This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
11 Hemphill v. Miller, 75 111. App. 488. If he can not regain the realty which he has received under the contract, and which he has conveyed in turn, he can not have rescission. Cain v. Hed-den (6a.), 98 S. E. 262.
12 Yeoman v. Lasley, 40 0. S. 190.
13 Clark v. Wells, 127 Minn. 353, L. R. A. 1916F, 476, 149 N. W. 547.
14 Clark v. Wells, 127 Minn. 353, L. R. A. 1916F, 476, 149 N. W. 547.
15 Basye v. Paola Refining Co., 79 Kan. 755, 25 L. R. A. (N.S.) 1302, 101 Ac. 658.
16 Louisville & Nashville Ry. Co. v. Helm, 121 Ky. 645, 89 S. W. 709.
17 Louisville & N. R. Co. v. Helm, 121 Ky. 645, 89 S. W. 709.
18 Glisson v. Paducah Ry. & Light Co. (Ky.), 87 S. W. 305.
19 Schofield v. Schiffer, 156 Pa. St. 65, 27 Atl. 69.
20 Creveling v. Banta, 138 la. 47, 115 N. W. 598; Bowe v. Gage, 127 Wis. 245, 115 Am. St. Rep. 1010, 106 N. W. 1074.
L required to restore what he received under the contract in exchange for a cause of action against an insolvent debtor.21
If the property received by the person defrauded is worthless,22 or if its value is trifling,23 he need not offer to return it in order to rescind; The party seeking relief need not restore anything not received by him under the contract which he is seeking to avoid.24 He need not, of course, restore what he has received under some other contract which he is not seeking to avoid.25 If the fraud complained of consists in fraud between the agent of the defrauded party and the party guilty of fraud, the defrauded party need not restore what has been paid to such agent on his own account,26 but in such cases the defrauded party must, at least, notify the adversary party of his intention to rescind and give him an opportunity to take control of such property.27 If there is no fraudulent combination between the party guilty of fraud and the agent of the adversary party, the party seeking relief must tender what has been paid to such agent as commission.28 So he need not tender to the party against whom he seeks relief an amount paid to him by a third party.29 If the party guilty of fraud is placed in statu quo rescission for such fraud may be granted.30 The defrauded party is bound to restore to the party who is guilty of the fraud only what he received from such party.31 If A fraudulently represents to B that certain land is not subject to entry because a homestead has been filed thereon, but that A would secure relinquishment of such filing, for a certain sum, it is not necessary that B should abandon such land as a condition precedent to avoiding such contract and recovering such payment.32 If A has been induced by the fraud of an insurance company to pay premiums upon a policy, the possible liability of the insurance company upon such policy was not such a benefit to the defrauded party that he must make compensation therefor as a condition precedent to avoiding such contract and recovering payments thus made.33 If the beneficiary of an insurance policy which has matured is induced to enter into a compromise by the fraudulent representation of the insurance company •to the effect that such policy had lapsed by reason of failure to pay dues, it is said that the insured need not tender back what he received under such compromise, but that he may sue for the amount of the policy, and that the jury may deduct the amount paid under such contract of compromise.34 If the amount which is paid under a contract obtained by fraud is due whether such contract is held to be valid or invalid, it is not necessary for the defrauded party to restore what he has thus received as a condition precedent to rescinding such contract of fraud.35 If a creditor is induced to give an extension of time by the fraudulent statement of the principal debtor to the effect that the surety has consented to such extension and under such contract for an extension such principal debtor pays interest upon such debt, the creditor is not bound to restore to the principal debtor the interest thus paid, since in the contract for the extension of time such interest is due thereunder, while if it is invalid such interest is due upon the original obligation.36 If a release of damages for personal injury is signed by one who is unable to read the language in which such release is written, and who signs such release and accepts a sum of money in reliance upon the statement of the adversary party that such sum of money is payment for the services of the attending physician, and that the written instrument is merely a receipt therefor, it has been held that it is not necessary to return the consideration.37 This principle may apply where the fraudulent representation relates to the only defense which the party who is guilty of fraud sets up to his liability upon the original obligation. In such a case, if fraud is shown to exist, the same evidence establishes the fact that the party who is guilty of fraud is liable upon the original obligation. A different result would be reached where the party who is charged with fraud sets up defenses to the original obligation which involve facts other than those about which he made the alleged fraudulent statement. The omission of the defrauded party to restore what he received under a contract of compromise can not be justified under the theory that such amount is due to him if such contract of compromise is upheld, and that if such contract of compromise is held to be invalid, it should be credited upon his original cause of action; since it is possible that the contract of compromise may be held to be invalid for fraud, and yet the defrauded party may fail upon his original cause of action.38 In cases of informal rescission at law the party seeking relief must, as a condition precedent to maintaining his action, place the adversary party in statu quo, or make tender thereof.39 In a suit for formal rescission in equity it is not a condition precedent to bring the suit that the defrauding party be placed in statu quo. It is sufficient if the defrauded party is ready and willing so to place the adversary party.40 If the thing received by the defrauded party is surrendered at the trial of the action it is sufficient.41 The decree of rescission must itself provide for restoration, however, if the defrauding party has not been placed in statu quo before commencement of the suit.42 The duty to place the party guilty of fraud in statu quo is waived by his refusal to receive it and to return what he has received, and formal tender is thus waived.43 There is, however, some authority to the effect that even in equity the defrauded party must return what he has received under the contract as a condition precedent to maintaining a bill for rescission.44 It is said that a bill in equity to set aside a release on the ground of fraud must allege that the defrauded party returned the consideration which he received under such contract, and that an allegation that plaintiff was unable to return such consideration is not sufficient.45 If the defense of fraud is interposed in an action on an executory contract, it is not necessary as a condition precedent to making such defense to place the adversary party in statu quo.46
21 Creveling v. Banta, 138 la. 47, 115 N. W. 598.
22 Larkin v. Mullen, 128 Gal. 449, 60 Ac. 1091; Cheney v. Powell, 88 Ga. 629, 15 S. E. 750; Higham v. Harris, 108 Ind. 246, 8 N. E. 255; Hess v. Young, 59 Ind. 379; Childs v. Merrill, 63 Vt. 463, 14 L. R. A. 264, 22 Atl. 626.
23 Pidcock v. Swift, 51 N. J. Eq. 405, 27 Atl. 470.
24 Hargadine-McKittrick Dry Goods Co. v. Dry Goods Co., 65 Kan. 572, 70 Ac. 582.
25 Petty v. Ry., 109 Ga. 666, 35 S. E. 82 [distinguishing Butler v. R. R., 88 Ga. 594, 15 S. E. 668]; Helvetia
Copper Co. v. Hart-Parr Co. (Minn.), 171 N. W. 272.
26 MortIand v. Mortland, 151 Pa. St. 593, 25 Atl. 150.
27 Henniger v. Heald, 52 N. J. Eq. 431, 29 Atl. 190.
28 Wood v. Nichols, 6 Wash. 96, 32 Ac. 1055, 35 Ac. 140.
29 Whitmire v. Boyd, 53 S. Car. 315, 31 S. E. 306.
30 Harvey v. Morris, 63 Mo. 475.
31 Martin v. Hutton, 90 Neb. 34, 36 L. R. A. (N.S.) 602, 132 N. W. 727.
32 Martin v. Hutton, 90 Neb. 34, 36 L. R. A. (N.S.) 602, 132 N. W. 727.
33 Kettlewell v. Refuge Assur. Co. [19081, 1 K. B. 545, 3 B. R. C. 844, 77 L. J. K. B. N. S. 421, 07 L. T. N. S. 896.
34 Industrial Mutual Indemnify Co. v. Thompson, 83 Ark. 575, 119 Am. St. Rep. 149, 104 S. W. 200.
35 Arkansas. Industrial Mutual Indemnity Co. v. Thompson, 83 Ark. 575, 119 Am. St. Rep. 149, 104 S. W. 2002.
California. Matteson v. Wagoner, 147 Cal. 739, 82 Ac. 436.
Kansas. Missouri Pacific Ry. Co. v. Goodholm, 61 Kan. 758, 60 Ac. 1066.
Ohio. Bebout v. Bodle, 38 O. S. 500.
Wisconsin. Bowe v. Gage, 127 Wis. 245, 115 Am. St. Rep. 1010, 106 N. W. 1074.
36 Bebout v. Bodle, 38 O. S. 500.
37 Spring Valley Coal Co. v. Buzis, 213 111. 341, 72 N. E. 1060.
38 Insurance Co. v. Hull, 51 0. S. 270, 37 N. E. 1116 [distinguished, Manhattan Life Insurance Co. v. Burke, 69 O. S. 294, 70 N. E. 74]; Gilmore v. Western Electric Co. (N. D.), 172 N. W. 111; Hadley v. Hadley, 79 Or. 573, 165 Ac. 106.
39 Rigdon v. Walcott, 141 111. 649, 31 N. E. 158; Mortimer v. McMullen, 202 III. 413, 67 N. E. 20.
40 United States. Thackrah v. Hasa, 119 U. S. 499, 30 L. ed. 486.
Indiana. Shull v. Shull, 100 Ind. 477; Higham v. Harris, 108 Ind. 246, 8 N. E. 255.
Massachusetts. Thomas v. Beals, 154 Mass. 51, 27 N. E. 1004.
Montana. Maloy v. Berkin, 11 Mont. 138, 27 Ac. 442.
New York. Gould v. Bank, 86 N. Y. 75.
Wisconsin. Paetz v. Stoppleman, 75
Wis. 510, 44 N. W. 834; Ludington v. Patton, 111 Wis. .208, 86 N. W. 571.
"There was no necessity for an offer to return the consideration before the bill was brought. A bill in equity is not, like an action at law, brought on the footing of a rescission previously completed. * * * The foundation of the bill is that the rescission is not complete and that it asks the aid of the court to make it so." Thomas v. Beals, 154 Mass. 51, 27 N. E. 1004 [quoted in Ludington v. Patton, 111 Wis. 208, 86 N. W. 571].
Becker v. Trickel, 80 Wis. 484, an action in equity in which it was held that an offer to restore is necessary before suing in equity is overruled in Ludington v. Patton, 111 Wis. 208, 86 N. W. 571.
41 Thurston v. Blanchard, 39 Mass. (22 Pick.) 18, 33 Am. Dec. 700.