In view of a useful distinction recently made it is probably going too far to say that the misrepresentation must "relate distinctly and directly to the contract, and affect its very essence and substance." A rapacious money-lender concealed his identity (by means of an assumed name) in order to induce. a borrower to deal with him; and it was held that the fraud was sufficiently material to warrant a rescission of the contract. A. L. Smith, L. J., said:

"In my opinion the first point which arises is not whether the fraud was material to the contract entered into, but whether the fraud was material to the inducement which brought about the contract."

A Manitoba case is much to the same effect. A man having a contract for the purchase of lands resold them at a much higher price, pretending that he was agent merely for his vendor, and procured his vendor to convey direct to the subpurchaser. The sub-purchaser would have made more careful inquiries had he been aware of the facts, and was held entitled to rescind his agreement.?

It is always very difficult, when a misrepresentation has been followed by action, for the misrepresenter to contend that his misstatement was immaterial. The onus lies heavily upon him to disprove the propter hoc.3

Several Representations, and One of Them Untrue.

"When certain statements have been made, all in their nature capable, more or less, of leading the party to whom they are addressed to adopt a particular line of conduct, it is impossible to say of any one of such representations so made that even if it had not been made the same resolution would have been taken or the same conduct followed. Where, therefore, in a negotiation between two parties, one of them induces the other to contract on the faith of the representations made to him, any one of which has been untrue, the whole contract is in this court considered as having been obtained fraudulently. Who can say that the untrue statement may not have been precisely that which turned the scale in the mind of the party to whom it was addressed?" 4

The subject is closely associated with that treated of in a later chapter, to which reference may be made. There is, no doubt, distinction between questions as to the materiality of

Huber v. Guggenheim (1898), 89 Fed.
R. 598.

3 Smith v. Kay (1859), 21 Beav. 522; 7 H. L. 750; Traill v. Baring (1864), 1 Gordon v. Street (1899), 2 Q. B. 4 De G., J. & S. 318; 42 L. J. Ch. 521; 646; 69 L. J. Q. B. 45. Bailey v. Seymour (1894), 42 S. C. 322;

4 Per Lord Cranworth, in Raynell

2 Hutchinson v. Calder (1883), 1 20 S. E. R. 62. And see ch. XI. Man. 17. The judgment was reversed on appeal, but not upon the v. Sprye (1852), 1 D. M. & G. 707; 21 ground that such a misrepresenta- L. J. Ch. 633.

tion would not be material. Id. 46.

5 See pust, ch. XI.

misrepresentations and questions as to whether a change of position took place upon the faith of such misrepresentations. But it may be said that a change of position upon the faith of a misrepresentation proves its materiality. And, given a material misrepresentation, followed by a change, and the propter will be easily inferred. There are cases, too, in which neither factor is palpably existent, and presumptions have to be resorted to.

Assisted Misrepresentation.—It is obvious that in cases of assisted misrepresentation, not only must the misrepresentation have been material, but the assistance also must have been of such character as to have influenced the result. The formula adopted in this work to express the requisite relation between the assistance rendered by the estoppel-denier and the action of the estoppel-asserter is that the change of position must be reasonably consequent upon the assistance. This subject is treated in a subsequent chapter.1

1 Ch. XIII.

CHAPTER VIII.

CONDITION NO. 6.

Fraud or Bad Faith is Not Essential.

The question now to be considered relates to the moral quality of the misrepresentation. Must there be fraud or bad faith in it? or may it be of perfectly innocent character? Indeed, there is a much deeper question (usually not thought of) directing our ethical inquiry, sometimes not to the misrepresentation at all, but to the assistance rendered to it by some third person by the person said to be estopped.

Misrepresentation may be found in three departments of the law: (1) Deceit, (2) Rescission, and (3) Estoppel. The wider our survey of it the better we shall understand it.

I. MISREPRESENTATION AND DECEIT.

Mr. Bigelow's list of requisites of an estoppel contains the following:

"The representation must have been made with knowledge, actual or virtual, of the facts."

91

And in exposition of that proposition he says:2

"Estoppel arising in virtue of a misrepresentation is the converse of an action of deceit. The property or interest claimed by reason of the estoppel corresponds to the damages sought in the action of deceit; and in order to make good the claim of estoppel the same things, it should seem, are requisite that are necessary to the maintenance of the action mentioned. Now by the clear weight of authority in which courts of equity. in recent times at least, agree with the courts of law, it is necessary to the recovery of damages in an action for misrepresentation, by the current of authority, to show that the defendant made the representation (1) with actual knowledge of its falsity, or (2) recklessly, without knowing whether it was true or false, or (3) under circumstances in which, from his peculiar relation to the facts, he was bound to know the true state of things."

Passing over for a moment the stated requisite of fraud, let it be observed:

1. That in Mr. Bigelow's classification there is no room for his third sort of case. The first two classes exhaust the pos

1 On Estoppel (5th ed.), p. 570. And see Willmott v. Barber (1880), 15 Ch. D. 96; 42 L. J. Ch. 792, a case, how

ever, having more relation to acqui-
escence than to estoppel.
2 Id., p. 609.

sible cases, for they include cases where a representation has been made which is known to be false, and those in which it is made "without knowing whether it was true or false." It is useless then to inquire whether the asserter "was bound to know the true state of things;" for whether he was or was not so bound he is estopped (1) if he make a representation which he knows to be false, and (2) which may be false.1

2. The present writer cannot agree either that an action of deceit will lie merely because the misrepresenter "was bound to know the true state of things" in the absence of that fraud which would place the instance in one of the other categories. In the leading case of Derry v. Peek, Lord Herschell said:

"I think the authorities establish the following propositions: First, in order to establish an action of deceit, there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved when it is shown that a false representation has been made, (1) knowingly, (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states."

And although the learned judge refers to cases in which "a person within whose province it lay to know a particular fact," it is "only for the purpose of putting them aside" as being "in an altogether different category from actions to recover damages for false representations, such as we are dealing with." 3. Nor can the present writer agree that for "estoppel the same things are requisite" as in the action of deceit. The lat

1 In Watson v. Jones, 25 S. R. 682 (Fla.), it is said: "We are therefore of opinion that proof of scienter in the third phase does not give another or different right or ground of action from that given by proof under the first phase, but that it simply establishes the same ultimate fact, viz. knowledge, by a different class of evidence; and consequently that an allegation that defendant 'knew' his representation to be false is provable by evidence embraced in the third phase. In other words, an aver. ment that defendant's situation or means of knowledge were such as made it his duty to know whether his statement was true or false, and an averment that defendant well

knew his statements to be untrue, are but different methods of stating the same ultimate fact, viz. knowledge. McBeth v. Craddock, 28 Mo. App. 380; De Lay v. Carney Bros., 100 Iowa, 687; 69 N. W. R. 1053."

2 (1889) 14 A. C. 357; 58 L J. Ch. 864. See the Derry v. Peek scholia cited with it in ch. XVI.

3 As to this point of reality of belief see Allcroft v. Bishop of London (1889), 23 Q. B. D. 414; 58 L. J. Q. B. 385; 24 Q. B. D. 213; 59 L. J. Q. B. 169; (1891) A. C. 666; 61 L. J. Q. B. 62; Angus v. Clifford (1891), 2 Ch. 449; 60 L. J. Ch. 443; White v. Sage (1892), 19 Ont. App. 135; Turner v. Francis (1894), 10 Man. 340; 25 S. C. Can. 110.

ter, as we have just seen, must be based upon "fraud, and nothing short of that will suffice." In estoppel, on the other hand, as we shall abundantly see, a perfectly innocent misrepresentation, or even innocent assistance rendered to a misrepresentation of another person, may be quite sufficient for estoppel.2

II. MISREPRESENTATION AND RESCISSION.

In some cases of misrepresentation rescission of the contract is sought, and not damages in deceit, nor yet estoppel. The law as to mala fides, in such cases, is explained by Lord Herschell:"

"I think it important that it should be borne in mind that such an action (i. e., an action for deceit) differs essentially fron one brought to obtain rescission of a contract on the ground of misrepresentation of a material fact. The principles which govern the two actions are widely different. Where rescission is claimed it is only necessary to prove that there was misrepresentation; then, however honestly it may have been made, however free from blame the person who made it. the contract having been obtained by misrepresentation cannot stand. In an action of deceit, on the contrary, it is not enough to establish misrepresentation alone; it is conceded on all hands that something more must be proved to cast liability upon the defendant, though it has been a matter of controversy what additional elements are requisite."

III. MISREPRESENTATION AND ESTOPPEL.

Misrepresentation as a basis for an action of deceit then. must, according to the present state of the law, be fraudulent. On the other hand, misrepresentation as a ground for rescission

1 Reference, of course, is made to the present state of the law. See, however, the chapter on Deceit, ch. XVI.

2 Mr. Bigelow at page 629, note 1, himself says: 66 As there need not be any actual design that the representation should be acted upon, there need be no design to defraud."

* Derry v. Peek (1889), 14 App. Cas. 359; 58 L. J. Ch. 864; Reese v. Smith (1869), L. R. 4 H. L. 81; 39 L. J. Ch. 855 (per Lord Cairns); Petrie v. Guelph, 11 S. C. Can. 450; Jordan v. Provincial (1898), 28 S. C. Can. 554; Budd v. McLaughlin (1896), 10 Man. 75. A very capable jurist (Strong, C. J.) has suggested a distinction between executed and executory contracts, holding that for rescission of the former the misrepresentation

must be fraudulent (as in deceit), but otherwise where the contract remains executory. Bell v. Macklin (1889), 15 S. C. Can. 581. This may at all events be said: That rescission ought to include restoration to the status quo ante; that where the contract has been executed, complete restoration is frequently impossible; and that if there has been bad faith the court might be less careful upon that point than if the misrepresentation had been made innocently. If the point is well taken it will involve the consideration of contracts partly executed; and perhaps a dis. tinction as to the heinousness of the fraud as compared with the complexities of the change of position — perhaps to the exercise of judicial discretion in such cases.