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But, generally, innocent misrepresentations do not "strike at the root of the contract," but only concern some quality or incident, the absence or presence of which is not sufficiently important to constitute an error in substantia in the sense explained in the preceding chapter. The misrepresentations, therefore, with which we are concerned are not to be regarded from the point of view of common mistake.

Misrepresentations are also to be distinguished from cases where a thing is sold by a particular description and the thing delivered is different. There is then neither a mistake nor a misrepresentation, but the contract is not performed.2

A misrepresentation concerning a material point, not amounting to fraud, and not a term of the contract, and not creating an error in substantia, is differently treated at law and in equity, and is differently treated at law when a certain class of contracts are involved.

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$ 77. Rule in Equity as to Misrepresentations. trine of Courts of equity is that a material untrue statement, though not made fraudulently, and though not a term of the contract, is ground for granting relief to the party

2 This is very well shown by Bannerman v. White, 10 C. B. N. S. 844; 31 L. J. C. P. 28, where the seller of the hops grown on 300 acres of land was asked by the buyer if any sulphur had been used in their treatment. The reply was in the negative. The buyer said that if sulphur had been used he would not even ask the price. Then a sale was agreed upon, no further reference being made to sulphur. Afterwards it was discovered that sulphur had been used on five out of the 300 acres in experimenting with a new machine, and that the seller had either forgotten this or thought it of no moment. The buyer then repudiated the contract. In an action against him for the breach the jury found as matters of fact that the statement that no sulphur had been used was not wilfully false, but that "the affirmation that no sulphur had been used was intended between the parties to be part of the contract of sale." The Court in giving judgment on this verdict for the defendant said: "The intention of the parties governs in the making and construction of all contracts. If the parties so intend the sale may be absolute, with a warranty superadded, or the sale may be conditional, to be null if the warranty is broken. And upon this statement of facts we think that the intention appears that the contract should be null if sulphur had been used." ·

who entered into the contract because he relied upon such misstatement.1 In fraud, there is always present an element of moral wrong or delinquency; in misrepresentation such element is lacking. But mere commendation is not actual misrepresentation. Simplex commendatio non obligat.

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This subject has been much confused by the use of the term "constructive fraud," or "legal fraud," as equivalent to a material but innocent misrepresentation. So it has been said that if a party does not know the representation to be false, or makes a mistake, his negligence is equivalent to fraud. Equity proceeded on the theory that a man who obtained the benefit of a contract by a untrue statement was "bound to make his representation good," and that the innocent misrepresentation of a fact was as injurious to the other party as one wilfully false. Making a representation good, in this sense, is a different thing from performing a promise.

Equtiy considers that the party to whom a representation of fact is made has a right to rely upon it, and is relieved from the necessity of making an investigation. It is not a sufficient answer to him to say, "If you had used due diligence you would have found out that the statement was untrue. You had the mean afforded you of discovering its: falsity, and did not choose to avail yourself of them.3

1 Smith v. Richards, 13 Peters, 36; Joice v. Taylor, 6 G. & J. 54; Tayman v. Mitchell, 1 Md. Ch. 497; Kent v. Carcaud, 17 Md. 299; Keating v. Price, 58 Md. 532; Crowley v. Smith, 46 N. J. L. 380; Rorer Iron Co. v. Trout, 83 Va. 397. Cf. 2 Pomeroy, Eq. Jur. §§ 884,, 887.

2 Smith v. Richards, 13 Peters, 36, 38.

3 Redgrave v. Hurd, 20 Ch. D. 1, 12. In this case the Master of the Rolls said that the text-books did not accurately state the law. In Slaughter v. Gerson, 13 Wallace, 385, it is said by Field, J.: “When the means of information are at hand and equally open to both parties, and no concealment is made or attempted, then the misrepresentation furnishes no ground for a Court of Equity to refuse to enforce the contract of the parties. The neglect of the purchaser to avail himself in all such cases of the means of information, whether attributable to his indolence or credulity, takes from him all just claim to relief." But in Clark v. Edgar, 84 Mo. 106, and other cases, the law is laid down in accordance with the statement in the text.

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In England the Judicature Act of 1873 effected a fusion of law and equity, and it was provided that whenever the rules of the two conflicted; the equitable rule should prevail. Since that statute, a party who has been induced to make a contract by the innocent misrepresentation of the other party has a right to ask for a rescission as well as to resist specific performance. Thus, where a party was induced by misrepresentations made without fraud by the defendant to become a partner in a business, it was held that he was entitled to a rescission of the contract and the repayment of his capital, although the business as restored to the defendant was worse than worseless." So, if one subscribes for shares in a company upon the faith of a prospectus stating that A. and X. will be directors, he is entitled to have his subscription vacated and the amount paid upon it refunded, if A. and X. had not promised to become directors, although the parties issuing the prospectus thought that they had, for, in an action for the rescission of a contract on the ground of misrepresentation, it is not necessary to prove knowledge by the defendant of its untruth.5

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Rescission of Contract in Equity for Misrepresentation. The rule in England on this subject, as appears from the aforegoing authorities, is that when one has been induced to make a contract by reason of material but not fraudulent misrepresentations of fact, he may ask for the rescission of the contract and the restoration of what he paid and delivered under it, upon his returning the consideration received. This rule is not restricted to contracts which are enforceable only in equity, but applies to all contracts, executed as well as executory. This right to disaffirm is as extensive as in the case of fraud.

In this country, a Court of Equity has always refused its aid in the enforcement of a contract obtained by misrepresentation, however innocent, on the theory that a man could

4 Adam v. Newbigging, 13 App. Cas. 308; Newbigging v. Adam, 34 Ch. D. 582.

5 Karbery's Case [1892], 3 Ch. 1, 13

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not be allowed to take advantage of his own untrue statement after he finds out that it was untrue. But when the contract is enforceable by action at law, or has been executed on both sides, the general rule is that a party cannot resort to a Court of Equity to have it rescinded on the ground of misrepresentation not fraudulent.1 In exceptional cases, however, equity does rescind a contract for such misrepresentation, when the circumstances appeal to the conscience of the Chancellor.2

$79. Rule at Law. The principle applied in courts of law is that a material misrepresentation, not amounting to fraud and not a term of the contract, has no effect whatever, except in the case of a certain class of contracts. This rule is based upon the theory expressed in the maxims, caveat emptor, simplex commendatio non obligat, and in the frequent statement that the parties contract with one another at arm's length. A party in contracting is deemed not to have a right to rely upon a statement made to him in good faith by the other party unless such statement amounts to a promise or condition or warranty. In the sale of chattels, statements by the seller upon which the buyer relies are often treated as warranties.

There are, however, certain contracts which are treated as being uberrimae fidei, and in these an innocent misrepre

1 Wenstrom Co. v. Purnell, 75 Md. 120; Groff v. Rohrer, 35 Md. 327 ; Dillon v. Conn. Ins. Co., 44 Md. 386; McShane v. Hazlehurst, 50 Md. 107; Wilde v. Gibson, 1 H. L. C. 632; Brownlie v. Campbell, L. R. 5 App. Cas. 936. See, 1 Story's Eq. Jur. §§ 193-197. In Cochran v. Pascault, 54 Md. 1, the Court refused to rescind an executed contract on the ground of misrepresentation, although specific performance of the contract would not have been granted. See, Delaine Co. v. James, 94 U. S. 207.

2 Tucker v. Osbourn, 101 Md. 613; Wilson v. Md. Life Ins. Co., 60 Md. 157; Taymon v. Mitchell, 1 Md. Ch. 497; Kountze v. Keennedy, 147 N. Y. 124; Trimble v. Reid, 97 Ky. 713.

As to when equity will rescind a contract for innocent misrepresentations, see also, Hicks v. Setvens, 121 Ill. 186; Grosh v. Ivanhoe Co., 95 Va. 161; Robinson v. Welty, 40 Va. 402. Cf. Holcomb v. Noble, 69 Mich. 396, as to action at law. It seems likely that this exception will eventually kill the rule.

sentation is a ground for rescission. Parties in making these contracts are regarded as standing in a quasi-fiduciary relation to one another, and are under the obligation to state the material facts accurately, if they state them at all, whether they know them accurately or not.

$ 80. Contracts Uberrimae Fidei, or of the Utmost Good Faith. The principal contracts affected at law as well as in equity by innocent misrepresentation are the following:

(1) Contracts of life insurance. The accidental misrepresentation or concealment of a material fact by the assured is ground for avoiding the contract.1

(2) Contracts of marine insurance. The applicant is bound to communicate to the insurer wth accuracy all the material facts within his knowledge, and negligence is visited with the same penalty as a wilful purpose to defraud.2

(3) Contracts of fire insurance. In this case there is not the same duty to make full disclosure of all facts as in the case of marine insurance, but the innocent misrepresentation of a material fact is ground for avoiding the policy. Statements by the assured respecting the property insured, or his title to it, are called warranties, and the force of the policy depends upon their truth.3

(4) Contracts for the sale of land. A party contracting to buy or sell land is not bound to make a full disclosure. Thus, in buying land on which there is a valuable mine, the purchaser is under no obligation at law or in equity to disclose that fact to the seller. But a contract of this kind is

1 New York Life Ins. Co. v. Fletcher, 117 U. S. 519; Vose v. Eagle, etc., Co., 6 Cush. 42; London Assurance Co. v. Manuel, 11 Ch. D. 363. This rule is in some States modified by statute. See Aetna Life Ins. Co. v. Millar, 113 Md. 686.

2 Allegre v. Md. Ins. Co., 2 G. & J. 136; 8 G. & J. 190; Neptune Ins. Co. v. Robinson, 11 G. & J. 256; Augusta Ins. Co. v. Abbott, 12 Md. 348; Ionides v. Pender, L. R. 9 Q. B. 537.

3 Wineland v. Security Ins. Co., 53 Md. 276; U. S. Fire, &c., Co. v. Kimberly, 34 Md. 224.

4 Butler's Appeal, 26 Pa. St. 63; Fox v. Mackreth, 2 Bro. C. C. 120; Standard Steel Car Co. v. Stamm, 207 Pa. 425.

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