Where a horse or other animal is sold sound or unsound or subject to all faults, the mere failure of the seller to disclose latent defects of which he had knowledge is no ground for a charge of fraud. If the seller resorts to artifices to conceal tl. defect in the animal and throw the buyer off his guard a charge of fraud may be sustained." So in case of a sale of a horse if the seller knows the horse to be unsound, and informs the buyer that he is sound so far as he knows, and the buyer, not knowing the contrary, nor able to discover it by ordinary observation, relies on such representation, and consummates the trade, there is no doubt but that this, if injury results from it, constitutes a fraud. Where the seller of a horse or other animal with knowledge that it is unsound states that he knows nothing about the animal a charge of fraud has been sustained, though he expressly refused to warrant. its soundness. While the habit of crib biting may not be a latent defect which the seller is required to disclose, a charge of fraud may be based on artifices and evasions resorted to conceal such habit. Though the animal is expressly sold subject to all defects if the seller resorts to artifices to conceal defects of which he has knowledge a charge of fraud may be sustained. has been held that the fact that the seller after the sale and at the time the buyer came to take the horse away told him he must take it at his own risk would not prevent him from being liable for his prior fraudulent misrepresentations as to the condition of the horse. So the fact that, after fraudulent representations by the seller as to the soundness of an animal to be sold at auction made to a proposed buyer, an announcement was made at the auction sale that the seller did not warrant soundness has been held not to relieve the seller from liability. Where the latent defect consists of a contagious disease it

v. Moses, 90 Pa. St. 250, 35 Am. Rep. 654 (failure to disclose that a horse is a "cribber").

Note: L.R.A.1917C 620 et seq.

As to the seller's duty to disclose latent defects generally, see supra, par. 621.

2. West v. Anderson, 9 Conn. 107, 21 Am. Dec. 737; Ward v. Hobbs, L. R. 4 App. Cas. 13, 48 L. J. Q. B. 281, 40 L. T. (N. S.) 73, 27 W. R. 114, 3 Eng. Rul. Cas. 125.

Note: L.R.A.1917C 624.

3. Croyle v. Moses, 90 Pa. St. 250, 35 Am. Rep. 654; George v. Johnson, 6 Humph. (Tenn.) 36, 44 Am. Dec. 288; Baker v. Seahorn, 1 Swan (Tenn.) 54, 55 Am. Dec. 724; Howard v. Gould, 28 Vt. 523, 67 Am. Dec. 728. Note: L.R.A.1917C 622.

It

4. Whitworth v. Thomas, 83 Ala. 308, 3 So. 781, 3 A. S. R. 725. As to what constitutes unsoundness in a horse as covered by a warranty of soundness, see supra, par. 497 et seq.

5. Kitchen v. Long, 67 Fla. 72, 64 So. 429, L.R.A.1917C 617.

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

7. West v. Anderson, 9 Conn. 107, 21 Am. Dec. 737; George v. Johnson. 6 Humph. (Tenn.) 36, 44 Am. Dec. 288; Baker V. Seahorn, 1 Swan (Tenn.) 54, 55 Am. Dec. 724.

Note: L.R.A.1917C 624.

8. George v. Johnson, 6 Humph. (Tenn.) 36, 44 Am. Dec. 288.

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

seems that there is imposed on the seller an especial duty to disclose such fact, and this view seems to be taken even though there is no duty imposed on him to disclose ordinary latent defects.10 Thus where in the sale of a horse the seller knew that it had the glanders, or other dangerous disease, and to account for its condition falsely represented that it had the distemper or other minor disease, he is guilty of fraud if the buyer purchases in reliance thereon; 11 still where no artifices or representations were resorted to to conceal the fact that the animal was affected with a contagious disease, and it was sold subject to all faults, the failure to disclose the defect has been held not to subject the seller to a charge of fraud.12 Of course a charge of fraud may be based on the seller's knowingly false representations that the animal is free from any contagious disease.13 To found a charge of fraud on the failure of the seller to disclose a defect in the animal sold it must be shown that he had knowledge of such defect; 14 and though it is generally held that a sale may be rescinded for fraudulent representations or concealments concerning the breeding qualities of an animal bought for breeding purposes,15 it has been held that representations as to the getting qualities of a stallion cannot be made with knowledge of their falsity and therefore a charge of fraud cannot be based thereon.16

638. Sale of Books.-Another quite fruitful source of litigation in which charges of fraud have been brought against the seller are cases involving the sale of books and similar publications.17 It has been held that a misrepresentation that only the biographies of a limited number of local persons were to appear in a biographical work of prominent men of a state may be made a basis of a charge of fraud when the buyer purchased in reliance thereon, his biography to be

10. Jeffrey v. Bigelow, 13 Wend. (N. Y.) 518, 28 Am. Dec. 476; Puls v. Hornbeck, 24 Okla. 288, 103 Pac. 665, 138 A. S. R. 883, 29 L.R.A. (N.S.) 202. See also Skinn v. Reutter, 135 Mich. 57, 97 N. W. 152, 106 A. S. R. 384, 63 L.R.A. 743; Ward v. Hobbs, L. R. 4 App. Cas. 13, 48 L. J. Q. B. 281, 40 L. T. (N. S.) 73, 27 W. R. 114, 3 Eng. Rul. Cas. 125.

Notes: 29 L.R.A.(N.S.) 203; L.R.A. 1917C 620; 15 Ann. Cas. 1008.

11. George v. Johnson, 6 Humph. (Tenn.) 36, 44 Am. Dec. 288; Wintz v. Morrison, 17 Tex. 372, 67 Am. Dec. 658. See also Howard v. Gould, 28 Vt. 523, 67 Am. Dec. 728.

12. Ward v. Hobbs, L. R. 4 App. Cas. 13, 48 L. J. Q. B. 281, 40 L.. T.

(N.S.) 73, 27 W. R. 114, 3 Eng. Rul.
Cas. 125 (it was further held in this
case that the fact that the sale was in
violation of a penal statute did not
render the seller liable).

Note: 15 Ann. Cas. 1008.
13. Note: 15 Ann. Cas. 1008.

14. Puls v. Hornbeck, 24 Okla. 288, 103 Pac. 665, 138 A. S. R. 883, 29 L.R.A. (N.S.) 202; Warren v. Buck, 71 Vt. 44, 42 Atl. 979, 76 A. S. R. 754.

Notes: 29 L.R.A. (N.S) 202; L.R.A. 1917C 622.

15. Notes: 15 Am. Dec. 106; Ann. Cas. 1916A 575.

16. Oltman v. Williams, 167 N. C. 312, 83 S. E. 348, Ann. Cas. 1916A 587.

17. Note: 22 L.R.A.(N.S.) 1210.

one of those included.18 So it has been held that a representation by a seller of books that they are a special, limited, extra illustrated edition, which, if true, would give them a greater value than an ordinary edition would have, is not mere dealer's talk, but, if false, will entitle the purchaser to rescind his contract.19

639. Sale of Securities. In the sale of stocks, bonds, notes and other securities, general representations as to their value as an investment are, as a rule, regarded as dealer's talk on which the buyer has no right to rely and therefore though false and made in bad faith are not the basis of a charge of fraud,20 and the rule in regard to representations of value applies to mere representations or expressions of opinion respecting the solvency or pecuniary ability of third parties, whose notes are given in payment for goods purchased. Thus it has been held that false representations by one selling railroad bonds that the "bond was an A No. 1 bond," and that "the railroad was good security" therefor, made to the purchaser for the purpose of inducing the sale, will not render him liable to damages even though he made the statements in bad faith. So it has been held that a cause of action is not shown by a complaint alleging that the defendant fraudulently stated to the plaintiff that the stock of a certain company was worth eighty per cent of its par value, which statement the plaintiff believed, and relying thereon bought of the defendant some of the stock, paying said eighty per cent therefor, whereas, in fact, the stock was worth but forty per cent, as the defendant well knew. On the other hand representations as to the safety or security of the investment, made under circumstances showing that they were intended as representations of fact and not mere expressions of opinion or dealer's talk, have been given such effect and a charge of fraud based thereon sustained. Thus it has been held that a seller who, to induce a sale of notes, represents them to be "good as gold," and who intends, and is understood to intend, not an expression of an opinion, but a statement of a fact of his own knowledge, may be, if such representations were known by him to be false, chargeable with fraud. So one who effects a sale of stock on

18. Greenleaf v. Gerald, 94 Me. 91, 46 Atl. 799, 80 A. S. R. 377, 50 L.R.A.

542.

19. Schultheis v. Sellars, 223 Pa. St. 513, 72 Atl. 887, 22 L.R.A. (N.S.) 1210.

20. Burwash v. Ballou, 230 Ill. 34, 82 N. E. 355, 15 L.R.A.(N.S.) 409; Deming v. Darling, 148 Mass. 504, 20 N. E. 107, 2 L.R.A. 743.

Note: 15 L.R.A. 795.

2. Deming v. Darling, 148 Mass. 504, 20 N. E. 107, 2 L.R.A. 743.

3. Ellis v. Andrews, 56 N. Y. 83, 15 Am. Rep. 379.

4. Crane v. Elder, 48 Kan. 259, 29 Pac. 151, 15 L.R.A. 795; Andrews v. Jackson, 168 Mass. 266, 47 N. E. 412, 60 A. S. R. 390, 37 L.R.A. 402. Note: 15 L.R.A. 795.

5. Andrews v. Jackson, 168 Mass. 266, 47 N. E. 412, 60 A. S. R. 390. 37

1. Homer v. Perkins, 124 Mass. 431, L.R.A. 402. See also Crane v. Elder 26 Am. Rep. 677.

48 Kan. 259, 29 Pac. 151, 15 L.R.A.

a representation that it has always paid a certain dividend per annum, when in fact it has never paid such a dividend, may be held liable in an action of deceit. The kindred question as to warranties involved in the sale of choses in action is discussed in another place."

640. Claim for Damages Generally.-If a seller has been guilty of fraud in the procurement of the sale, the buyer may ordinarily maintain an action on the case as for deceit to recover his damages resulting from the fraud, and the fact that the buyer has resold the property does not affect his right to maintain such an action. No interest in the right of action for damages for the fraudulent representation of the seller as to the subject matter of the sale passes to a third person who purchases from the original buyer.10 Payment of the price is not essential to the maintenance by the buyer of an action for damages, nor is the buyer before bringing his action required to wait until the price becomes due; 11 still there is no error in admitting evidence offered by the buyer to show that the price has been paid.19 In an action by the seller for the price the buyer, where the doctrine. of recoupment is recognized, may recoup his damages resulting from the seller's fraud, and may as a general rule under the statutes relating to set-off and counterclaim interpose his claim for damages in defense to an action for the price,13 and where the sale was by an executor and fraudulent misrepresentations were made by him, the buyer has been permitted to recoup the damages. 14 It is otherwise, however, where the doctrine of recoupment does not prevail and no

795, where a charge of fraud was sustained under the circumstances of the case upon representations that notes were "perfectly good."

6. Handy v. Waldron, 18 R. I. 567, 29 Atl. 143, 49 A. S. R. 794.

7. See supra, par. 476.

8. Van Natta v. Snyder, 98 Kan. 102, 157 Pac. 432, L.R.A.1918A 102 and note; McFarlane v. Moore, 1 Overt. (Tenn.) 174, 3 Am. Dec. 752; Warner v. Wheeler, 1 D. Chip. (Vt.) 159, 6 Am. Dec. 717.

9. Medbury v. Watson, 6 Metc. (Mass.) 246, 39 Am. Dec. 726.

Note: L.R.A.1918A 111.

The same principle is applied in the case of warranties and it is held that a resale by the buyer does not affect his right to sue for damages for a breach of the warranty. See supra, par. 516. 10. Medbury v. Watson, 6 Metc. (Mass.) 246, 39 Am. Dec. 726 (holding that the second purchaser is not disqualified by interest to testify in an

action by the first buyer).

11. Morehouse v. Northrop, 33 Conn. 380, 89 Am. Dec. 211.

12. Morehouse V. Northrop, 33 Conn. 380, 89 Am. Dec. 211.

13. Dowagiac Mfg. Co. v. Gibson, 73 Ia. 525, 35 N. W. 603, 5 A. S. R. 697; Van Natta v. Snyder, 98 Kan. 102, 157 Pac. 432, L.R.A.1918A 102 and note; Smith v. Werkheiser, 152 Mich. 177, 115 N. W. 964, 125 A. S. R. 406, 15 L.R.A. (N.S.) 1092; Harman v. Sanderson, 6 Smedes & M. (Miss.) 41, 45 Am. Dec. 272; Cecil v. Spruger, 32 Mo. 462, 82 Am. Dec. 140; Burton v. Stewart, 3 Wend. (N. Y.) 236, 20 Am. Dec. 692; Fargo Gas, etc., Co. v. Fargo Gas, etc., Co., 4 N. D. 219, 59 N. W. 1066, 37 L.R.A. 593; McCorkle v. Doby, 1 Strob. L. (S. C.) 396, 47 Am. Dec. 560. See supra, par. 367 et seq., as to defenses to an action for the price generally.

14. Williamson v. Walker, 24 Ga. 257, 71 Am. Dec. 119.

statute exists authorizing claims for unliquidated damages to be set off.15 Where a note is given for the price, the sureties thereon or accommodation indorsers cannot set up the fraud of the seller in defense of their liability, the sale not having been rescinded by the buyer, as the right to recoup damages for the fraud is personal to the buyer.16 Though the subject matter of the sale is a patent, a state court has jurisdiction of an action based on fraud in the sale, including a suit for a rescission or for damages.17

641. Waiver of Claim for Damages Generally.-If the buyer has knowledge of the falsity of the seller's representations before the contract of sale is entered into and nevertheless concludes the contract no claim can, of course, be based thereon, as he has no right to rely on such representations.18 And according to the better view it seems that one who is induced by fraud to enter into a contract for the purchase of personal property, and who, on discovery of the fraud while the contract remains wholly executory, nevertheless executes it on his part, or requires performance on the part of the other party, waives the fraud and cannot subsequently maintain an action for damages therefor. To allow a purchaser who has discovered the fraud while the contract is still wholly executory to go on and execute it, and then sue for the fraud, looks very much like permitting him to speculate on the fraud of the other party. It is virtually to allow a man to recover for self-inflicted injuries. The fraud is really consummated, and the damages incurred, by the acceptance of the property and paying for it. And if this is done after the fraud is discovered, the purchaser cannot say that he sustained this damage by reason of the fraud.19 It has been held that, in case of sale on credit, if the buyer with knowledge of the fraud and without objection makes payments and also secures an extension of the time of credit or other modification of the original contract, he waives any claim for damages. 20 Ordinarily if the contract of sale has been partly executed, it seems that the buyer may continue performance on his part without waiving his claim for damages,1 and it has been

15. Allison v. Noble, 1 Litt. (Ky.) 279, 13 Am. Dec. 230.

16. Elliott v. Brady, 192 N. Y. 221, 85 N. E. 69, 127 A. S. R. 898, 18 L.R.A. (N.S.) 600.

17. Page v. Dickerson, 28 Wis. 694, 9 Am. Rep. 532. See PATENTS, vol. 20, p. 1181 et seq.

18. See supra, par. 627, as to the right to rely on representations. 19. McDonough V. Williams, 77 Ark. 261, 92 S. W. 783, 7 Ann. Cas. 276, 8 L.R.A. (N.S.) 452 and note.

Notes: 7 Ann. Cas. 280; L.R.A.

1918A 106; 20 Ann. Cas. 172.

20. Tuttle v. Stovall, 134 Ga. 325, 67 S. E. 806, 20 Ann. Cas. 168. See also Elliott v. Brady, 192 N. Y. 221, 85 N. E. 69, 127 A. S. R. 898, 18 L.R.A. (N.S.) 600.

Notes: 20 Ann. Cas. 172; L.R.A 1918A 114.

1. McDonough v. Williams, 77 Ark. 261, 92 S. W. 783, 7 Ann. Cas. 276, 8 L.R.A. (N.S.) 452 and note; Van Natta v. Snyder, 98 Kan. 102, 157 Pac. 432, L.R.A.1918A 102 and note.