Story Case

Jacob Wise was the guardian of Edward Hilton, who had a substantial inheritance. After Hilton became twenty-one and while Wise was still acting as guardian, Hilton offered to purchase a riding horse belonging to Wise. The latter was not eager to sell, but nevertheless, negotiated with his ward; finally, an agreement was reached, and Hilton received possession of the horse.

During the negotiation, Hilton inquired of Wise as to the age of the animal, and Wise answered in good faith, that it was five years old. Hilton replied to this, "Well, five or six years is a good age".

Two weeks after the sale, when Wise demanded his purchase money, Hilton refused to pay on the ground that the horse was six years old, and not five as Wise represented. Wise contended that this was an immaterial representation made in good faith, and therefore not a good defense. Is this correct?

Ruling Court Case. Miles Vs. Erwin, Volume 1 Mccord's Chancery Reports (South Carolina), Page 524

Lyle Harper and others claimed an interest in some land owned, as a matter of fact, by Miles. Harper, relying upon his claim, was trespassing upon the property; Miles went to Erwin, his lawyer, related the facts in the matter, and asked him to proceed in any way necessary to free his land from these claims. Erwin investigated, and then told Miles that the claim of Harper was without any foundation, but that he was uncertain as to the claims of the other parties. He brought a bill in court and eliminated the claim of Harper. Harper took an appeal, and while it was pending, one Corless applied to Erwin, the lawyer, with a view of purchasing the land from his client. He told Erwin that the land might be procured for a very reasonable sum if he "would throw cold water on Miles' title." Thereupon, Erwin told Miles that his title was very doubtful because of the claims of these other persons. Because of this Miles sold the land to Corless for the sum of $300. Later, Corless sold it again for $2,500 and gave Erwin $900. This was a suit brought by Miles to recover this money from his lawyer, Erwin, on the ground that Erwin had made false representations.

Erwin claimed that the representations were not false. He insisted that he did really believe that Miles' title was doubtful. Miles, however, contended that he should have been told all the facts, especially as to the desire of Corless to purchase the property.

Decision

The relation between an attorney and his client is a highly confidential one; and the law demands of the attorney the highest degree of faith in his dealings with the client. It is true that the title of Miles was doubtful; but the statements of Erwin, under the circumstances, were deceptive; he should have told him that Corless, notwithstanding the doubtful title, was willing to purchase the land for a far higher price than he actually paid for it.

Mr. Justice Johnson said in part: "The policy of the law is clearly opposed to contracts between client and attorney in relation to property in litigation and of which the latter has charge. The value of the property, we know, depends almost exclusively on the certainty of title; and from the nature of his profession, the attorney is supposed to be more competent to judge of it than the client. To discharge the duties which that relation imposes, he must acquaint his client with all the information he possesses on the subject matter".

Because the utmost good faith must be exercised by one in confidential relation with another, the law will not permit the fiduciary to gain at the expense of his ward or client. If the trusted one does gain, the law will presume that he has acted in bad faith and will compel him to reimburse the one who has trusted him.

Judgment was given for Miles.

Ruling Law. Story Case Answer

Errors in contracts made between persons standing in a confidential relation illustrate another exception to the general rule that an innocent misrepresentation does not affect the validity of a contract. A confidential relation exists, where one person has a legal or a natural right to control another, and is under a legal or natural duty to look after the interests of that other. Instances of this kind are: the relation between principal and agent; the relation between guardian and ward; the relation between father and son, or parent and child. In these relations, the parties do not stand on an equal basis. The one who has control and is under a duty to look after the interests of the other has a decided advantage, and can easily benefit by the other's more or less helpless, and dependent condition. Because of this, the law wisely says that the person having this legal or natural advantage must exercise the highest degree of faith in dealing with the other. Consequently, any misrepresentation, however innocent, or a non-disclosure of material facts, will give the dependent party the right to set aside the contract, be it a contract concerning land or concerning personal property, or any other kind of contract.

It follows from what has been said, that Edward Hilton, in the Story Case, has a good defense and is entitled to have the contract set aside. Of course in this case, Wise can demand a return of the horse.