held that though the buyer, at the time he gave his note for the price, had acquired knowledge of the fraud, still if he expressly reserved his right to claim damages therefor, his giving of the note will not preclude him from setting up his claim in defense by way of counterclaim or recoupment. There is also authority for the position that the performance by the buyer of an executory contract of purchase after the discovery of the fraud simply precludes the disaffirmance of the contract and leaves the right of action for fraud unaffected. It has been held that when the buyer has been guilty of fraud in weighing or measuring the commodity sold, and the seller with knowledge thereof proceeds with the sale and without objection accepts payment on the basis of the false weights or measures, he cannot thereafter maintain an action for damages for the fraud. Mere delay by the buyer to sue for damages will not necessarily operate as a waiver of the right to sue when the delay is not beyond the time when the action would be barred by the statute of limitations. A suit for damages is not a suit for the violation of the contract, but is one for a tort and involves affirmance of the contract, and he may keep the fruits of the contract and maintain an action for the damages suffered by reason of the fraud. If the buyer after the discovery of the fraud accepts another article in place of the article originally purchased, and the substitution is in effect a new agreement of the original purchaser and is itself unaffected with fraud, it will constitute a waiver of any claim for damages for the original fraud."

642. Effect of Rescission on Claim for Damages.-If the buyer rescinds the sale this will ordinarily preclude any subsequent claim for general damages for the fraud, as the claim for such damages is founded on the continued existence of the sale, which has been put an end to by the rescission. On the other hand where the buyer has suffered special damages as distinguished from general damages, he may, according to the better view, after rescission recover such special damages. Thus it has been held that where a retail merchant has been induced by fraud to purchase inferior goods for resale in his business, he may after repudiating the contract hold the seller liable for the special damages resulting to his business from offering the inferior goods to the public. An exception to the general rule also

2. Dowagiac Mfg. Co. v. Gibson, 73 Ia. 525, 35 N. W. 603, 5 A. S. R. 697. 3. Note: 7 Ann. Cas. 280.

4. Reid v. Ladue, 66 Mich. 22, 32 N. W. 916, 11 A. S. R. 462.

5. Tuttle v. Stovall, 134 Ga. 325, 67 S. E. 806, 20 Ann. Cas. 168.

Note: L.R.A.1918A 113.

6. Note: 37 L.R.A. (N.S.) 299.
7. Mundt v. Simpkins, 81 Neb. 1,
R. C. L. Vol. XXIV.-23.

353

exists in case where the buyer expends money or material in the improvement of the property before discovering the fraud by which he was induced to purchase it. In such case he may rescind the contract of sale, return the property, and recover for what he has necessarily expended, as the seller gets the benefit of the improvements made on the property when it is returned to him.10

643. Measure of Damages Generally.-In some cases the view is taken that the measure of the general damages recoverable for the fraud of the seller in misrepresenting the condition of the property is the difference between the actual value of the property and the price paid,11 but according to the better view it is the difference between the value of the property as it actually was and what its value would have been if it were as it was represented to be.12 The real distinction between the two lines of cases is that one recognizes the buyer's benefits in the bargain as an element of damages and the other does not. In other words, one line of cases gives to the buyer only what he has actually parted with in the bargain, while the other line not only gives him that, but in addition gives him the benefits of his bargain, by permitting him to show what the property would have been worth had it been as represented.18 The value is ordinarily to be determined by the market value of the commodity at the place of the sale and delivery.14 Where the alleged fraud consisted in the seller's misrepresentation of the price he paid for the article and the buyer agreed to pay for an interest in the article a proportion of the actual cost price, it has been held that the buyer could recover as damages the difference he had paid over the proportionate part of the actual cost, though the article was in fact worth

10. Mundt v. Simpkins, 81 Neb. 1, 43 N. H. 363, 80 Am. Dec. 172; Durst 115 N. W. 325, 129 A. S. R. 670.

11. Smith v. Bolles, 132 U. S. 125, 10 S. Ct. 39, 33 U. S. (L. ed.) 279; Crater v. Binninger, 33 N. J. L. 513, 97 Am. Dec. 737. See FRAUD AND DECEIT, vol. 12, p. 453.

12. Gustafson V. Rustemeyer, 70 Conn. 125, 39 Atl. 104, 66 A. S. R. 92, 39 L.R.A. 644; Williams v. McFadden, 23 Fla. 143, 1 So. 618, 11 A. S. R. 345; Stiles v. White, 11 Metc. (Mass.) 356, 45 Am. Dec. 214; Nash v. Minnesota Title Ins., etc., Co., 163 Mass. 574, 40 N. E. 1039, 47 A. S. R. 489, 28 L.R.A. 753; Smith v. Werkheiser, 152 Mich. 177, 115 N. W. 964, 125 A. S. R. 406, 15 L.R.A. (N.S.) 1092; Kendrick v. Ryus, 225 Mo. 150, 123 S. W. 937, 135 A. S. R. 585; Page v. Parker,

v. Burton, 47 N. Y. 167, 7 Am. Rep. 428; Robertson v. Holton, 156 N. C. 215, 72 S. E. 316, 37 L.R.A.(N.S.) 298; Fargo Gas, etc., Co. v. Fargo Gas, etc., Co., 4 N. D. 219, 59 N. W. 1066, 37 L.R.A. 593; Woodward v. Thacker, 21 Vt. 580, 52 Am. Dec. 73. See FRAUD AND Deceit, vol. 12, p. 452.

13. Kendrick v. Ryus, 225 Mo. 150, 123 S. W. 937, 135 A. S. R. 585; Fargo Gas, etc., Co. v. Fargo Gas, etc., Co., 4 N. D. 219, 59 N. W. 1066, 37 L.R.A. 593.

14. Durst v. Burton, 47 N. Y. 167, 7 Am. Rep. 428. This is the same rule as it applied in the case of a breach by the seller of his executory contract of sale by a failure to deliver. See supra, par. 386.

more than the amount the seller paid therefor.15 If the seller on complaint of the buyer substitutes another article for the first, and is also guilty of fraud in regard to the article substituted, the buyer cannot recover general damages for both transactions, but is limited to the recovery of damages to the difference in value between the substituted article and what such substituted article would have been worth if it had been as represented.16

644. Special Damages. The buyer is not in all cases limited to a recovery of the difference between the value of the property as represented and its actual value, or the difference between the price paid and its actual value, but may as in other cases of fraud recover consequential damages which are the natural or proximate result of the seller's fraud.17 Thus where the fraud consists in the sale of animals infected with a contagious disease, which is communicated to other animals of the buyer, it has been held from an early date that the buyer could recover for such consequential damages,18 and also expenses reasonably incurred in caring for and treating the purchased animals and those to which the disease was communicated.19 And where hogs infected with cholera were sold without disclosing such fact this has been held such a wilful fraud as to warrant the recovery of exemplary damages.20 Where hay, on which a poisonous substance, such as white lead, has been spilt is sold without disclosing such fact, damages resulting from the buyer's loss of cattle which are killed as the result of eating it has been held recoverable.1 And where in the sale of old rags to a manufacturer to be worked up in his factory the seller fraudulently represents that they are free from

15. Pendergast v. Reed, 29 Md. 398, 96 Am. Dec. 539.

16. Robertson v. Halton, 156 N. C. 215, 72 S. E. 316, 37 L.R.A. (N.S.)

298.

Note: 37 L.R.A. (N.S.) 298.

17. Dushane v. Benedick, 120 U. S. 630, 7 S. Ct. 696, 30 U. S. (L. ed.) 810; Smith v. Bolles, 132 U. S. 125, 10 S. Ct. 39, 33 U. S. (L. ed.) 279; American Pure Food Co. v. Elliott, 151 N. C. 393, 66 S. E. 451, 31 L.R.A. (N.S.) 910; Puls v. Hornbeck, 24 Okla. 288, 103 Pac. 665, 138 A. S. R. 883, 29 L.R.A. (N.S.) 202; Wintz v. Morrison, 17 Tex. 372, 67 Am. Dec. 658.

Note: 34 L.R.A. (N.S.) 701.

18. Jeffrey v. Bigelow, 13 Wend. (N. Y.) 518, 28 Am. Dec. 476; Hobbs v. Smith, 27 Okla. 830, 115 Pac. 347, 34 L.R.A. (N.S.) 697; Wintz v. Morrison, 17 Tex. 372, 67 Am. Dec. 658,

See also Skinn v. Reutter, 135 Mich. 57, 97 N. W. 152, 106 A. S. R. 384, 63 L.R.A. 743; Robertson v. Halton, 156 N. C. 215, 72 S. E. 316, 37 L.R.A. (N.S.) 298; Smith v. Green, 1 C. P. D. 92, 45 L. J. C. Pl. 28, 33 L. T. N. S. 572, 24 W. R. 142, 23 Eng. Rul. Cas. 566.

Notes: 34 L.R.A. (N.S.) 701; 15 Ann. Cas. 1008; 3 Eng. Rul. Cas. 137.

19. Skinn v. Reutter, 135 Mich. 57, 97 N. W. 152, 106 A. S. R. 384, 63 L.R.A. 743.

Note: 34 L.R.A. (N.S.) 702.

20. Hobbs v. Smith, 27 Okla. 830, 115 Pac. 347, 34 L.R.A. (N.S.) 697. Note: 34 L.R.A. (N.S.) 702.

As to exemplary or punitive damages generally, see DAMAGES, vol. 8, p. 579 et seq.

1. French v. Vining, 102 Mass. 132, 3 Am. Rep. 440.

contagious germs special damages caused the buyer by reason of the infection of his employees and consequent loss to his business has been held recoverable. So where the sale of commodities to a retail merchant for resale is induced by the fraudulent representation of the seller as to the quality, special damages resulting to the retailer's business from his offering the goods to the public have been held recoverable as special damages. It has been held that where the action is for damages for fraud in the sale of a horse, the buyer cannot recover expenses incurred in keeping the horse to the time of its death, because he would have incurred such expenses as owner of the horse, irrespective of the seller's fraud.*

645. Rescission Generally.-As in case of other contracts, if the seller has been guilty of fraud the buyer may rescind and recover the purchase price if paid in whole or in part, or escape liability for the price if unpaid. However, to entitle the buyer to recover what he has paid in an action of assumpsit, he must put an end to or rescind the contract and must ordinarily before commencing his action give notice to the seller of his election to rescind. It has been held that where the buyer rescinded the sale on account of the seller's fraud and sued for the consideration paid, the defendant could not set up the fraud of the plaintiff as a defense. The maxim in pari delicto, potior est conditio possidentis has no application. That maxim applies only where two or more are jointly concerned in the perpetration of one and the same fraud, by which some third person is to be the sufferer. It does not permit one independent deceit or fraud to be set off against another deceit or fraud."

646. Waiver of Right to Rescind Generally.-The general rule is well established that the buyer has two remedies, i. e., he may keep the property and recover, either in an affirmative action or by way of set-off or recoupment, damages occasioned him by the fraud, or

2. Dushane v. Benedick, 120 U. S. 630, 7 S. Ct. 696, 30 U. S. (L. ed.) 810.

3. American Pure Food Co. v. Elliott, 151 N. C. 393, 66 S. E. 451, 31 L.R.A.(N.S.) 910.

4. West v. Anderson, 9 Conn. 107, 21 Am. Dec. 737.

5. Whitworth v. Thomas, 83 Ala. 308, 3 So. 781, 3 A. S. R. 725; Tarkington v. Purvis, 128 Ind. 182, 25 N. E. 879, 9 L.R.A. 607; Bonewell v. Jacobson, 130 Ia. 170, 106 N. W. 614, 5 L.R.A.(N.S.) 436; Morrow v. Bonebrake, 84 Kan. 724, 115 Pac. 585, 34 L.R.A. (N.S.) 1147; Perley v. Balch, 23 Pick. (Mass.) 283, 34 Am. Dec. 56; Badger v. Phinney, 15 Mass. 359, 8

Am. Dec. 105; Boles v. Merrill, 173 Mass. 491, 53 N. E. 894, 73 A. S. R. 308; Ripley v. Case, 78 Mich. 126, 43 N. W. 1097, 18 A. S. R. 428; Keen v. James, 39 N. J. Eq. 527, 51 Am. Rep. 29; Masson v. Bovet, 1 Denio (N. Y.) 69, 43 Am. Dec. 651; Fowler v. Williams, 2 Brev. (S. C.) 304, 4 Am. Dec. 579; Warner v. Wheeler, 1 D. Chip. (Vt.) 159, 6 Am. Dec. 717.

Notes: 43 Am. Dec. 654; 9 L.R.A. 607; Ann. Cas. 1916A 575.

6. Fowler v. Williams, 2 Brev. (S. C.) 304, 4 Am. Dec. 579; Warner v. Wheeler, 1 D. Chip. (Vt.) 159, 6 Am. Dec. 717.

7. Whitworth v. Thomas, 83 Ala 308, 3 So. 781, 3 A. S. R. 725.

he may rescind the sale and recover whatever of value he has parted with by reason thereof, with interest, etc. These actions being inconsistent, a resort to an action by way of affirmance is a bar to the right to rescind. And since a sale is voidable only at the option of the buyer, to entitle him to rescind he must act promptly on the discovery of the fraud, and if after discovering the fraud he acquiesces in the sale either by express words or by an unequivocal act or unreasonable delay he will be deemed to have affirmed the sale and he cannot afterwards rescind." Thus if the buyer after discovery of the fraud by unequivocal acts treats the property as his own he waives his right of rescission.10 Equivocal acts, however, which do not clearly evince a purpose, with complete knowledge of the fraud, to retain the property as his own will not defeat his right to rescind; to have such effect the act must be unequivocal and must show an election. to retain the property after discovering the fraud before the right to rescind is gone.11 Ordinarily the buyer cannot be charged with unreasonable delay if he acts promptly on the discovery of the fraud,19 and the fact that the buyer after having his suspicions aroused paid the price does not constitute a waiver of his right to rescind, if his suspicions were lulled by the further fraudulent conduct of the seller.13 A purchaser of a business who, within a week, discovers that the sale was fraudulent and offers to rescind, and, on refusal, tests the matter further for two months, and then makes an absolute rescission, is not guilty of unwarrantable delay in rescinding the sale. 14

647. Restoration by Buyer Generally. It is the general rule that where there has been a delivery in whole or in part of the subject matter of the sale the buyer must return what he has received before he will be permitted to rescind the contract, and recover what he has

8. Cheney v. Dickinson, 172 Fed. 109, 96 C. C. A. 314, 28 L.R.A. (N.S.) 359; Kimball v. Cunningham, 4 Mass. 502, 3 Am. Dec. 230; Nash v. Minnesota Title Ins., etc., Co., 163 Mass. 574, 40 N. E. 1039, 47 A. S. R. 489, 28 L.R.A. 753; Mundt v. Simpkins, 81 Neb. 1, 115 N. W. 325, 129 A. S. R. 670; Davis v. Schmidt, 126 Wis. 461, 106 N. W. 119, 110 A. S. R. 938.

Note: 31 L.R.A. (N.S.) 910.

9. Burwash v. Ballou, 230 Ill. 34, 82 N. E. 355, 15 L.R.A.(N.S.) 409; Johnson v. McLane, 7 Blackf. (Ind.) 501, 43 Am. Dec. 102; Tarkington v. Purvis, 128 Ind. 182, 25 N. E. 879, 9 L.R.A. 607; Wilbur v. Flood, 16 Mich. 40, 93 Am. Dec. 203; Masson v. Bovet, 1 Denio (N. Y.) 69, 43 Am. Dec. 651.

Notes: 43 Am. Dec. 655; 9 L.R.A. 607, 609.

10. Continental Jewelry Co. v. Pugh, 168 Ala. 295, 53 So. 324, Ann. Cas. 1912A 657; Tarkington v. Purvis, 128 Ind. 182, 25 N. E. 879, 9 L.R.A. 607; Masson v. Bovet, 1 Denio (N. Y.) 69, 43 Am. Dec. 651.

Note: 43 Am. Dec. 655.

11. Tarkington v. Purvis, 128 Ind. 182, 25 N. E. 879, 9 L.R.A. 607.

12. Pence v. Langdon, 99 U. S. 578, 25 U. S. (L. ed.) 420; Whitworth v. Thomas, 83 Ala. 308, 3 So. 781, 3 A. S. R. 725.

13. Hambrick v. Wilkins, 65 Miss. 18, 3 So. 67, 7 A. S. R. 631.

14. Boles v. Merrill, 173 Mass. 491, 53 N. E. 894, 73 A. S. R. 308.