Sec 250

Fraud, as a basis for avoiding a bargain (as distinguished from fraud as a basis for a suit for deceit), involves an error of the party on whom the imposition was effected. There was no consent of two minds to the same thing, therefore, there was no contract. Hence it follows that when there is no distortion of truth, there can be no claim that a contract is void on account of fraud. Mere suppression of information a party may have, no matter how greatly such information might affect the price of the article in which he is dealing, does not affect the validity of a contract he may make concerning it, provided there is no misstatement by him, either express or implied, of facts calculated to mislead the other party.2 Persons dealing in stocks, for instance, may secure, by peculiar activity and large outlay (as was the case with the Rothschilds during the close of the wars of Napoleon I.), private information of political events calculated to have a great effect on the market; but their non-disclosure of such information will not invalidate any purchase or sale they may make. If all that a vendor of railway stock knows about the stock was to be published before he effected a valid sale, the process of selling by intelligent operators would be so protracted that there would be few sales of railway stock except by persons who keep themselves stupidly ignorant of the securities in which they deal. - " If a vendee has private knowledge," says Judge Story, "of a declaration of war, or of a treaty of peace, or of other political arrangements (in respect to which men speculate for themselves) which materially affect the prices of commodities, he is not bound to disclose the fact to the vendor at the time of his purchase;1 but, at least in a legal and equitable sense, he may innocently be silent. - For there is no pretence to say that upon such matters men repose confidence in each other, any more than they do in regard to other matters affecting the rise and fall of markets."2 A party doing business is expected to inform himself of whatever ordinary business sagacity could advise him as to such business; and the other party is under no duty to communicate such facts to him.3 - Chancellor Kent4 states the law as follows: "When the means of information relative to facts and circumstances affecting the value of the commodity are equally accessible to both parties, and neither of them does or says anything tending to impose upon the other, the disclosure of any superior knowledge, which one party may have over the other, as to those facts and circumstances, is not requisite to the validity of a contract. There is no breach of any implied confidence that one party will not profit by his superior knowledge as to facts and circumstances open to the observation of both parties, or equally within the reach of their ordinary diligence; because neither party reposes in any such confidence, unless it be specially tendered or required. . . . The common law affords to every one reasonable protection against fraud in dealing; but it does not go to the romantic length of giving indemnity against the consequences of indolence and folly, or a careless indifference to the ordinary and accessible means of information."5 - Cicero6 takes a very high view of the duties, in this respect, of contracting parties, arguing that each party is bound to disclose any special information he may have as to the bargain which the other party may not possess. "But this statement," so comments Judge Story,1 "is not borne out by the acknowledged doctrines, either of courts of law or of equity, in a great variety of cases. However correct Cicero's view may be of the duty of every man, in point of morals, to disclose all facts to another with whom he is dealing, which are material to his interests, yet it is by no means true that courts of justice generally, or at least in England and America, undertake the exercise of such a wide and difficult jurisdiction. Thus it has been held by Lord Thurlow (and the case falls precisely within the definition of Cicero of undue concealment), that if A., knowing there to be a mine in the land of B., of which he knows B. to be ignorant, should, concealing the fact, enter into a contract to purchase the estate of B. for a price which the estate would be worth without considering the mine, the contract would be good; because A., as the buyer, is not obliged, from the nature of the contract, to make the discovery. In such cases the question is not, whether an advantage has been taken, which, in point of morals, is wrong, or which a man of delicacy would not have taken. But it is essentially necessary, in order to set aside the transaction, not only that a great advantage should be taken, but also that there should be some obligation on the party to make the discovery."2 The right view is thus forcibly stated by President Wayland: "And, in the first place, I would remark that the moral precept respecting veracity is not a positive but merely a negative precept. It does not command us to bear witness, it merely forbids us to bear false witness. It does not direct us either when or what we shall speak; but it forbids us whenever we do speak, to utter anything except the simple verity. Hence, our duty, in respect to what we shall promulgate, saving only that we must not promulgate falsehood, is entirely unaffected by this command. It will indeed be seen, upon the slightest reflection, that this is the only precept that could have been given on this subject. The mere fact that anything is true is no reason whatever why we should promulgate it. Were of them died, while other pigs belonging to the plaintiff were infected by the disease. The court of queen's bench held that the sending the pigs to the market involved a negation of their being subject to a contagious disease such as that prohibited by the statute. This was reversed by the court of appeal, on the ground that there was no suppression amounting to a negation of a truth, and the judgment of the court of appeal was affirmed in the house of lords.1 - In an Illinois case in 1880, the evidence was that V. sold to P. one engine from a building which had been damaged by fire. The bed of the engine, which, subsequent to the fire, had been repaired, contained several cracks of which V. was cognizant, but which he did not point out to P., who could have discovered them by inspection. The engine was sold to P. as second-hand. P. employed an engineer to examine it, who did not observe the cracks. It was held that it was not incumbent on V. to inform P. either that the engine had been damaged by fire, or that it was cracked, as there was nothing said by him that involved a negation of these facts.2

Non-dis-closure of facts which business sagacity would dis-corer does not avoid contract.

1 Infra, sec 251.

2 Attwood v. Small, 6 Cl. & F. 232; supra, sec 246.

1 See on this point, infra, sec 251.

2 Story, Eq. Jur. 12th ed. sec 149; citing Pothier, Traite de Vente, pt. 2, ch. 2; Abbott v. Dermott, 34 Ga. 227.

3 Carter v. Bochm, 1 W. Bl. 593; Pimm v. Lewis, 2 F. & F. 778; Haley v. Ins. Co., 12 Gray, 545; Herring v. Scaggs, 62 Ala. 180; Boggs v. Ins. Co., 30 Mo. 63; Lanier v. Auld, 1 Murph. 138; Maney v. Porter, 3 Humph. 347.

4 Com. II. Let. 39.

5 This is adopted by Judge Story, Eq. Jur. 12th ed. sec 198. To same general effect, see Hanson v. Edgerly, 29 N. H. 343; Howard v. Gould, 28 Vt. 523; Paddock v. Strobridge, 29 Vt. 470; Kintzing v. McElrath, 5 Barr, 467; Harris v. Tyson, 24 Penn. St. 347; Westmoreland v. Dixon, 4 Hayw. 227.

6 De Off. Lib. 3, cap. 13.

1 Eq. Jur. 12th ed. sec 205.

2 Fox v. Mackreth, 2 Bro. Ch. 400; it otherwise, every man would be under obligations to tell every one whom he saw, every thing that he knew. Everything, whether bad or good, must be made a matter of universal publicity. The confidence of the most intimate friend-ships must be violated as a matter of religious duty. The domestic fireside would cease to be a sanctuary. The tortures of such a situation would be beyond endurance. Every man would flee to solitude as a refuge from society, which had thus become an intolerable nuisance. It being evident, then, that the fact that a thing is true is no reason for promulgating it, we naturally inquire what additional element must be combined, in order to render the promulgation of it obligatory. We answer, if the fact that a thing is true impose no obligation, the obligation must be derived from the general will of God, either expressed in revelation, or inferred from a consideration of the general consequences belonging to each particular case."1 - What has been said applies equally to an action for deceit. If an illusory agreement has been produced by a designedly false material statement, or by a suppression of material truth amounting to a falsification, then an action of deceit lies against the party stating the falsehood or suppressing the truth. But the truth suppressed, in order to found such an action, must be something the party suppressing was bound to state, and the negation of which his words or his conduct actively implied.2 - An English case finally decided in 18803 may be cited as illustrating the distinctions of the text. The defendant, in defiance of the prohibitions of 32 & 33 Vict. c. 78, sent to market a collection of pigs which, to his knowledge, were infected with a contagious disease; and the pigs were bought by the plaintiff, in whose hands some.

1 Wh. & Tu. Eq. L. C. 4th Am. ed.

1 The Limitations of Human Responsibility, by Francis Wayland, Boston, 1838; a work as remarkable for strong sense as for true philanthropy.

2 Ibid. Smith v. Hughes, L. R. 6 Q. B. 597; Peek v. Gurney, L. R. 6 H. L. 403; Laidlaw v. Organ, 2 Wheat. 178; Hanson v. Edgerly, 29 N. H. 343; Foster v. Peyser, 9 Cush. 242; Fisher v. Birdlong, 10 R. I. 525; Otis v. Raymond, 3 Conn. 413; Hadley v. Imp. Co., 13 Oh. St. 502; Mitchell v. Mc-Dougall, 62 111. 498; Caples v. Steel, 7 Oregon, 491; Van Arsdale v. Howard, 5 Ala. 596.

3 Ward v. Hobbs, L. R. 3 Q. B. D. 150; reversing S. C, L. R. 2 Q. B. D. 33; and aff. in H. of L., L. R. 4 Ap. C. 13; cited supra, sec 222, 229; and see Anson, 146.