It is not necessary in order that a contract may be rescinded for fraud or misrepresentation that the party making the misrepresentation should have known that it was false. Innocent misrepresentation is sufficient. For though the representation may have been made innocently, it would be unjust to allow one who has made false representations even innocently, to retain the fruits of a bargain induced by such representations.86 This is often called a doctrine of courts of equity as distinguished from courts of law, and doubtless in its origin it was such; but, at the present time, it is rather a distinction between a right of rescission on the one hand whether that right is asserted in a court of equity, in a court of law, or without the aid of a court,88 and an action for damages on the other hand. It is, however, a modern doctrine, and though its justice and the weight of authority already in its favor make it clear that it will prevail, there is no little authority for the statement that a right of rescission cannot be established because of misrepresentation, if the misrepresentation though false was made with belief on reasonable grounds in its truth.89 It is to be remembered also
85 Moody v. Cox, [18171 2 Ch. 71; Smith c. Sweeney, 69 Ala. 624; Oliver v. Oliver, 118 Ga. 362, 45 S. E. 232. Compare Fletcher v. Bartlett, 157 Maw. 113, 31 N. E. 760. See further in connection with undue influence, infra, J 1627. In Ennui v. Borner, 100 Fed. 12, 40 C. C. A. 249, the seller sold three cargoes of ore, the price to be fixed on the basis of an analysis made by either of two chemists. The seller requested the buyer to submit a sample for analysis to either chemist he chose. The buyer had a sample analysed by each chemist and sent a copy of the analysis which proved most favorable to himself to the seller with a check based thereon which the seller accepted. The buyer resold the ore in accordance with the other analysis. The court held the buyer was bound to report both analyses, and his failure to do so gave the seller a right to rescind his acceptance of the buyer's check as full payment. See also the remarks of Brewer, J., in Graffenstein b. Epstein, 23 Kans. 443, and Jenkins v. Jenkins, 66 Oreg. 12, 132 Pac. 542.
86 See supra, Sec. 1425. v Redgrave v. nurd, 20 Ch. D. 1; Smith v. Chadwick, 9 A. C. 187; Smith v. Richards, 13 Pet. 26, 10 L. Ed. 42; Perm Mut. L. Ins. Co. v. Mechanics', etc., Trust Co., 72 Fed. 413, 19 C. C. A. 286, 37 U. S. App. 692, 38 L. R. A. 33, 70; In re American Knit Goods Mfg. Co., 173 Fed. 480, 97 C. C. A. 486; Pritchett v. Fife, 8 Ala. App. 462,62 So. 1001; Black .Walton, 32 Ark. 321; Grant, o. Ledwidge, 109 Ark. 297, 160 S. W. 200; Lathrop v. Maddux, 58 Col. 258, 144 Pac. 870; Shelton v. Ellis, 70 Ga. 297; Newman v. Claflin, 107 Ga. 89, 32 S. E. 943; Day v. Lown, 51 Iowa, 364, 1 N. W. 786; Maine v. Midland Inv. Co., 132 la. 272, 109 N. W. 801; Matthey v. Wood, 12 Bush, 293; Atlas Shoe Co. v. Bechard, 102 Me. 197, 66 Atl. 300, 10 L. R. A. (N. S.) 245; Montgomery Door Co. v. Atlantic Lumber Co., 206 Mass. 144, 92 N. E. 71; Bates v. Cash-man, 230 Mass. 167, 119 N. E. 663; Drake v. Fairmont, etc., Co., 129 Minn. 145, 151 N. W. 914; Helvetia Copper Co. v. Hart-Parr Co., 137 Minn. 321, 163 N. W. 665; Peters v. Lohman, 171 Mo. App. 465, 166 S. W. 783; Post v.
Liberty, 45 Mont. 1, 121 Pac. 475; Foulks, etc., Co. v. Thies, 26 Nev. 158, 65 Pac. 373, 90 Am. St. Rep. 6S4; Cowley p. Smyth, 46 N. J. L. 380, 50 Am. Rep. 432; Kountse v. Kennedy, 147 N. Y. 124, 129, 41 N. E. 414, 29 L. R. A. 360, 49 Am. St. 651; Bloom-quist v. Fareon, 222 N. Y. 375, 118 N. E. 855; Leary v. Geller, 224 N. Y. 56, 120 N. E. 31; Zagarino v. Kurzrok, 135 N. Y. App. Div. 763,119 N. Y. S. 907; Simpson v. J. 1. Case Threshing Mack Co., 170 N. Y. S. 166; Pierce v. Tiersch, 40 Ohio St. 168; United States Gypsum Co. v. Shields, 101 Tex. 473, 108 S. W. 1165; Altgelt v. Gerbie (Tex. Civ. App.), 149 S. W. 233; Adams v. Reed, 11 Utah, 480, 40 Pac. 720; Smith v. Columbus Buggy Co., 40 Utah, 580, 123 Pac. 580; Ogden Valley Co. v. Lewis, 41 Utah, 183, 125 Pac. 687; Lowe v. Trundle, 78 Va. 65; Robinson v. Welty, 40 W. Va. 385, 22 S. E. 73; McKinnon v. Vollmar, 75 Wis. 82, 43 N. W. 800, 6 L. R. A. 121, 17 Am. St. Rep. 178; Kathan v. Comstock, 140 Wis. 427, 122 N. W. 1044, 28 L. R. A. (N. 8.) 201.
Most of the foregoing decisions relate to sales of real or personal property, but the principle is generally applicable. A case which frequently arises involves the validity of a release signed by an injured person induced by misrepresentation of a physician employed by the person liable for the injury. In Clark v. Northern Pacific Ry. Co., 36 N. D. 503, 162 N. W. 406\ 407, L. R. A. 1917 E. 399, the court said: - "At 50 L. R. A. (N. S.) 1091, a supplemental note is given, and from an examination of the cases therein cited it is at once apparent that the courts have swung strongly in favor of rescission of the release if the physician made any false representations whether it was his honest opinion or not. Something over twenty cases were decided from the time of the first note in 1906 to the time of the second note in 1914, and since the printing of the note we have found several cases following the law therein announced. The latest of these is Jacobson v. Chicago, etc., Ry. Co., 132 Minn. 181, 156 N. W. 251, L. R. A. 1916 D. 144."
88 As to this, see supra,Sec. 1370.
89 This was so stated by Fuller, C. J., for the court in Southern Development Co. v. Silva, 125 U. S. 247, 250, 31 L. Ed. 678, 8 Sup. Ct. 881; and to the same effect see Crooker v. White, 162 Ala. 476, 50 So. 227; Wainscott v. Occidental Assoc., 98 Cal. 253, 33 Pac. 88; Crocker v. Manley, 164 HI. 282, 45 N. E. 577, 56 Am. St. Rep. 196; J. I. Case Threshing Mach. Co. v.Mo-Kay, 161 N. C. 584, 77 S. E. 848; that rescission presupposes a restoration of the status quo, and this may be impossible, e, g., where after the death of one whose life was insured, the insurer discovers innocent misrepresentations made by the insured in procuring the policy.90 In England the right of rescission for innocent misrepresentation is limited where a contract has been executed on both Bides. It is said by a learned English writer,91 that rescission is allowed in such cases only where there has been fraud or "essential error." 92 No such limitation seems imposed by the American decisions,93 and clearly if the parties can be put in statu quo, there is no sound reason for refusing relief merely because the transaction has been executed.