ÆäÀÌÁö À̹ÌÁö
PDF
ePub

under a false impression as to the extent of the debtor's estate, in which the latter knowingly left him; it was held that the composition was void, and that the creditor might sue for his original debt (x). And where a party who was about to sell a publichouse falsely represented to B., who agreed to purchase it, that the receipts amounted to so much a month; and B., to the knowledge of the defendant, communicated that representation to C., who afterwards agreed to become the purchaser instead of B.: this was held to amount to a fraud by the defendant upon C. (y).

But there are cases in which the mere omission to communicate a fact will not amount to fraud, if the omission was made bonâ fide and without actual fraud. Thus, where the prospectus of a jointstock company stated, that the capital consisted of 60,000 shares, of 251. each; but, at the time the plaintiff executed the subscribers' agreement, the deposits had been paid only on 10,160 shares: it was held that, inasmuch as the directors might honestly suppose that other names would afterwards come in, the omission to communicate that fact to the plaintiff, at the time he executed the agreement, did not avoid that instrument, so as to entitle him to recover his deposit (z).

And if there be no misrepresentation of any existing fact, but only an intention, at the time of the contract, to depart from it, which intention is not alleged to have been carried into effect, that does not vitiate the contract (a).

CH. XXI. s. 4. Illegal, &c., (Misrepresen tation.)

Contracts

Effect of

sion without

mere omis

fraud.

Or of inten-
ried into
tion, not car-

effect.

Inadequacy

of considera

tion will not, per se, raise presumption

Nor will inadequacy of consideration, of itself, defeat the contract, or substantiate a charge of fraud. But, with other circumstances of suspicion, it may undoubtedly assist in establishing a fraud (b). And so, although weakness of intellect, short of of fraud. insanity, in one of the contracting parties, is no ground, per se, for invalidating a contract; it may have that effect, if additional facts, betraying an intention to overreach, can be proved (c).

credit, must

Lastly, a representation made as to the character, credit, or Representaresponsibility of a third person, in order to induce the owner of tions, as to goods to sell them to the latter on credit, gives no cause of action, be written. however false and fraudulent the representation may be, unless it be reduced into writing, and signed by the party making it (d).

[blocks in formation]

R. R. 618.

(c) Osmond v. Fitzroy (1731), 3 P. Wms. 130; 6 Bro. P. C. 137.

(d) 9 Geo. 4, c. 14, s. 6. See, for the law on this subject, Lyde v. Barnard (1836), 1 M. & W. 101; Haslock v. Fergusson (1837), 7 A. & E. 86; Swann v. Phillips (1838), 8 A. & E. 457 ; Pasley v. Freeman (1789), 3 T. R. 51; 1 R. R. 634.

CH. XXI. s. 4.
Illegal, &c.,
Contracts
(Fraud on
Creditors of
Insolvent).

Fraud on

third persons. Fraud on the

creditors of an insolvent, who compounds with his creditors.

(c) Fraud on Third Persons.

With regard to the cases in which a contract may be avoided, by reason of its being fraudulent as against persons not parties thereto, the result of the authorities is as follows:

Where a debtor in embarrassed circumstances enters into an arrangement, either by deed or otherwise, with his creditors, to pay them a composition upon their claims, or to discharge their demands, in full, by instalments at stated intervals; any private agreement, between such debtor and one of the creditors who professes to join in the general arrangement, that the former, or a third party for him, shall pay a further sum of money, or give a better or further security than such as is provided for the other creditors, is void as a fraud on them. For, in such cases, the creditors bargain for an equality of benefit, as to payment and security-there being a tacit understanding that all shall share alike, pari passu, and that it shall not be competent to one of them, without their knowledge, to stipulate for any additional benefit or security to himself (e). Accordingly, if one creditor does make any such stipulation, in fraud of the other creditors, the effect thereof will be to destroy any security which may have been given to him, even for the legal amount of the composition (ƒ). And it makes no difference that the stipulations in question did not originate with the creditor, but in the voluntary offer of the debtor himself, or of a third person on his behalf (g); or that the creditor has realised nothing under the agreement: for it is the mere fact of such an agreement having been made which constitutes the fraud (h).

So, where there is a composition, it is a fraud in any one creditor who concurred therein, to sue the insolvent contrary to the terms of such composition (i); although such creditor was the last who agreed to the terms, or signed the deed; and although he did not actively induce any of the creditors to agree thereto (k).

And where a creditor executed a composition deed, containing a release, on being paid a larger sum than the amount of the composition on his debt, and on the representation of the debtor that no other creditor had been similarly preferred-which representation the debtor knew to be false-it was held that the creditor

(e) Dauglish v. Tennent (1866), L. R.,
2 Q. B. 49; Milner, Ex parte (1885), 15
Q. B. D. 605.

(f) Howden v. Haigh (1840), 11 A. &
E. 1033; per Littledale, J., id. 1039;
and see observations of Alderson, B., on
this
case, Davidson v. M'Gregor (1841),
M. & W. 755, 763.

(g) Knight v. Hunt (1829), 5 Bing.

432.

(h) Higgins v. Pitts (1849), 4 Exch. 312, 324; Howden v. Haigh (1840), 11 A. & E. 1033.

(i) See Cranley v. Hillary (1813), 2 M. & S. 120.

(k) Steinman v. Magnus (1809), 11 East, 390.

could not rely on this fact, in order to avoid his release, inasmuch CH. XXI. s. 4. as he himself was particeps fraudis (l).

And a creditor, who affects to join in a general arrangement for settling the affairs of the debtor, is not allowed to keep back part of his demand, and sign for the remainder only, and then to sue the debtor for that portion which he did not include in the deed. of arrangement (m). So, if a private agreement made by one creditor with a debtor, in consideration of the former signing a composition deed, be void on the ground of fraud, no security obtained by virtue thereof is rendered valid by the arrangement for such composition deed being afterwards abandoned (n).

Illegal, &c.,
Contracts

(Fraud on
Third
Persons).

Fraud on laterally inparties colterested in a

contract.

Where one person advances money to another to buy goods from a third, and the person to whom the money is advanced, agrees with the third to pay a price higher than the money advanced, this agreement is void as a fraud upon the person advancing the money, and the third person cannot sue for the higher price (0). Lord Ellenborough ruled that a secret agreement to allow a Commission. poundage to a person, for recommending a third party to buy goods of him who was to pay the poundage, is void as a fraud on the customer (p); but in a subsequent case that an agreement to pay the plaintiff a percentage, for introducing the defendant, a medical man, to a partnership with another medical man, upon a premium being paid to the latter, is valid (g); and both these rulings appear to be correct.

dation of customers.

An agreement to sell a business or goodwill, and recommend Recommencustomers, is good (r). Any contract in fraud of a marriage settlement, e.g., by the Fraud on husband to pay back 1,000l. out of 3,000l., agreed to be settled, or by a creditor to conceal and reduce his claim, is void even against the debtor or husband (s).

marriage.

office.

It has also been held, that an agreement made in consideration Sale of private of the sale or relinquishment of an office, although it be not of a public character, is illegal, if it be made without the knowledge or sanction of the person who has the right of appointing to such office. Where, therefore, A., who held an office for life, which was in the gift of B., agreed with C. to resign, and to procure the

(1) Mallalieu v. Hodgson (1851), 16 Q. B. 689; and see Coleman v. Waller (1829), 3 Y. & J. 212.

(m) Britten v. Hughes (1829), 5 Bing.

460.

(n) Wells v. Girling (1819), 1 B. & B.

447.

(0) Jackson v. Duchaire (1790), 3 T. R. 551.

(p) Wyburd v. Stanton (1802), 4 Esp. 179.

(q) Edgar v. Blick (1816), 1 Stark. 464; 18 R. R. 809.

(r) Bunn v. Guy (1803), 4 East, 190; Bryson v. Whitehead (1822), 1 S. & S. 74; and see Labouchere v. Dawson (1872), L. R., 13 Eq. 322, and p. 561, ante.

(s) Turton v. Benson (1718), 1 P. Wms. 495; Eastabrook v. Scott (1797), 3 Ves. 460; Scott v. Scott (1787), 1 Cox, 366; and see cases collected in Vaizey on Settlements, Vol. I., pp. 134-149.

Illegal, &c.,

CH. XXI. s. 4. appointment for him; and C., in consideration thereof, agreed that A. should have a moiety of the profits; and A., having resigned, procured the appointment of C.: it was held that this agreement, not having been communicated to B., was void (t).

Contracts (Fraud on Third Persons).

Action for deceit, when it will lie.

Depreciation by buyer.

Action for

(d) The Action for Deceit.

The general rule is-that an action for a deceit lies, "if a man, by false affirmance of a thing within his knowledge, procure a fact to be done which otherwise would not be done" (u); and this action may be maintained, although the fraudulent misrepresentation be not embodied in the agreement between the parties, and cannot be substantiated without the aid of parol evidence (x).

But, to support this action, it must appear that a fraud has been committed for which the defendant is responsible, and that damage has resulted from such fraud to the plaintiff; and the fraud must consist in depriving the plaintiff, by deceitful means, of some benefit which the law entitled him to demand or expect (y). And, in the case just cited, it was held that a buyer is not liable to an action for deceit, merely for misrepresenting the seller's chance of sale, or the probability of his getting a better price for his commodity, than the price which such proposed buyer offers; -such false representation being in a matter merely gratis dictum by the buyer, in respect of which he was under no legal obligation to the seller for the precise accuracy and correctness of his statement, and upon which, therefore, it was the seller's own indiscretion to rely.

Nor will the action for deceit lie merely for the concealment of a material fact, which a party was only morally bound to disclose (z). And although, as a general rule, a principal is civilly responsible for the fraud of his authorised agent, acting within his authority, to the same extent as if it were his own fraud (a); yet it is doubtful whether, where a man has been induced by the fraud of the agent of a joint-stock company to become a partner in that company, he can bring an action of deceit against the company whilst he remains a partner in it (b).

Where one only of the parties to a contract has been guilty of irrespectively' fraud, such fraud may, in some cases, be taken advantage of, as

of contract.

(t) Waldo v. Martin (1825), 4 B. & C. 319.

(u) Com. Dig. "Action upon the Case for a Deceit," (A.), 10; per Cur., Gerhard v. Bates (1853), 2 E. & B. 476, 488; per Parke, B., Thom v. Bigland (1853), 8 Exch. 725, 731.

(x) Dobell v. Stevens (1825), 3 B. & C. 623.

(y) Vernon v. Keys (1812), 12 East, 632, 636; affirmed in Ex. Ch., 4 Taunt. 488; 11 R. R. 499.

(z) Peek v. Gurney (1873), L. R., 6 H. L. 377, 390, 403.

(a) Ante, p. 227.

(b) Per Lord Blackburn, Houldsworth v. City of Glasgow Bank (1880), 5 App. Cas. 317, 340.

CH. XXI. 8. 4.
Illegal, &c.,
Contracts
(Deceit).

against him, by a stranger to the contract. Thus, where the defendant sold a gun to the plaintiff's father, for the use of himself and his sons, and fraudulently warranted the gun; and one of the sons, the plaintiff, confiding in the warranty, used the gun, whereupon it burst and injured him it was held, that the Langridge. plaintiff might sue the defendant for the deceit (c).

Lery v.

Action of not lie for mere care

deceit will

lessness. Peek v.

An action of deceit will not lie for mere carelessness, as where a person makes a false statement, which he honestly believes to be true, without any reasonable ground for believing it to be true; the action will lie only if the false statement has been made knowingly, or without belief in its truth, or recklessly, without caring Derry. whether it be true or false. So it was laid down by the House of Lords in Peek v. Derry (d), in which the defendants were directors of a tramway company who had issued a prospectus stating that the company had by their special Act the right to use steam power, whereas the Act only authorised such use with the consent of the Board of Trade, which consent the company had not obtained, and never did obtain, and the plaintiff had taken shares in reliance upon these statements. The law of this subject, so far as the directors of a public company are concerned, has since been materially altered by the Directors' Liability Act, 1890, 53 & Directors' Liability Act. 54 Vict. c. 64, by which the liability of a director of a company for statements in a prospectus or notice, inviting persons for shares or debentures in the company, has been considerably increased, and by the Companies Act, 1900, 63 & 64 Vict. c. 48, p. 263, ante. The buyer of shares from the original allottee cannot sue the directors of a company for deceit in a prospectus, unless indeed he can show some direct connection between them and himself in the communication of the prospectus and its influence upon his conduct in purchasing the shares (e).

Buyer of original allottee

shares from

cannot sue.

statement.

If a statement alleged to amount to an actionable representation Ambiguous be fraudulent, it lies on the plaintiff to prove that he had interpreted the statement in the sense in which it was false and had been in fact deceived by it into making the contract complained

of (ƒ).

coverable.

And if a man be induced by misrepresentation to buy an article, Damages rethe damages recoverable for the misrepresentation will consist of the difference between the value of the article as represented, and its real value at the time it was bought (g).

(c) Levy v. Langridge (1838), 4 M. & W. 337, Ex. Ch.

(d) Peck v. Derry (1889), 14 App. Cas. 337, reversing decision of C. A. and restoring that of Stirling, J.

(e) Peek v. Gurney (1873), L. R., H. L. 377.

6

(f) Smith v. App. Cas. 187.

(g) Waddell v. B. D. 678, C. A.; Twycross v. Grant 469, 544, C. A.

Chadwick (1884), 9

Blockey (1879), 4 Q.
per Cockburn, C.J.,
(1877), 2 C. P. D.

« ÀÌÀü°è¼Ó »