tracts and in torts. Speaking broadly, and without any attempt to traverse the topic carefully in this connection, a misrepresentation will not justify rescission unless it is a condition of the contract,2 or is actually fraudulent. It is actually fraudulent when it contains "a false statement of fact, made with a knowledge of its falsehood, or in reckless disregard whether it be true or false, and with the intention that it should be acted upon by the complaining party and actually inducing him to act upon it."4 Although the seller makes false representations during the negotiations, if the contract of sale is reduced to writing and one of its terms is that the buyer purchases "entirely upon his own judgment, waiving all defects, either patent or latent," the latter cannot successfully urge that he has been defrauded.5

299. In some jurisdictions, however, it is held that actual fraud is not necessary to the right of rescission; but that the right exists whenever one party has been actually deceived by a misrepresentation of the other, although the party making it was not aware of its falsity and acted in good faith."

Although the vendor, in a particular case, is entitled to rescind

1 P. Sheeran & Co. v. Russell, 145 Ky. 223; 140 S. W. 195 (1911); Stewart v. Ticonic, 104 Me. 578, 586; 72 At. 741 (1908); mutual mistake of law is not ground for rescission. Packard Mach. Co. v. Schweiger, 147 Wis. 67; 132 N. W. 606 (1911); honest opinion that a bolt was of a certain size, is not a fraudulent statement of fact.

2 Bannerman v. White, 10 C. B. N. s. 844 (1861); Burdick's Cases on Sales, 701; Karberg's Case, 1892, 3 Ch. 1.

Lewark v. Carter, 117 Ind. 206; 20 N. E. 1191; 10 Am. St. R. 40 and note, 45 (1888); Fuchs & Lang Co. v. Kittredge & Co., 242 Ill. 88; 89 N. E. 723 (1909); Hotchkiss v. Bon Air Coal Co., 108 Me. 34; 78 At. 1108 (1911); Carr v. Nat. Bank, etc., 167 N. Y. 375; 60 N.E.649 (1901). Actual fraud by seller's agent is principal's fraud.

4 Anson on Contracts (4th Eng. ed.), 153. Accord, Weidman v. Phillips, 159 Mich. 380; 124 N. W. 40 (1909); Brucker v. Kairn, 89 Neb. 274; 131 N. W. 382 (1911).

Floyd v. Woods, 110 Ga. 850; 36 S. E. 225 (1900).

Omaha Elec. Light & P. Co. v. Union Fuel Co., 88 Neb. 423; 129 N. W. 989 (1911).

7 Newman v. H. B. Claflin Co., 107 Ga. 89; 32 S. E. 943 (1899); Prewitt v. Trimble, 92 Ky. 176; 17 S. W. 356; 36 Am. St. R. 586 note, 591 (1891); Joslyn v. Cadillac Auto Co., 177 Fed. 863; 101 C. C. A. 77 (1910); Hafer v. Cole, Ala. -; 57 So. 757 (1912). See Professor Williston's discussion of this topic in 24 Harv. L. R. 415 (1911).

1

the sale and reclaim the goods, he may waive the right. If, with knowledge of the fraud, he sues for the contract price, or takes security therefor, or proves his claim in insolvency proceedings; or if the property has passed to a bona fide purchaser,2 the vendor's right to rescind and reclaim the goods is lost. Moreover, as a rule the vendor must rescind in toto if at all, and upon rescission he must restore the vendee to his former position; but if the contract is severable, or if the vendee has by his own wrongful act made it impossible for the vendor to put him in statu quo,5 the rule will not be strictly enforced. Accordingly, if a defrauding vendee has paid a part of the price, and has sold a part of the goods equal to or exceeding such payment, the vendor, upon discovering the fraud, may rescind the sale and retake the remaining goods from the vendee without returning the payment. Or if the defrauding purchaser, after selling a part of the goods, has been declared bankrupt, the vendor may rescind the original sale, retake the unsold goods, and prove in bankruptcy for the amount received by the bankrupt for the goods sold, as money received to the vendor's use.7

6

The foregoing statements are applicable, mutatis mutandis, to a defrauded vendee.8

Again, the defrauded party should act promptly after dis

1 Joslin v. Cowee, 52 N. Y. 90 (1873); Droege v. Ahrens Co., 163 N. Y. 466; 57 N. E. 747 (1900).

2 Supra, ¶ 291.

Harden v. Lang, 110 Ga. 392; 36 S. E. 100 (1900); Adam, etc. Co. v. Stewart, 157 Ind. 658; 61 N. E. 1002 (1901); Continental Jewelry Co. v. Pugh, 168 Ala. 295; 53 So. 324; 22 Ann. Cas. 657 with full note (1910). ♦ Friend Bros. v. Hulbert, 98 Wis. 183; 73 N. W. 784 (1898).

Gray v. D. M. Osborne & Co., 102 Wis. 641; 78 N. W. 1079 (1899); Burdick's Cases on Sales, 705; Pitcher v. Webber, 103 Me. 101; 68 At. 593 (1907); damaged condition of property, when tendered back, due to its own imperfections.

John V. Farwell Co. v. Hilton, 84 Fed. 293 (1897); Burdick's Cases on Sales, 703; Sisson v. Hill, 18 R. I. 212; 26 At. 196 (1893). The note to this case in 21 L. R. A. 207 cites many cases opposed to the view stated in the text. Gates v. Raymond, 106 Wis. 657; 82 N. W. 530 (1900), accords with the text.

"In re Hirschman, 104 Fed. 69 (1900).

Tuttle v. Stovall, 134 Ga. 325; 67 S. E. 806 (1910); Am. Pure Food Co. v. Elliott, 151 N. C. 393; 66 S. E. 451 (1909).

covering the fraud, but a delay of two months before making a rescission has been held not unreasonable.1

The return of worthless property is unnecessary.2

300. Legal Holder of Bill of Lading has Apparent Authority to sell. The apparent right of property as owner is conferred, also, upon the legal holder of a bill of lading. Such an instrument is not only a symbol of the goods therein described, so that its delivery while the goods are in transit is the legal equivalent of the transfer of possession of the goods themselves, but it is an "effective representation of the ownership of the goods," and hence "the parting with a bill of lading is parting with that which is the symbol of property, and which, for the purpose of conveying a right and interest in the property, is the property itself."4 As a symbol of the goods and a muniment of title thereto, a bill of lading was treated by the law merchant as negotiable, to some extent, "for the general convenience of commerce;" and its legal holder might, "by indorsement, transfer a greater right than he himself had." 5

1 Boles v. Merrill, 173 Mass. 491; 53 N. E. 894; 73 Am. St. R. 308 (1899); cf. Mizell v. Watson, 57 Fla. 111, 117; 49 So. 149 (1909); if facts are undisputed, what is a reasonable time is for the court, otherwise for the jury; Pitcher v. Webber, 103 Me. 101, 105; 68 At. 593 (1907); Hotchkiss v. Bon Air Coal Co., 108 Me. 34; 78 At. 1108 (1911); Ditton v. Purcell, 21 N. D. 648; 132 N. W. 347 (1911); McMillan v. Batten, 52 Ore. 218, 226; 96 Pac. 675 (1908); Smith v. Columbus Buggy Co., Utah, -; 123 Pac. 580 (1912); Archibald v. Hahn, 53 Wash. 602; 102 Pac. 656 (1909); Ward v. Marvin, 78 Vt. 141; 62 At. 46 (1905).

2 Taft v. Myerscough, 197 Ill. 600; 64 N. E. 711 (1902).

3 In Barber v. Meyerstein, L. R. 4 H. L. 317 (1870), at p. 329, it is said: "An indorsement of the bill of lading carries with it the property in the goods when the goods are at sea," and "the bill of lading remains in force at least so long as complete delivery of possession of the goods has not been made to some person having a right to claim them under it." Again, at p. 335, "Unquestionably the bill of lading, as long as the engagement to the shipowner has not been fulfilled, is a living current instrument, and no doubt the transfer of it for value passes the absolute property in the goods."

Barber v. Meyerstein, L. R. 4 H. L. 317 (1870), 326, 330.

Jenkyns v. Usborne, 7 M. & G. 678, 699 (1844). In this case the one undertaking to transfer the bill of lading was not in possession of it, and the court held that "the interest in the goods did not pass, as it would have done if the transfer had been by assignment of the bill of lading," and that the transferee obtained only such rights as his transferrer had.

His indorsement or assignment thereof to a bona fide purchaser not only cut off an unpaid vendor's right of stoppage in transitu,' but enable the transferee to hold the goods against a defrauded vendor.2

301. Bill of Lading not fully Negotiable. But a bill of lading was not treated as negotiable for all purposes. Indeed, the contract for carriage and delivery, which is embodied in a bill of lading, did not pass to the indorsee with the property in the goods, and statutes were required to enable him to enforce the rights in respect of this contract in his own name.3 Nor was a bill of lading, even when considered as a document of title, possessed of all the characteristics or governed by all the rules of negotiable paper. If it was obtained by a trick of such nature as that no title to it passed to the consignee, he could not confer upon an innocent purchaser for value a valid title by its indorsement. Nor could the innocent purchaser from a thief or from a finder of a bill of lading acquire title to it; and if the owner of a bill of lading, made out in two or more parts, transferred one part to a purchaser for value and thus devested himself of title to the goods, he could not by a subsequent transfer of another part confer any property rights in them to a second innocent purchaser for value.

5

1 Lickbarrow v. Mason, 2 D. & E. 63 (1787); Dows v. Greene, 24 N. Y 638 (1862). This topic will be considered more fully in the next chapter. 2 The Argentina, L. R. 1 Adm. 370 (1867); Winslow v. Norton, 29 Me. 419 (1849).

See Bills of Lading Act (1855), 18 & 19 Vict. c. 111. Under this statute, the bona fide transferee of a bill of lading, takes it free from all liabilities of his transferrer to the shipowner, not stated in the instrument. Leduc v. Ward, 20 Q. B. D. 475 (1888).

4 Dows v. Perrin, 16 N. Y. 325 (1857).

Brower v. Peabody, 13 N. Y. 121 (1855); Benjamin on Sales (5th Eng. ed.), 919.

Barber v. Meyerstein, L. R. 4 H. L. 317, 331, (1870). "There is no authority or reason for holding that the person who first obtains the assignment of a bill of lading, and has given value for it, shall not acquire the legal ownership of the goods it represents." First Nat. Bank v. Ege, 109 N. Y. 120; 4 Am. St. R. 431; 16 N. E. 317 (1888). But the carrier is justified in a bona fide delivery of the goods to the holder first presenting a bill of lading. Glyn Co. v. East Ind. Co., 7 App. Cas. 591 (1882). Burdick's Cases on Sales, 508. A purchaser of goods, under a contract providing for payment in exchange for bill of lading, has no

Again, it was held that "although the shipper may have indorsed in blank a bill of lading deliverable to his assigns his right is not affected by an appropriation of it without his authority. . . . The bill of lading only represents the goods; and in this instance the transfer of the symbol does not operate more than a transfer of what is represented." To such an instrument, "the doctrine of bona fide purchaser only applied in a limited sense.'

"2

302. Negotiability of Bills of Lading under Statutes. - In many jurisdictions, statutes have been enacted, declaring bills of lading, warehouse receipts, and other documents of title to be negotiable by indorsement and delivery, in the same manner as bills of exchange. Even such legislation, however, has not transformed a document of title to goods into a fully negotiable instrument. Its nature and its functions make such a transformation impracticable,3 and fully justify the view taken by most courts that these statutes have for their sole objects the right to demand all three parts as a condition of making payment. Sanders v. Maclean, 11 Q. B. D. 327 (1883).

1 Gurney v. Behrend, 3 E. & B. 622, 634; 23 L. J. Q. B. 265 (1854).

Pollard v. Vinton, 105 U. S. 7, 8 (1881); The Carlos F. Roses, 177 U. S. 655, 665; 20 Sup. Ct. 803 (1899). "It is not a negotiable instrument in the sense that a bill of exchange or a promissory note is. Its transfer does not preclude, as in those cases, all inquiry into the transaction in which it originated, because it has come into hands of persons who have innocently paid value for it." Accord, Anchor Mill Co. v. Burlington, etc. Ry., 102 Ia. 262; 71 N. W. 255 (1897).

Shaw v. Railroad Co., 101 U. S. 557, 565 (1879); Burdick's Cases on Sales, 514; First Nat. Bank v. Mt. P. Milling Co., 103 Ia. 518, 522; 72 N. W. 689 (1897). But see L. of Ia. 1911, ch. 155; The Uniform Bills of Lading Act. In the Shaw case, it was said: "It cannot be that the statute, .. intended to change totally the character of bills of lading, put them in all respects on the footing of instruments which are representatives of money, and charge the negotiation of them with all the consequences which usually attend or follow the negotiation of bills and notes. Some of these consequences would be very strange, if not impossible; such as the liability of indorsers, the duty of demand ad diem, notice of non-delivery by the carrier, etc., or the loss of the owner's property by the fraudulent assignment of a thief." In Tiedeman v. Knox, 53 Md. 612 (1880), there is a dictum to the effect that the extremely rigid statute of that State makes bills of lading "negotiable in the same sense as bills of exchange;" but see Seal v. Zell, 63 Md. 356 (1884). In accord with the Tiedeman dictum is Nat. Bank of Commerce v. Chatfield, 118 Tenn. 481; 101 S. W. 765 (1907), construing Shannon's Code, § 3605, which is similar to the Maryland statute.