Story Case

John Dixon was a cotton grower in southeastern Georgia. After he had had his cotton ginned and baled, he found that he had approximately a thousand pounds of unginned cotton left. As this was scarcely sufficient to make a bale of ginned cotton, he decided to sell it, if possible, to a neighbor. He offered it to Mr. Cross for three cents a pound. Mr. Cross inquired whether any of this cotton had been picked after frost. Mr. Dixon replied that it had all been picked before frost. He was mistaken, however; for, unknown to him, his laborers had picked about a hundred pounds after frost. When Mr. Cross discovered this, he refused to accept the cotton. Mr. Dixon sued for the purchase price agreed upon, alleging that he was innocent of any misrepresentation. What should be the decision of the court?

Ruling Court Case. Bannerman Vs. White, Volume 10 Common Bench Reports, New Series, Page 860

Bannerman, a grower of hops, offered to sell his whole crop of a certain year to White. Before White really considered the offer, he asked Bannerman if any sulphur had been used upon the growing crop, saying that if such were the case, he would not even consider the purchase. White replied that no sulphur had been used. It appeared, however, that sulphur had been used as an experiment on five acres out of three hundred acres, which constituted his crop. The hops from that five acres had been harvested and mixed with the hops from the remaining number of acres. When he was asked the foregoing question, Bannerman had either forgotten about this, or did not think that it was sufficiently important to mention. When White discovered that sulphur had been used on five acres, and the hops from this tract had been mixed with the remainder, he refused to accept the hops. It appeared that Bannerman made this representation innocently and without any intention to defraud White. So he brought this action to recover the price agreed upon for the hops.

"White contended that he was not liable, because the representation, though innocently made, was really a condition of the contract, and not having been performed or fulfilled, he was discharged from any obligation under their agreement.

Decision

As a general rule, an innocent misrepresentation does not affect the reality of consent of the contracting parties. But, if the fact misrepresented is very material or important, it may be considered as a condition upon which the parties contracted; and unless that condition is complied with, the injured party is entitled to be discharged from his contract. In this case, the Court came to the conclusion that the fact that no sulphur had been used was a condition upon which the parties contracted. Since it appeared that sulphur had been used, White was discharged from any obligation under the contract.

Mr. Chief Justice Erie, who delivered the opinion of the Court, said in part:

"We avoid the term warranty because it is used in two senses, and the term condition because the question is whether that term is applicable. Then the effect is that the defendant, White, required, and that the plaintiff, Bannerman, gave, his assurance that no sulphur had been used. This assurance was a preliminary stipulation; and, if it had not been given, the defendant would not have gone on with the treaty which resulted in the sale. In this sense, it was the condition upon which the defendant contracted, and it would be contrary to the intention expressed by this stipulation that the contract should remain valid if sulphur had been used".

Judgment was given for White.

Ruling Law. Story Case Answer

The general rule is that an innocent misrepresentation does not effect the reality of the consent of the parties to a contract. But a representation may become a part of the contract as a condition or warranty. If the latter is the case, and the condition is not performed, or the warranty is broken, then the other party is discharged from any obligation under the contract. It is in every case of this kind a matter of construction to say whether the representation is a part of the contract as a condition. If it is concluded that it is not a condition, forming a part of the contract, then it has no effect at all. If, on the other hand, it is found that it was a condition, forming a material part of the contract, the contract may be avoided. In the Story Case, Mr. Cross expressly requested information whether the cotton in question had been picked before frost. A reasonable conclusion would be that he intended to contract only on that condition. Some of the cotton, in fact, having been picked after frost, he is relieved of any liability upon the contract.