a party to the contract. As to represen tations made by agents. A. cannot be allowed to rescind his contract with B. because he has been induced to enter into it by some fraud of C. to which B. is no party (a). Thus in Sturge v. Starr (b) a woman joined with her supposed husband in dealing with her interest in a fund. The marriage was in fact void, the man having concealed from her a previous marriage. It was held that this did not affect the rights of the purchaser. And so if A. effects an insurance on the life of B., false statements made by B. to the insurance office concerning his own health, but not known by A. to be false, do not in the absence of special conditions avoid the contract (c). But when we come to deal with contracts made by agents the question arises to what extent the representations of the agent are to be considered as the representations of the principal for the purposes of this rule. And this question, though now practically if not absolutely set at rest by recent decisions, is one which has given rise to some difficulty. A false statement made by an agent with his principal's express authority, the principal knowing it to be false, is obviously equivalent to a falsehood told by the principal himself; and we do not know that this has ever been disputed, or that it has been ever supposed to make any difference whether the agent knows the statement to be false or not. But we may also have the following cases: A statement not expressly authorized by the principal, nor known to be untrue by him, but known to be untrue by the agent; or conversely: A statement not known to the agent to be untrue, and not expressly authorized by the principal, the true state of the facts being, however, known to the principal. There is no doubt that in the first case the principal is responsible both at law and in equity, subject only to the limitation to be presently stated. In the second case there is every reason to believe that the same rule holds good. At common law there has been a much canvassed decision to the contrary (d), which, however, has been practically overruled by the remarks since made upon it (e), or at any rate cut down to a decision on a point of pleading which perhaps cannot, and certainly need not, ever arise again. (a) See per Lord Cairns, Smith's ca. 2 Ch. at p. 616. (b) 2 My. & K. 195. (c) Wheelton v. Hardisty, 8 E. & B. 232, 285, 27 L. J. Q. B. 241. (d) Cornfoot v. Fowke, 6 M. &W. 358. (e) 1 Sm. L. C. 95 and see especially per Willes, J. in Barwick v. English Joint Stock Bank, L. R. 2 Ex. 262. is whether was within Joint Mackay v. "cial Bank wick. We can at once see that the above distinctions are material, The only if at all, only when there is a question of fraud in the strict question sense, and then chiefly when it is sought to make the principal the repreliable ex delicto. Where a non-fraudulent misrepresentation sentation suffices to avoid the contract, there it is clear that the only thing the agent's to be ascertained is whether the representation was in fact within authority. the scope of the agent's authority. But it may be now taken Barwick as the law that this is the only question even in a case of fraud. . English It was so laid down in a recent case by a considered judgment Stock Bank, of the Exchequer Chamber (a), fully approved by a more recent decision of the Judicial Committee (). According to this the Commerrule is "that the master is answerable for every such wrong," of New including fraud, "of the servant or agent as is committed in the Brunscourse of the service and for the master's benefit, though no express command or privity of the master be proved." Although the master may not have authorized the particular act, yet if "he has put the agent in his place to do that class of acts" he must be answerable for the agent's conduct. It makes no difference whether the principal is a natural person or a corporation (e). In both of these cases, accordingly, a banking corporation was held to be liable for a false representation made by one of its officers in the course of the business usually conducted by him on behalf of the bank; and this of course involves the proposition that the party misled is entitled to rescind the contract induced by such representation. On the whole there seems to be no room for serious doubt that the law of England as now settled is correctly expressed by s. 238 of the Indian Contract Act: "Misrepresentations made, or frauds committed, by agents acting in the course of their business for their principals, have the same effect on agreements made by such agents as if such misrepresentations or frauds had been made or committed by the principals; but misrepresentations made or frauds committed by agents in matters which do not fall within their authority do not affect their principals." The directors and other officers of companies, acting within Directors the functions of their offices, are for this purpose agents, and and Pro (c) L. R. 5 P. C. 413-5: Swift v. Jewsbury, (Ex. Ch.) L. R. 9 Q. B. at p. 312, per Lord Coleridge, Č. J. moters. Agent always liable for his own personal fraud. The repre the companies are bound by their acts and conduct. And reports made in the first instance to a company by its directors, if afterwards adopted by a meeting and "industriously circulated," must be treated as the representations of the company, 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 (). 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). It is to be borne in mind that in a case of actual fraud on the part of an agent the responsibility of the principal does not in any way exclude the responsibility of the agent. "All persons directly concerned in the commission 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. The representation must be made as part of the same sentation transaction. must be in the same transac tion. It is believed that the statement of the rule in this form, though at first sight vague, is really more accurate than that (a) Per Lord Westbury, New Brunswick &c. Co. v. Conybeare, 9 H. L. C. 711, 725. (b) P. 438 above. (c) Smith's ca. 2 Ch. 604, 611; p. 465 above; and further, as to the application of the doctrines of agency to partners and directors on these points, Lindley, 1. 333; but note the effect of Mackay v. Commercial Bank of New Brunswick, L. R. 5 P. C. 394, on the law as there stated and the dicta there cited. (d) Per Lord Westbury, Cullen v. Thomson's Trustees and Kerr, 4 Macq. 424, 432; Swift v. Winterbotham, L. R. 8 Q. B. 244, 254. Scotland v. Addie, 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 maintaining an action of deceit. Thus in Western Western Bank of Scotland v. Addie (a) the directors of the bank Bank of 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. In Peck v. Gurney (b) the important point is decided that the Peek v. Gurney. sole office of a prospectus is to invite the public to take shares in the company in the first instance. Those 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 (c) are expressly overruled. The proceeding there in hand was in the nature of (a) L. R. 1 Sc. & D. 145. (b) L. R. 6 H. L. 377, 395: and see the case put by Lord Cairns as an illustration at p. 411. (c) Bedford v. Bagshaw, 4 H. & N. 538, 29 L. J. Ex. 59; Bagshaw v. Seymour, 18 C. B. 903, 29 an action of deceit, but the doctrine must equally apply to the rescission of a contract. In Way v. Hearn (a) the action was on a promise by 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 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 misrepresentation 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 () 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 not considered are not confined to any particular ground of (a) 13 C. B. N. S. 292, 32 L. J. C. P. 34. (b) But qu. whether time is in itself material: sce L. R. 7 Ex. 35, 8 Ex. 205, |