Story Case

Mr. Lyle owned a tract of land known as Blackacre. Upon the marriage of his son, James, he made a conveyance of this tract to him. At that time he told his son that Blackacre contained 276 acres of land. James lived upon the tract for several years, but took no steps to ascertain just how many acres the tract contained. He then moved to the city. After working there for several years, he decided to go in business for himself. In order to raise the necessary capital he advertised Blackacre for sale. Mr. Shull saw the advertisement and interviewed James Lyle. Lyle said that the tract contained 276 acres, and that he was willing to take $3,000 for the whole of it. An agreement was made in writing, by which James Lyle agreed to sell, and Mr. Shull agreed to buy Blackacre on the terms just mentioned. After the deed was made and delivered and the part of the purchase price had been paid, Mr. Shull directed a surveyor to ascertain the number of acres in the tract. It was found that the tract contained only two hundred and forty acres. Mr. Shull then filed a bill, asking that the transaction be set aside because of this misrepresentation. James Lyle contended that it should not be set aside, because the misrepresentation was innocently made. Should the transaction be set aside?

Ruling Court Case. Norman Burr Vs. Caleb Benedict, Volume 99 Massachusetts Reports, Page 463

Caleb Benedict was the owner of certain land, concerning which he apparently knew very little. He offered to sell it to Norman Burr. The latter was unable to make a visit to the land, but desired some information concerning it. Benedict then gave him "information", such as it was. Benedict represented that the land was in the town of Sheffield. As a matter of fact, it was in the town of Great Barrington. He further informed Burr that it was all dry land, and almost all of it accessible to teams and that it could cut from fifteen to eighteen cords of wood to the acre. All the statements were inaccurate. The land included a very large swamp; very little of the land was accessible by teams; and the average number of cords which could be cut from the land was about twelve. He also stated that six acres of the land was cleared, and ready for cultivation and faced a public road. He, himself, thought this was true, but this six acre tract of cleared land, which faced the road, did not belong to him. Norman Burr relied upon these statements and purchased the land. When he investigated, he found the situation to be as stated above. He, thereupon, brought a bill in equity to have the transaction set aside.

Benedict contended that Burrs' prayer for cancellation of the contract should be denied. He admitted that he had seriously misrepresented the situation, but contended that, since he was innocent in doing so, there was no ground for cancellation of the contract.

Decision

Misrepresentation of a material character made by one person to another in entering into a contract, renders the contract voidable, however innocently the misrepresentations were made. In such a case, it cannot be said that the other party ever really consented to such an agreement. In this case, no doubt Benedict had no intention of misinforming Burr as to the land; but his statements did mislead him as to very material facts. The consent of Burr to such a contract can in no wise be said to be real. Therefore, a Court of Equity will cancel such an agreement.

Mr. Justice Foster very clearly states the principles involved: "There can be no doubt of the full equity jurisdiction of this Court to set aside a conveyance of land on the grounds of mistake, where the vendor has undertaken to sell something which he did not own, and the estate embraced in the deed, although owned by him, is not that which the vendee intended to buy and supposed that he was obtaining by the conveyance. In such a case, the equity for a rescission of the transaction does not depend upon intentional fraud on the part of the grantor; and it is by no means limited to cases in which an action for deceit would lie at common law. Relief is granted upon the ground that it would be inconscientious to oblige a man, who has not been himself negligent or in fault, to adhere to his bargain, and to retain property where he was induced by a misapprehension as to the material and essential circumstances, which he was led into by the conduct of the other party".

Accordingly, judgment was given for Norman Burr.

Ruling Law. Story Case Answer

It has just been stated that, as a general rule, an innocent misrepresentation does not affect the validity of a contract. But it was also seen that the fact represented might become a condition upon which the parties contract. If this be the case no contract is ever made. However, there are certain contracts in which it is held that every innocent misrepresentation does affect the validity of a contract, and entitles the injured party to have the contract cancelled or set aside in a court of equity. Every representation is said to be material. This is true of contracts to sell land. In such a case, if one party, however, innocently, makes a misrepresentation as to the land, this will give the other the right to have the transaction set aside. In the Story Case, the statement by James Lyle that the land contained 276 acres was a material fact in the agreement, and although it was innocently made, it entitles Mr. Shull to have the transaction set aside.