ment to the sale and which operates to deceive the buyer may be made the basis of a charge of fraud.14 It is not essential to found a charge of fraud that a misrepresentation be directly made; if a false impression is made by words or acts in order to mislead and has such effect, it may be sufficient.15 Fraudulent representations may be as well by arts or artifices calculated to deceive as by positive assertions,16 and concealment, when a duty to disclose is imposed on the seller, may form the basis of a charge of fraud as in case of active misrepresentations.17 In case of the sale of a patent right it has been held that a charge of fraud may be based on false representations as to its value and usefulness.18 On the other hand the same rule has been applied to the sale of patent rights as to other personal property, and such representations have been held not to be the basis of a charge of fraud.19

623. Time of Making of Misrepresentations.-In order that a charge of fraud may be based on false representations by the seller it is not necessary that they be made at the exact time of the sale; it is sufficient if they were made in view of and to induce the buyer to make the purchase and in fact had such effect.20 Thus a charge of fraud has been sustained where the seller exhibited a mule to a proposed buyer,

As to fraud in the sale of mines generally, see MINES, vol. 18, p. 1181. 15. Stewart v. Wyoming Cattle Ranche Co., 128 U. S. 383, 9 S. Ct. 101, 32 U. S. (L. ed.) 439; Howard v. Gould, 28 Vt. 523, 67 Am. Dec. 728.

14. Whitworth v. Thomas, 83 Ala. of a mining lease that the ground has 308, 3 So. 781, 3 A. S. R. 725; West not been mined, and that it has been v. Anderson, 9 Conn. 107, 21 Am. prospected by digging shafts to the Dec. 737; Morehouse v. Northrop, 33 ore and then left, are not matters of Conn. 380, 89 Am. Dec. 211; Barrie opinion but statements of fact upon v. Miller, 104 Ga. 312, 30 S. E. 840, which a charge of fraud may be 69 A. S. R. 171; Frenzel v. Miller, 37 based. Ind. 1, 10 Am. Dec. 62; Dowagiac Mfg. Co. v. Gibson, 73 Ia. 525, 35 N. W. 603, 5 A. S. R. 697; Hanks v. McKee, 2 Litt. (Ky.) 227, 13 Am. Dec. 265 (misrepresentation in sale of a slave of the degree to which asthma, with which she was afflicted, had progressed); Ripley v. Case, 78 Mich. 126, 43 N. W. 1097, 18 A. S. R. 428; Kendrick v. Ryus, 225 Mo. 150, 123 S. W. 937, 135 A. S. R. 585; Stewart v. Stearns, 63 N. H. 99, 56 Am. Rep. 496; Mayer v. Dean, 115 N. Y. 556, 22 N. E. 261, 5 L.R.A. 540; Fargo Gas, etc., Co. v. Fargo Gas, etc., Co., 4 N. D. 219, 59 N. W. 1066, 37 L.R.A. 593; Wintz v. Morrison, 17 Tex. 372, 67 Am. Dec. 658. Notes: 6 Am. Dec. 118; 90 Am. Dec. 426; 37 L.R.A. 593.

In Kendrick v. Ryus, 225 Mo. 150, 123 S. W. 937, 135 A. S. R. 585, it is held that representations by the seller

16. Croyle v. Moses, 90 Pa. St. 250, 35 Am. Rep. 654.

17. Keen v. James, 39 N. J. Eq. 527, 51 Am. Rep. 29. As to the duty to disclose latent defects, see the next preceding paragraph.

18. Page v. Dickerson, 28 Wis. 694, 9 Am. Rep. 532.

19. Neidefer v. Chastain, 71 Ind. 363, 36 Am. Rep. 198. As to representations as to value generally, see infra, par. 633.

20. Harris v. Mullins, 32 Ga. 704, 79 Am. Dec. 320; Keen v. James, 39 N. J. Eq. 527, 51 Am. Rep. 29.

and at that time represented the animal sound, knowing the contrary, even though the seller afterwards said to the proposed buyer that "the animal will be sold in a short time at auction, and you will then have a chance to buy him," and about an hour subsequently the mule was offered for sale at auction, and the proposed buyer purchased it relying on the prior representations of the seller.1

624. Misrepresentations by or to Third Persons.-It is clear that mere fraud of a third person which induces the purchase of goods will not give the purchaser a right to rescind the contract, if the seller is not a party to the fraud; in such a case the contract must stand and the buyer must resort to his remedy against such third person.2 On the other hand the misrepresentations need not be made directly by the seller; it is sufficient in case they are made by a third person that it was at the instigation of the seller, and that it was so made may be proven by circumstantial evidence. So, though misrepresentations by the seller as to value cannot ordinarily be made the basis of a charge of fraud, misrepresentations by a third person are placed on a different basis. The distinction between the two cases is marked and obvious; in the one, the buyer is aware of his position; he is dealing with the owner of the property, whose aim is to secure a good price, and whose interest it is to put a high estimate upon his property, and whose great object is to induce the purchaser to make the purchase; while in the other, the man who makes the false assertions has, apparently, no object to gain; he stands in the situation of a disinterested person, in the light of a friend, who has no motive or intention to depart from the truth, and who thus throws the buyer off his guard, and exposes him to be misled by the deceitful representations. To entitle a purchaser to relief from false representations, it is not necessary that they should be made to him by the seller directly. If they are made to a third person with the intent that they shall reach the purchaser and be acted on by him in the manner occasioning injury, or, more broadly, if they are made with the intent of their influencing everyone to whom they may be communicated, or who may read or hear about them, one of the latter class of persons will be in the same position as one to whom the representations are communicated directly."

625. Artifices to Conceal Defects.-If a seller resorts to artifices to conceal defects a charge of fraud may be based thereon; and though

1. Harris v. Mullins, 32 Ga. 704, 79 Am. Dec. 320.

2. Compton v. Bunker Hill Bank, 9 Ill. 301, 3 Am. Rep. 147; Nash v. Minnesota Title Insurance, etc., Co., 163 Mass. 574, 40 N. E. 1039, 47 A. S. R. 489, 28 L.R.A. 753; Bank v. Looney, 99 Tenn. 278, 42 S. W. 149, 63 A. S. R. 830, 38 L.R.A. 837. Note: 85 A. S. R. 374.

3. Rees v. Jackson, 64 Pa. St. 486, 3 Am. Rep. 608.

4. See infra, par. 633.

5. Kenner v. Harding, 85 Ill. 264, 28 Am. Rep. 615.

6. Note: 85 A. S. R. 373.

7. Mamlock v. Fairbanks, 46 Wis. 415, 1 N. W. 167, 32 Am. Rep. 716. Note: 90 Am. Dec. 428, 429.

ordinarily there is no obligation on the part of the seller to disclose open or patent defects, at the same time the seller must not use any art, or practice any artifice, to conceal defects, or make any representations, or do any act, to throw the purchaser off his guard, or to divert his eye, or to obscure his observation, or to prevent his use of any present means of information. Misrepresentations made with the intent to deceive and divert the attention of the buyer by lulling any suspicions appearances might have excited may be made the basis of a charge of fraud,10 and where there are defects, latent or open, though ordinarily the seller is under no obligation to disclose the same if the sale is expressly made subject to defects,11 yet if by artifices or misrepresentations as to the actual condition of the subject matter he misleads the buyer, a charge of fraud may be based thereon.12

626. Materiality of Representation and Negligence of Buyer.-To constitute a misrepresentation a ground of fraud for avoiding the contract, or to entitle the buyer to his action, it must be in regard to a material fact, operating as an inducement to the purchase, and on which the buyer had a clear right to rely. Likewise the party complaining must have been actually deceived thereby; and, generally, such representation must not be mere matter of opinion, or in respect of facts equally open to the observation of both parties, and concerning which the party complaining, had he exercised ordinary prudence, could have attained correct knowledge. If a party blindly trusts, where he should not, and closes his eyes, where ordinary diligence requires him to see, he is willingly deceived, and the maxim applies, volenti non fit injuria.18 The unmistakable drift, however, of the decisions is towards the just doctrine that the wrongdoer cannot shield. himself from liability by asking the law to condemn the credulity of his victim. The falsity of the statement may be apparent because the

8. See supra, par. 620.

9. Croyle v. Moses, 90 Pa. St. 250, 35 Am. Rep. 654; Mamlock v. Fairbanks, 46 Wis. 415, 1 N. W. 167, 32 Am. Dec. 716.

10. Wintz v. Morrison, 17 Tex. 372, 67 Am. Dec. 658.

11. See supra, par. 621.

12. West v. Anderson, 9 Conn. 107, 21 Am. Dec. 737; Harris v. Mullins, 32 Ga. 704, 79 Am. Dec. 320; George v. Johnson, 6 Humph. (Tenn.) 36, 44 Am. Dec. 288; Baker v. Seahorn, 1 Swan (Tenn.) 54, 55 Am. Dec. 724; Wood v. Hobbs, 4 App. Cas. 13, 48 L. J. Q. B. 281, 40 L. T. N. S. 73, 27. W. R. 114, 3 Eng. Rul. Cas. 124. 13. Slaughter v. Gerson, 13 Wall. R. C. L. Vol. XXIV.-22.

337

379, 20 U. S. (L. ed.) 627; Jenkens v. Long, 19 Ind. 28, 81 Am. Dec. 374; Frenzel v. Miller, 37 Ind. 1, 10 Am. Dec. 62; Neidefer v. Chastain, 71 Ind. 363, 36 Am. Rep. 198; Poland v. Brownell, 131 Mass. 138, 41 Am. Rep. 215; Younger v. Hoge, 211 Mo. 444, 111 S. W. 20, 18 L.R.A. (N.S.) 94; Page v. Parker, 43 N. H. 363, 80 Am. Dec. 172; Williams v. Hicks, 2 Vt. 36, 19 Am. Dec. 693; Mamlock v. Fairbanks, 46 Wis. 415, 1 N. W. 167, 32 Am. Rep. 716.

Notes: 81 Am. Dec. 376; 90 Am. Dec. 427; 32 A. S. R. 384; 2 L.R.A. 743; 37 L.R.A. 593 et seq.

See infra, par. 631. as to so called dealer's talk.

thing misrepresented is before the buyer, and the most casual look will suffice to discover the falsehood, no artifice being used to divert his attention; or the statement may carry its own refutation upon its face, may be so absurd or monstrous that it is palpably false; still the general rule is, and, on principle, must be, that the question is primarily one of reliance by the buyer on the false statement of the seller. Whether it was wise for him to rely on it, whether he was prudent in so doing, whether he is not chargeable with negligence in a certain sense in not investigating-these inquiries are, in general, immaterial, provided the buyer has in fact been deceived.14 As a general rule to found a charge of fraud on the misrepresentations of the seller, even for relief by way of rescission, they must have resulted in damage or prejudice to the buyer.15 The question as to whether a misrepresentation was material, whether relied on by the buyer as a ground for an action of deceit or for rescission, has been held a question of law for the determination of the court.16

627. Reliance of Buyer on Representations.-The buyer must have relied on the alleged fraudulent representations of the seller to entitle him to base a charge of fraud thereon,17 and therefore if the buyer has actual knowledge of the falsity of the representation he cannot do so.18 And ordinarily when the buyer undertakes to make full investigation of his own and the seller does nothing to prevent his investigation from being as full as he chooses to make it, the buyer cannot afterwards allege that the seller made misrepresentations.19 But the fact that he may have made investigation in respect to the representations of the seller will not preclude him from basing a charge of fraud thereon if in fact he relied on them and was deceived.20 Thus a

14. Fargo Gas, etc., Co. v. Fargo Gas, etc., Co., 4 N. D. 219, 59 N. W. 1066, 37 L.R.A. 593 and note.

Note: 14 Ann. Cas. 261.

16. Greenleaf v. Gerald, 94 Me. 91, 46 Atl. 799, 80 A. S. R. 377, 50 L.R.A. 542. See FRAUD AND DECEIT, vol. 12, p. 447.

17. Meland v. Youngberg, 124 Minn. 446, 145 N. W. 167, Ann. Cas. 1915B 775 and note.

18. Connersville V. Wadleigh, 7 Blackf. (Ind.) 102, 41 Am. Dec. 214.

15. Southern Development Co. v. Silva, 125 U. S. 247, 8 S. Ct. 881, 31 U. S. (L. ed.) 678; Campbell v. Whittingham, 5 Marsh. (Ky.) 96, 20 Am. Dec. 241; Meland v. Youngberg, 124 Minn. 446, 145 N. W. 167, Ann. Cas. 1915B 775; Jakway v. Proudfit, 76 Neb. 62, 109 N. W. 388, 14 Ann. Cas. 258. (This case involved a suit to rescind a sale of corporate stock for fraudulent representations that certain stock had been paid for in cash, whereas a note had been given there- 20. Morrow v. Bonebrake, 84 Kan. for which the corporation had nego- 724, 115 Pac. 585, 34 L.R.A. (N.S.) tiated but was liable as indorser. The 1147; Meland v. Youngberg, 124 Minn. note was paid by the maker after the 446, 145 N. W. 167, Ann. Cas. 1915B sale and consequently the buyer suf- 775.

fered no prejudice.)

19. Southern Development Co. v. Silva, 125 U. S. 247, 8 S. Ct. 881, 31 U. S. (L. ed.) 678; Meland v. Youngberg, 124 Minn. 446, 145 N. W. 167, Ann. Cas. 1915B 775.

charge of fraud may be based on the representation of a diamond dealer that the diamond offered by him for sale is of a certain grade and quality, though the buyer examined the stone and could have ascertained the falsity of the representation by a more thorough and searching inquiry.1

628. Effect of Warranty.-It seems to be the general rule, where there is a sale with warranty, that if the warranty was made with knowledge of its falsity the buyer may either sue on the warranty or on the fraud, as the fraud is in no way diminished because the seller has at the same time bound himself by a warranty. And a fortiori a charge of fraud may be based on misrepresentations as to the quality of the goods sold which were not covered by the warranty. And it has been held, in case of the sale of a ship en voyage, that an express warranty that the ship is unencumbered does not prevent the concealment of the fact that the freight, to be earned on the voyage, had been encumbered from being an actionable fraud. The exaction, however, of a warranty covering the representations alleged to have been fraudulently made, on principle would seem to show that the buyer did not rely on the representations of the seller, and it has been held that where an express warranty covering the representations of the seller as regards the speed of a vessel is inserted in the contract at the exaction of the buyer, he is presumed to have relied thereon and not on the representations and therefore cannot found a charge of fraud on the falsity of such representations.5

629. Expressions of Opinion; Promissory Representations.—A representation on which a charge of fraud on the part of a seller may be based must be a representation of an existing fact, as distinguished from the expression of an opinion or promissory representation. Thus in case of the sale of a business, a representation that the profits

1. ΜΟΥΤΟΝ 724, v. Bonebrake, 84 Kan. 115 Pac. 585, 34 L.R.A.(N.S.) 1147.

2. Corry So. 891, house Am.

So. 891, Ann. Cas. 1917E 1052.

5. Williams Transp. Line v. Darius Cole Trans. Co., 129 Mich. 209, 88 N. W. 473, 56 L.R.A. 939.

v. Sylvia, 192 Ala. 550, 68 Ann. Cas. 1917E 1052; More- 6. Gordon v. Butler, 105 U. S. 553, Northrop, 33 Conn. 380, 89 26 U. S. (L. ed.) 1166; Jenkins v. Dec. 211; Carter v. Glass, 44 Long, 19 Ind. 28, 81 Am. Dec. 374; Mich. 154, 6 N. W. 200, 38 Am. Rep. Holbrook v. Connor, 60 Me. 578, 11 240; Mahurin v. Harding, 28 N. H. Am. Rep. 212; Homer v. Perkins, 124 Am. Dec. 401; Hexter v. Bast, Mass. 431, 26 Am. Rep. 677; Bigelow St. 52, 17 Atl. 252, 11 A. S. v. Barnes, 121 Minn. 148, 140 N. W. Handy v. Waldron, 18 R. I. 1032, 45 L.R.A. (N.S.) 203; WilliamAtl. 143, 49 A. S. R. 794; Nice son v. Holt, 147 N. C. 515, 61 S. E. 8 Gratt. (Va.) 442, 56 Am. 384, 17 L.R.A. (N.S.) 240; McCrillis

128, 59

125 Pa.

R. 874; 567, 29 Cockran,

V.

Dec. 151; West v. Emery, 17 Vt. 583, v. Carlton, 37 Vt. 139, 86 Am. Dec.

44 Am.

3.

Connersville

Dec. 356.

Black f.

V. Wadleigh, 7

(Ind.) 102, 41 Am. Dec. 214.
v. Sylvia, 192 Ala. 550, 68

4. Corry

700.

Notes: 81 Am. Dec. 376; 15 Am. Rep. 383; 2 L.R.A. 743.