§ 869. Concealment of latent defects-Caveat emptor. As has been seen, one party to the contract is not, as a general rule, bound to see to it that the other does not deceive himself, but he is bound not to aid in that deception. Caveat emptor is the usual rule, and the seller of goods is not bound, under ordinary circumstances, to point out defects in his wares, though he is bound not to represent, either by act or implication, that such defects do not exist. In the case of latent defects, not discoverable upon ordinary observation, some difficulty exists. The question has been confused by association with cases, hereafter to be considered, in which there is an implied warranty, as in the case of sales of goods for a particular purpose and the sale of articles for food. In an action for fraud or deceit, however, the question becomes one of knowledge on the part of the seller which he fails to communicate to the buyer. It certainly cannot be fraud or deceit to sell an article having a secret defect of which the seller is ignorant. Whether the seller is bound to point out defects, known to him but not discoverable by the usual examination, which if known to the seller would deter him from buying, is a question upon which the authorities are not agreed; but the weight of authority, in this country at least, is that to intentionally conceal such a defect is a fraud upon the buyer. Where the defect is of a nox

ment on that basis, which the seller accepted. The same course was pursued on the arrival of the other cargoes; but the analysis was so unfavorable to the seller that he asked to have the ore resampled, but the buyer told him that it had been so mixed with other ore that this was impossible. The buyer sold the ore in accordance with the other chemist's analysis, which made the ore of better grade, but he at no time informed the seller that such an analysis had been made. Held, that he was bound in good faith to report both analyses, and, having concealed the second, the acceptance of the

first by the seller was not such an acceptance as precluded his recovery of the price according to the second.

1 See Smith v. Hughes, L. R. 6 Q. B. 597, cited ante, § 846.

2 That the vendor is not bound to disclose secret defects, see Beninger v. Corwin (1854), 24 N. J. L. 257; Peek v. Gurney (1873), L. R. 6 H. L. 377.

There are many cases which hold otherwise. In Missouri a failure to disclose a latent defect, known to the seller and not to the buyer, and of such a character that, if known, the buyer would not have purchased, is a fraudulent concealment. McAdams v. Cates, 24 Mo. 223; Barron v. Alex

ious character, the authorities in this country are pronounced upon the duty of the seller to disclose his knowledge of it.1

$870. Must be present representation and not mere promise as to future.- In the next place, there must be a representation concerning a present or past condition, and not a mere promise as to the future. As is said in a recent case: "A representation, in order that, if material and false, it may form

the ground of an action where one has been induced to act by reason thereof, should be one of some existing fact. A statement promissory in its character, that one will thereafter sell goods at a particular price or time, will pay money, or do any similar thing, or any assurance as to what shall thereafter be done, or as to any further event, is not properly a representation, but a contract, for the violation of which a remedy is to be sought by action thereon."1

§ 871. Must be representation as to facts and not mere expression of opinion. The representation must also be of an existing fact and not the mere expression of an opinion. Thus, representations concerning the value or worth of an article, the goodness of a security, the profitableness of a contemplated investment, and the like, are mere expressions of opinion, and neither vitiate a contract nor give rise to an action for damages. And, as will be seen, the same rule applies even though the opinion was given with a knowledge of its unsoundness and for the purpose of deceiving the other party, unless there is a want of knowledge by the other party who relies entirely upon the opinion, or unless some artifice is employed to prevent his inquiry or his discovery of the truth.3

§ 872. Must be representation of fact and not of law.The representation must also be one of fact as distinguished from one of law. In the leading case upon the subject it is said by the supreme court of the United States, quoting from the supreme court of Illinois: "A representation of what the law

1 Dawe v. Morris, supra.

5

2 See Esterly Harvesting Mach. Co. v. Berg, 52 Neb. 147, 71 N. W. R. 952; Lynch v. Murphy, 171 Mass. 307, 50 N. E. R. 623; Evans v. Gerry, 174 Ill. 595, 51 N. E. R. 615; Lehigh Zinc & Iron Co. v. Bamford, 150 U. S. 665; Reeves v. Corning, 51 Fed. R. 774.

The question of the effect of representations concerning value, cost, offers, and the like, is more fully considered post, § 936.

5 Fish v. Cleland, 33 Ill. 237. To same effect: Lehman v. Shackleford, 50 Ala. 437; Beall V. McGehee, 57 Ala. 438; Grant v. Grant, 56 Me. 573; Jordan v. Stevens, 51 Me. 78, 81 Am. Dec. 556; Thompson v. Phonix Ins. Co., 75 Me. 55, 46 Am. R. 357; Smither v. Calvert, 44 Ind. 242; Gormely v. Gymnastic Ass'n, 55 Wis. 350,

L

will or will not permit to be done is one on which the party to whom it is made has no right to rely; and, if he does so, it is his folly, and he cannot ask the law to relieve him from the consequences. The truth or falsehood of such a representation can be tested by ordinary vigilance and attention. It is an opinion in regard to the law and is always understood as such." The same rule applies ordinarily to representations concerning the legal effect of instruments or transactions.1

$ 873. But while these principles are appropriate enough where the parties are dealing at arm's length with each other, the relation or situation of the parties may modify the result. Thus it is said: "Notwithstanding a misrepresentation as to a matter of law does not, per se, constitute a fraud, yet other circumstances, concurring with such misrepresentation, may make it a fraud. If any peculiar relationship of trust or confidence existed between the parties, and the plaintiff has availed himself of such trust or confidence to mislead the defendant, by a misrepresentation as to the legal effect of the contract, it would constitute a fraud. So, if the defendant was in fact ignorant of the law, and the other party, knowing him to be so, and knowing the law, took advantage of such ignorance to mislead him by a false statement of the law, it would constitute a fraud." 2

$874. Representation must be material. The representation which shall affect the contract or give rise to an action for damages must be one concerning facts material to

13 N. W. R. 242; Jaggar v. Winslow, 30 Minn. 263, 15 N. W. R. 242; Champion v. Woods, 79 Cal. 17, 12 Am. St. R. 126, 21 Pac. R. 534.

This rule does not apply to representations concerning the law of another State or country. Wood v. Roeder, 50 Neb. 476, 70 N. W. R. 21. 1 Etna Ins. Co. v. Reed, 33 Ohio St. 283; Clem v. Newcastle R. Co., 9 Ind. 488, 68 Am. Dec. 653.

Representations regarding the va

lidity of a patent must ordinarily be regarded as mere expressions of opinion as to legal effect. Reeves v. Corning, 51 Fed. R. 774. So, that a patent is valid and "covers broadly" certain points. Huber v. Guggenheim, 89 Fed. R. 598.

2 Townsend v. Cowles (1858), 31 Ala. 428. To like effect: Lamb v. Lamb, 130 Ind. 273; Kline v. Kline, 57 Pa. St. 120.

the transaction. It must be a representation to the complaining party "of material facts calculated to deceive him and induce him to act. Representations as to matters which are merely collateral, and do not constitute essential elements of the contract into which the plaintiff is induced to enter, are not sufficient." "To avoid a contract for false representations, the representations must relate distinctly and directly to the contract, must affect its very essence and substance, and must be material to the contract. If the representations relate to other matters, or to the contract in a trivial and unimportant respect only, or are wholly collateral, they afford no ground for avoiding the contract." 2

§ 875. Representation must have been made with knowledge of its falsity or without belief in its truth.- And, again, the representation must have been made either with knowledge of its falsity, or, at any rate, without belief in its truth. Some statements of the rule do indeed go further than this, and treat, as fraudulent, assertions made by a person as true which he does not know and has no reasonable ground to believe to be

1 Per Morton, C. J., in Hedden v. Griffin (1884), 136 Mass. 229, 49 Am. R. 25. To same effect: Dawe v. Morris (1889), 149 Mass. 188, 21 N. E. R. 313, 14 Am. St. R. 404, 4 L. R. A. 158; Williams v. McFadden (1887), 23 Fla. 143, 1 S. R. 618, 11 Am. St. R. 345; McGar v. Williams (1855), 26 Ala. 469, 62 Am. Dec. 739; Etna Ins. Co. v. Reed, 33 Ohio St. 283.

2 Per Start, J., in Stone v. Robie (1894), 66 Vt. 245, 29 Atl. R. 257, citing Long v. Woodman, 58 Me. 49; Medbury v. Watson, 6 Metc. (Mass.) 246, 259, 39 Am. Dec. 726; Clem v. Newcastle, etc. R. Co., 9 Ind. 488, 68 Am. Dec. 653; Wight v. Shelby R. Co., 16 B. Mon. (Ky.) 4, 63 Am. Dec. 522.

3 Thus in Massachusetts, in Chatham Furnace Co. v. Moffatt (1888),

147 Mass. 403, 18 N. E. R. 168. 9 Am. St. R. 727, C. Allen, J., said: "It is well settled in this Commonwealth that the charge of fraudulent intent, in an action for deceit, may be maintained by proof of a statement made, as of the party's own knowledge, which is false, provided the thing stated is not merely a matter of opinion, estimate or judgment, but is susceptible of actual knowledge; and in such case it is not necessary to make any further proof of an actual intent to deceive. The fraud consists in stating that the party knows the thing to exist when he does not know it to exist; and if he does not know it to exist, he must ordinarily be deemed to know that he does not. Forgetfulness of its existence after a former knowledge,