scientific grounds (a): this gives us such forms of speech as “constructive fraud," conduct "amounting to fraud in the contemplation of a Court of Equity," and the like descriptions, under which it is possible to bring almost anything (b). In courts of law too some difficulty has been caused by the indefinite use of the term Fraud, but more particularly by the assumption that the right of rescinding a contract on the ground of a false representation must needs be strictly co-extensive with the right of bringing a distinct action of deceit, in which the representation is treated as a substantive wrong. Again, there is this unavoidable confusion in practice, at any rate in equity, that the question of innocent misrepresentation is seldom or never raised as a neat point. The cases are almost invariably mixed up with charges of actual fraud, of which it is sometimes not easy to ascertain the precise effect. It will be understood therefore that we approach the subject with considerable diffidence. We will first endeavour to deal with the more troublesome part of it, namely non-fraudulent representations. doctrine as to repre at common law. "A representation is a statement or assertion made by the General one party to the other, before or at the time of the contract, of some matter or circumstance relating to it" (c). The judgment sentations of the Exchequer Chamber from which we take this definition goes on to state that, apart from fraud, which must be separately considered, and apart from certain exceptional classes of contracts, the validity of a contract is not affected if a representation so made is found to be untrue (much less if there is a mere omission to state a material fact), nor is such untruth or omission any cause of action (that is, of a separate independent action in tort). A representation, however, may be made an essential part of the contract, so that the contract is conditional upon its truth. It is then said to be a condition (d). (a) The ambiguous use of the word leads to unfounded charges of fraud in the strict sense on the one hand, and on the other hand to the absence of fraud in that sense being set up in answer to a case which is really of a quite different kind. (b) See the wonderfully miscellaneous contents of the chapters on "Actual Fraud " and "Constructive Fraud" in Story's Eq. Jurisp. (c) Per Cur. Behn v. Burness Doctrine Or there may be a distinct collateral agreement that the representation shall be true, so that its untruth, if so it prove, does not avoid the contract, but is a matter for compensation. It is then said to be a warranty. The classes of contracts which are exceptionally treated are these: (A) Marine insurance. (B) Fire insurance. (D) Sales of land. The peculiarity common to all of them, on which the exception is founded, is that the subject-matter of the contract is especially within the knowledge of one party, and the other has to rely, in the first instance at all events, on the correctness of the statements made by him. The same reason applies, and has been applied by recent decisions in courts of equity, to (E) Contracts to take shares in companies. We do not know that courts of law have either adopted or distinctly refused to adopt this last extension (a). Assuming for simplicity's sake that they would adopt it, we may say that so far as concerns cases where there is a condition or warranty, and so far as concerns the excepted classes of contracts, there is no difference between common law and equity. The question remains, however, what is considered as the general rule by courts of equity. Certainly it would be possible to express it in a similar form by enlarging the number of excepted cases: and it so far agrees with the common law that mere non-disclosure of material facts is prima facie no ground for rescinding a contract. But the prevailing tendency of authorities, and a certain amount of definite authority (though less than one might expect) are for putting the rule the other way; and on the whole it may be considered to stand thus: A contract is voidable at the option of a party who has been of equity. induced to enter into it by a statement contrary to the fact made (a) Kennedy v. Panama, &c. Mail Co. L. R. 2 Q. B. 580, p. 386 above, seems against it, but the question was not fairly raised. by the other party without reasonable grounds for believing it, though he does in fact believe it; or by the other's silence as to a material fact which, having regard to the nature of the contract or the position of the parties, it is his duty to communicate: Such statement or omission as aforesaid is called a misrepresentation. A contract is not voidable on the ground of misrepresentation, if the party seeking to set it aside has made independent inquiries in the matter of the representation and acted on his own judgment; or, where the misrepresentation consists in silence, if he had the means of discovering the truth with ordinary diligence. Such are believed to be the doctrines of common law and equity in their general outline. We proceed to follow them out in the order above given, beginning with the special topics for which at all events special rules are established. After this we shall be in a better position to judge how far any of these special rules are really treated as general rules in equity. Representations amounting to Warranty or Condition. treated. tion. The law on this subject is to be found chiefly in the Cases decisions on the sale of goods; the principles however are of specially general importance, and not without analogies, as we shall see, Warranty in other doctrines commonly treated as quite peculiar to equity. and condiWe therefore mention the leading points in this place, though very briefly. In the first place a buyer has a right to expect a merchantable article answering the description in the contract (a); but this is not on the ground of warranty, but because the seller does not fulfil the contract by giving him something different. "If a man offers to buy peas of another and he sends him beans, he does not perform his contract; but that is not a warranty; there is no warranty that he should sell him peas; the contract is to sell peas, and if he sends anything else in their stead it is a non-performance of it" (b). So that, even if it be a special term of the contract that the buyer shall not refuse to accept goods bought by sample on the score of the quality not being equal to sample, but shall take them with an allowance, he is not bound to accept goods of a different kind (a). It is open to the parties to add to the ordinary description of the thing contracted for any other term they please, so as to make that an essential part of the contract: a term so added is a condition. If it be not fulfilled the buyer is not bound to accept or keep the goods even if there has been a bargain and sale of specific goods (b). A warranty is an undertaking which, though part of the contract, is "collateral to the express object of it" (c). When specific goods have been sold with a warranty the buyer cannot reject them (d), but may obtain compensation by way of deduction from the price, or by a cross action (e). When there has been a sale with a warranty of goods not in existence or not ascertained, and the warranty is broken, the buyer may refuse to accept the goods, and this after keeping them, if necessary, for a time reasonably sufficient for trial or examination, provided he has not exercised further acts of ownership over them (f). This appears at first sight to put a warranty on the same footing as a condition where the sale is not of specific goods: but the true explanation is that given by Lord Abinger-that the tender of an article not corresponding to the warranty is not a performance of the contract (g). The warranty retains its peculiar effect in this, that if the buyer chooses to accept the goods, he has a distinct collateral right of action on the warranty; whereas if there is a condition but not a warranty the party may indeed insist on the condition, but if (a) Azémar v. Casella, L. R. 2 C. P. 431, in Ex. Ch. 677. (b) Benjamin on Sale, 488 sqq. (c) See note (b) last page. (d) Heyworth v. Hutchinson, L. R. 2 Q. B. 447, but as to the application of the rule in the particular case see Mr. Benjamin's remarks, p. 742 of his book. (e) The reduction of the price can be only the actual loss of value: any further damages must be the subject of a cross claim, which under the old practice required a separate action: Mondel v. Steel, 8 M. & W., 858, 871. But a defendant can now recover his whole damages by counter-claim, and have judgment for the balance if it be in his favour. Rules of 1875, Ord. XIX. r. 3, Ord. XXII. r. 10. (f) Heilbutt v. Hickson, L. R. 7 C. P. 438, 451; Indian Contract Act, s. 118. It is not the buyer's duty to send the goods back: it is enough for him to give a clear notice that they are not accepted, and then it is the seller's business to fetch them: Grimoldby v. Wells, L. R. 10 C. P. 391, 396. (g) And see Benjamin on Sale, 748. he accepts performance of the contract without it he may have no claim to compensation. Whether any term of a contract is in fact a condition or a warranty is a question of construction depending on the language used and to some extent on the nature and circumstances of the transaction («). A. Marine Insurance. Marine Insurance: The law as to the contract of marine insurance is peculiar. duty of Not only misrepresentation but concealment (b) of a material disclosure. fact, "though made without any fraudulent intention, vitiates the policy" (c), that is, makes it voidable at the underwriter's election (d). For this purpose a material fact does not, on the one hand, mean only such a fact as is "material to the risks considered in their own nature"; nor on the other hand does it include everything that might influence the underwriter's judgment: the rule is "that all should be disclosed which would affect the judgment of a rational underwriter governing himself by the principles and calculations on which underwriters do in practice act" (e). The only exception is that the insured is not bound to communicate anything which is such matter of general knowledge that he is entitled to assume the underwriter knows it already (ƒ): and the obligation extends not only to facts actually within the knowledge of the assured, but to facts which in the ordinary course of business he ought to know, though by the fraud or negligence of his agent he does not know them (g). These rules have in modern times at any rate been uniformly treated both at law and in equity as determined by the exceptional and speculative nature of this particular contract, and not affording ground for any conclusions of general law. That they Distincdo not apply to the contract of life insurance is clear from the tions as (a) An instructive case of a simple affirmation amounting under special circumstances to a condition is Bannerman v. White, 10 C. B. N. S. 844, 31 L. J. C. P. 28; Benjamin on Sale, 490. (b) This is the usual word, but nondisclosure would be more accurate. (c) Ionides v. Pender, L. R. 9 Q. B. 531, 537; 2 Wms. Saund. 555-9. (d) See Morrison V. Universal Marine Insurance Co. L. R. 8 Ex. 197, 205. (e) Parsons on Insurance, adopted (f) Morrison v. Universal M 2 Q. B. 511. to life insurance. |