Sec 255

It has been said by high authority that parties proposing to the public a business enterprise are bound to disclose all knowledge they may have as to the enterprise, "and not only to abstain from stating as fact that which is not so, but to omit no one fact within their knowledge the existence of which might in any degree affect the nature, extent, or quality of the privileges and advantages which the prospectus holds out as inducement to take shares."2 - But if this be the law, parties appealing to the public for support in complicated business enterprises would be obliged either to publish exhaustive treatises on the subject involved, or to conveniently limit their knowledge. If they could omit in their statements " no fact within their knowledge" which in any way bore on the question, they would have to take care not to know too much, and igno-

Proposer of business bound to give a fair statement.

1 Fox v. Mackreth, 2 Bro. Ch. 400; 1 Wh. & Tu. Lead. Cas. Eq. 4tlx Am. ed. 188; Haygarth v. Wearing, L. R. 12 Eq. 320; Laidlaw v. Organ, 2 Wheat. 178; Martin v. Jordan, 60 Me. 531; Fitzsimmons V. Joslin, 21 Vt. 129; Bank of Republic v. Baxter, 31 Vt. 101; Harris v. Tyson, 24 Penn. St. 347; Watts v. Cummins, 59 Penn. St. 84; Lungren v. Pennell, supra, sec 252; Shaeffer v. Sleade, 7 Blackf. 178; Emmons v. Moore, 85 111. 304; Yoste v. Laugliran, 49 Mo. 599; Hastings v. O'Donnell, 40 Cal. 148. See Merriam p. Lapsley, 12 Fed. Rep. 457, where a more extended liability is assumed. That a party is under such circumstances estopped by his silence, see supra, sec 253. 2 Kindersley, V. C, in New Brunswick R. R. v. Muggeridge, 1 Dr. & Sm. 381, approved by Lord Chelmsford in ranee, rather than diligence and study, would be encouraged in those conducting such enterprises. The better rule was subsequently stated by Lord Cairns, that non-disclosure will not vitiate a contract of this class unless it work a perversion of facts.1 But when there is such a perversion produced by non-disclosure, it exposes the parties concerned to liability.2 And this rule has been applied to misleading statements as to theamount of shares subscribed to a company,3 or as to the value of its property.4 sec 255 a. It is ruled in England that there is "a fiduciary relation between a promoter and the company in its corporate capacity, which imposes on the promoter the duty of full and fair disclosure in any transaction with the company, or even with persons provisionally representing the inchoate company before it is formed."5 And by statute adopted in 1867, it is made the duty of the promoters of a company to disclose in the prospectus any previous contract entered into by the company or the promoters; in default of which, the prospectus is to be deemed fraudulent in respect to any one taking shares on faith of the prospectus.6.

Sec 256

Ordinarily, parties who enter on business negotiations do so at their own risk, so far as concerns information on the subject with which they deal, the reason being that the one has as great an opportunity of acquaintance with the facts as the other. We have seen, however, that a party who takes upon himself the duty of notifying to another a particular condition of things is as much liable for an omission which makes his communication in the main false, as he is for a misstatement that involves entire falsification; and that, in fact, an omission under such circumstances to state a qualifying fact is a negation of that qualifying fact.1 We have also seen that this is the case with proposers of business enterprises and promoters of companies; and we will see in the next section that it is so with parties taking part in family negotiations. In this section we have to notice the most conspicuous illustration of the proposition before us - that which arises in insurance applications. An applicant for an insurance, in fact, is in the attitude of a person who is called upon to report not merely on a particular state of facts, but on a state of facts peculiarly within his own knowledge. Hence it has been held that "the law as to a contract of insurance differs from that as to other contracts, and that a concealment of a material fact, though made without any fraudulent intention, vitiates the policy."2 The suppression, therefore, of any material fact by a party seeking an insurance prevents the insurance from attaching.3 An insurer is entitled to hear from the applicant all facts within the applicant's distinctive knowledge which are material to the application; and the withholding of such facts vitiates the policy.4 The facts, however, must be either known to the applicant, or of such a character that they ought to be known to him.5 Whether the concealed fact is one which the applicant knew or ought to have known is for the jury.6 The fact also must be material, and So of promoters of company.

Applicants for insurance are bound to state all material facts.

Venezuela R. R. Co. v. Kisch, L. R. 2 H. L. 113.

1 Peek v. Gurney, L. R. 6 H. L. 403.

2 Ibid.; Henderson v. Lacon, L. R. 5 Eq. 263; Oakes v. Turquand, L. R. 2 H. L. 325.

3 Wright's case, L. R. 7 Ch. 55; Moore's case, L. R. 18 Eq. 661.

4 Reese River Co. v. Smith, L. R. 4 H. L. 64; aff. S. C, L. R. 2 Ch. 604.

5 Pollock, 3d ed. 522; citing New Sombrero Phosphate Co. v. Erlanger, L. R. 5 Ch. D. 73; aff. H. L. under name <of Erlanger v. New Sombrero.

Phosphate Co., L. R. 3 Ap. Ca. 1218; Bagnell v. Carlton, L. R. 6 Ch. D. 371. 6 See comments in Pollock, 3d ed. 523; and as construing the statute see Gover's case, L. R. 20 Eq. 114; 1 Ch. D. 182; Twycross v. Grant, L. R. 2 C. P. D. 469; Sullivan v. Mitcalfe, L. R. 5

C. P. D. 455. That a promoter cannot, if concerned in fraudulent representations for his own profit, be paid for his services out of the funds of the company after it goes into bankruptcy, see Hereford Waggon Co. in re, L. R. 2 Ch.

D. 621.

1 Supra, sec 217, 250.

2 Blackburn, J., Ionides v. Pender, L. R. 9 Q. B. 537; Lewis v. Ins. Co., 10 Gray, 508, cited Anson, 140; Lin-denau v. Desborough, 8 B. & C. 586; Bufe v. Turner, 6 Taunt. 338; Clark v. Ins. Co., 8 How. 235; New Y. Bowery Ins. Co. v. N. Y. Ins. Co., 17 Wend. 359; Hartford Ins. Co. v. Harmer, 2 Oh. St. 452; Arnauld, Insurance, 512.

3 New York Bowery Ins. Co. v. New York Ins. Co., 17 Wend. 359; see supra, sec 217, 249. "The insurer has a right to know the whole truth." May on Ins. 2d ed. sec 200.

4 Kerr on Fraud and Mist. 119; Wheelton v. Hardisty, 8 E. & B. 232; Carter v. Boehm, 3 Burr. 1905; Clark v. Ins. Co., 8 How. 235; Dennison v. Ins. Co., 20 Me. 125; Fletcher v. Ins. Co., 18 Pick. 419; Horn v. Ins. Co., 64 Barb. 81; Evans v. Kneeland, 9 Ala. 42; Walden v. Ins. Co., 12 La. 134.

5 May on Ins. 2d ed. sec 200; Sprott 0, Ross, 16 Ct. of Sess. 1145 (3 Big. Ins. Cas. 421); Ross v. Bradshaw, 1 W. Bl. 312 (4 Big. Ins. Ca. 574); Hall v. Ins. Co., 6 Gray, 185; Mutual Ins. Co. v. Robertson, 59 111. 125.

6 May on Ins. 2d ed. sec 202; Lindenau must be of a character which the applicant knew or ought to have known to have been material.1 As material facts in fire insurance have been held to be the fact that attempts had been made to set fire to the building to be insured,2 and in life insurance that the applicant had been insane twenty years before,3 and that he had not sufficient means to support himself.4 Pregnancy in a woman may be material.5 But facts of which the insurer ought himself, in the due pursuit of his business, to be advised need not be disclosed.6 - Where the applicant makes a special engagement to answer all questions put, the question put must be answered fully and fairly, and any failure in this respect avoids the policy.7 But the entire omission to answer a question, the insurer waiving the right to insist, does not avoid.8 v. Desborough, 3 Man. & R. 45; Geach v. Ingalls, 14 M. & W. 95; Vose v. Ins. Co., 6 Cush. 42; Houghton v. Ins. Co., 8 Met. Mass. 114.

1 Jones v. Ins. Co., 3 C. B. N. S. 65; Clark v. Ins. Co., 8 How. U. S. 235; Dennison v. Ins. Co., 20 Me. 125; Campbell v. Ins. Co., 98 Mass. 381; Mallory v. Ins. Co., 47 N. Y. 52; Mutual Ins. Co. v. Wise, 34 Md. 582; 2 Big. Ins. Cas. 43; Satterthwaite v. Ins. Co., 14 Penn. St. 393; Keith v. Ins. Co., 52 111. 518; Price v. Ins. Co., 17 Minn. 497; Hill v. Ins. Co., 2 Mich. 476; see Burritt v. Ins. Co., 5 Hill, 188; Gates v. Ins. Co., 1 Selden, 469.

2 Curry v. Ins. Co., 10 Pick. 535; Bebee v. Ins. Co., 25 Conn. 51; New-York Bowery Ins. Co. v. N. Y. Ins. Co., 17 Wend. 359; Walden v. Ins. Co., 12 La. 134.

3 Mallory v. Ins. Co., 47 N. Y. 52.

4 Valton v. Ass. Soc, 1 Keyes, 21; but see City Ins. Co. v. Carrugi, 41 Ga. 660; Delahay v. Ins. Co., 8 Humph. 684.

5 Lefavom v. Ins. Co., 1 Phila. 558.

6 Supra, sec 217, 250; Carter v. Boehme, 1 W. Bl. 593; Pimm v. Lewis, 2 F. & F. 778; Foley v. Tabor, 2 F. & F. 663; Haley v. Ins.

Co., 12 Gray, 545; Boggs v. Ins. Co., 30 Mo. 63.

7 May on Ins. 2d ed. sec 206, citing McDonald v. Ins. Co., L. R. 9 Q. B. 328; Jeffries v. Ins. Co., 22 Wall. 47; Hardy v. Ins. Co., 4 Allen, 217; Shaw-mut Ins. Co. v. Stevens, 9 Allen, 332; Chaffee v. Ins. Co., 18 N. Y. 376; Columbia Ins. Co. v. Cooper, 50 Penn. St. 331; North Am. Ins. Co. v. Throop, 22 Mich. 146. As to equivocal questions, see May on Ins. 2d ed. sec 210 et seq. That an agent's concealment is imputable to principal, see May, ut supra, sec 213. That evasive answers concealing the truth are misstatements, see Bliss on Ins. 165; Cazenove v. Ins. Co., 6 C. B. N. S. 437; Perrins v. Ins. Co., 2 E. & E. 317; Smith v. Ins. Co., 49 N. Y. 211; Hartman v. Ins. Co., 21 Penn. St. 466. A concealment by an applicant for life insurance of the fact that his proposal for insurance in other offices had been declined, he having been questioned on this point, is material, and avoids the contract. London Ass. v. Mansell, L. R. 11 Ch. D. 363; 41 L. T. N. S. 225.

8 See Armenia Ins. Co. v. Paul, 91 Penn. St. 520.