, originally valid, has become illegal from subsequent legislation, the courts strive to enforce it if possible, or as far as possible. Betterworth v. Dean of St. Paul, Sel. Cas. in Ch. 66; Thomson v. Thomson, 7 Ves. 473; Pratt v. Adams, 7 Paige, 615. A court of equity will not specifically enforce a contract which grows directly out of another which is illegal, immoral, or champertous. Bowman v. Cunningham, 78 Ill. 48. Nor a contract founded on an illegal consideration. Paton v. Stewart, 78 Ill. 481. The following recent cases furnish examples of contracts illegal, because opposed to the general principles of public policy: Contract by a director with the railroad company for the purchase of company property. Flanagan v. Great Western R'y Co., L. R. 7 Eq. 116. Contracts of purchase at auction, made under secret arrangements, by which competition was prevented. Whitaker v. Bond, 63 N. C. 290. A contract of sale made to enable a party to leave the state and thus escape from justice. Dodson v. Swan, 2 W. Va. 511. A contract against the policy of the law concerning land. Smith v. Johnson, 37 Ala. 633. Sometimes where the parties are not in pari delicto the defendant is not permitted to set up the illegality as a defense. Pingree v. Coffin, 12 Gray, 288; Freelove v. Cole, 41 Barb. 318; Sandfoss v. Jones, 35 Cal. 481.