The term "fraud" is one which is used in a variety of meanings. It is used as the name of a tort at common law; as a name for false representations which will enable the defrauded party to avoid liability upon a contract at common law; and as a name for such unfair dealing as will induce a court of equity to refuse specific performance against the party who has been deceived by such fraud, or in some cases to grant rescission upon his application. No general definition can be framed which will include all these different ideas. These ideas which have little in common except that an unfair and unconscientious advantage has been taken by one party of another. At common law fraud was used in at least the two different senses which have been indicated. When used as the name of the wrong for which the action of deceit would lie, the term "fraud" had a fairly exact meaning. It consisted of a false representation of a material fact made bv one who knew that it was false or in some cases who made a positive statement when he knew that he had not information sufficient to warrant his belief in the truth of such statement, made to one who did not know that it was false, with intent to deceive such person and to influence his action, which did deceive such person and influence his action to his damage.1 In addition to this meaning, it was also used to include the false statements made by one party to a contract which were of such a sort and produced such an effect that the other party could treat such contract as absolutely void if the false statement concerned an essential element of such contract;2 and also which were made under such circumstances that the adversary party could avoid such contract by his own acts at law in some cases; and in other cases he could have such contract set aside in equity, if the fraud concerned a collateral or material fact.3 As the term was originally used in the law of contracts,"fraud," for which a contract may be avoided, or which makes such contract void ab initio, has substantially the same elements as fraud in the law of torts.4 Other definitions lay emphasis upon the falsity and materiality of the representation and of the injuries suffered from action in reliance thereon, but minimize or ignore the wrongful intent of the party by whom such representation is made.5 This modification of the common-law definition is in part due to the influence of the equitable idea of fraud and in part due to the effect of the doctrine of innocent misrepresentation in jurisdictions in which a contract may be avoided at law for innocent misrepresentation.6
1 Deny v. Peek, L. R. 14 App. Cos. 337.
2 Seech. VII.
3 See Sec. 339 et seq.; Peek v. Gurney, L. R. 6, H. L. 377. "To constitute actionable fraud, it must be made to appear: (1) That defendant made a material representation; (2) that it was false; (3) that when he made it he knew that it was false, or made it reckleesly, without any knowledge of its truth and as a positive assertion; (4) that he made it with the intention that it should be acted upon by plaintiff; (5) that plaintiff acted in reliance upon it; (6) that he thereby suffered injury; and (7) that all these facia must be proven with a reasonable degree of certainty, and all of them must be found to exist; the absence of any of them would be fatal to a recovery;" Wingate v. Render, - Okla. - , 160 Ac. 614 [quoted in Henry v. Collier, - Okla. - , 169 Ac. 636, and in Dieterle v. Harris, - Okla. - , 169 Ac. 873].
4 United States. Cooper v. Schlesinger, 111 U. S. 148, 28 L. ed. 382; King v. Lamborn, 186 Fed. 21, 108 C. C. A. 123.
Alabama. Crooker v. White, 162 AKa. 476, 50 So. 227; Empire Life Ins. Co. v. Gee, 171 Ala. 435, 55 So. 166; Empire Life Ins. Co. v. Gee, 178 Ala. 492, 60 So. 90.
Arkansas. Parker v. Boyd, 108 Ark. 32, 156 S. W. 440.
Colorado. Sellar v. Clelland, 2 Colo. 532.
Florida. Wheeler v. Baars, 33 Fla. 696, 15 So. 584; Mizeli v. Upchurch, 46 Fla. 443, 35 So. 9.
Georgia. Emlen v. Roper, 133 Ga. 726, 66 S.E. 934.
Illinois. Antle v. Sexton, 137 III. 410, 27. N. E. 691 [affirming 32 III. App. 437]; Crocker v. Manley, 164 III. 282, 56 Am. St. Rep. 196, 45 N. E. 577; Prentice v. Crane, 234 111. 302, 84 N. E. 916; Gillespie v. Fulton Oil & Gas Co., 236 III. 188. 86 N. E. 210; Prout v. Hoy Oil Co., 263 111. 54, 105 N. E. 26; Wachsmuth v. Martini, 45 111. App. 244.
Maine. Atlas Shoe Co. v. Bechard, 102 Me. 197, 10 L. R. A. (N.S.) 245, 66 Atl. 390; Hotchkiss v. Bon Air Coal & Iron Co., 108 Me. 34, 78 Atl. 1108.
Michigan. Hoeft v. Kock, 119 Mich. 458, 78 N. W. 666.
Missouri Bank v. Byers, 139 Mo. 627, 41 8. W. 325.
Montana. Power v. Turner, 37 Mont. 621, 97 Ac. 950.
Nebraska. Spencer v. Johnston, 58 Neb. 44, 78 N. W. 482; Hitchcock v. Irrigation Co. (Neb.), 95 N. W. 638; York v. Boomer, 94 Neb. 62, 142 N. W. 689.
New York. Arthur v. Griswold, 55 N. Y. 400; Brackett v. Griswold, 112 N. Y. 454, 20 N. E. 376; Kountze v. Kennedy, 147 N. Y. 124, 49 Am. St. Rep. 651, 29 L. R. A. 360, 41 N. E. 414; Adams v. GilMg, 199 N. Y. 314, 92 N. E. 670 [affirming 115 N. Y. S. 999, 131 App. Div. 494].
Ohio. Spencer v. King, 3 Ohio N. P. 270.
Oklahoma. St. Louis & San Francisco R. Co. v. Reed, 37 Okfta. 350, 132 Ac. 355.
Pennsylvania. Hexter v. Bast, 125 Pa. St. 62, 11 Am. St. Rep. 874, 17 Atl. 252.
Virginia. Lake v. Tyree, 90 Va. 719, 19 S. E. 787; Dudley v. Minor's Executor, 100 Va. 728, 42 S. E. 870; Scott v. Boyd, 101 Va. 28, 42 S. E. 918.
West Virginia. Tolley v. Poteet, 62 W. Va. 231, 57 S. E. 811; Home Gas Co. v. Mannington Co-operative Window Glass Co., 63 W. Va. 266, 61 S. E. 329.
The fraud which furnishes the foundation for an action of deceit or for rescission in equity exists where a person makes a false representation of a material fact susceptible of knowledge, when he does not know whether it is true or false, with intention to induce the person to whom it is made, in reliance upon it, to do something to his pecuniary hurt, where such person acting with reasonable prudence. is thereby deceived and induced so to do to his damage": Martin v. South Bluefield Land Co., 81 W. Va. 62, 94 S. E. 493. See also, Definition of Fraud, by Melville M. Bigelow, 3 Law Quarterly Review, 419.
5 Alabama. Stone v. Walker, - Ala. - , 77 So. 554.
Michigan. Weinberg v. Ladd, 199 Mich. 164, 165 N. W. 711.
Minnesota. Corse v. Minnesota Grain Co., 94 Minn. 331, 102 N. W. 728.
Oklahoma. Choctaw Cotton Oil Co. v. Williams, - Okla. - , 168 Ac. 792.
Wyoming. Taylor v. First National Bank, 25 Wyom. 204, 167 Ac. 707.
"A material! false statement, relied upon by the other party in ignorance of its falsity, and which materially influences him to enter into the contract, constitutes a fraud which will authorize a rescission: [Sledge v. Scott, 56 Ala. 202; Perry v. Johnston, 59 Ala. 648; Davis v. Betz, 66 Ala. 206; Rice v. Gilbreath, 119 Ala. 424, 24 So. 421; Brewer v. Arantz, 124 Ala. 127, 26 So. 922; Moore v. Barber Asphalt Pav. Co., 118 Ala. 503, 23 So. 798"]; Stone v. Walker, - Ala. - , 77 So. 554. Upon this question, see also, Fricke v. International Harvester Co., 247 Fed. 869.
6See Sec. 376.
Wherever it becomes material, equity is inclined to refuse to be bound by a rigid definition and to extend the term "fraud" to any sort of unfair dealing by reason of which it will refuse specific performance as against the defrauded party or in some cases will grant rescission at his instance.7 Constructive fraud, therefore, though not a very appropriate name, has a well-recognized place in law.8 At the same time it must be admitted that many of the definitions of fraud in equity enumerate about the same elements as are included in the definition of fraud as a tort.9 Where this definition is found in equity, however, it is usually in a case in which fraud is found to exist. The definition is not applied so as to prevent relief in every case in which any of such elements is lacking.
A good illustration of the different uses of the term "fraud" is to be found in the most celebrated classification of the kinds of fraud. "1. Then fraud, which is dolus malus, may be actual, arising from facts and circumstances of imposition; which is the plainest case. 2. It may be apparent from the intrinsic nature and subject of the bargain itself; such as no man in his censes and not under delusion would make on the one hand, and as no honest and fair man would accept on the other; which are unequitable and unconscientious bargains; and of such even the common law has taken notice, for which, if it would not look a little ludicrous, might be cited I Lev. III. James v. Morgan. A third kind of fraud is, which may be presumed from the circumstances and condition of the parties contracting; and this goes farther than the rule of law; which is, that it must be proved, not presumed, but it is wisely established in this court to prevent taking surreptitious advantage of the weakness or necessity of another, which knowingly to do is equally against conscience as to take advantage of his ignorance; a person is equally unable to judge for himself in
7 See Definition of Circumvention, by Melville M. Bigelow, 5 Law Quarterly Review, 140. See Sec. 405 et seq. For a broad statutory definition, see Choctaw Cotton Oil Co. v. Williams, - Okla. - , 168 Ac. 792.
8 See ch. XVI.
9 Prentice v. Crane, 234 III. 302, 84 N. E. 916; Home Gas Co. v. Manning-ton Co-operative Window Glass Co., 63 W. Va. 266, 61 S. E. 329.
"The burden of proof is on the complainant; and unless he brings evidence sufficient to overcome the natural presumption of fair dealing and honesty, a court of equity will not be justified in setting aside a contract on the ground of fraudulent representations. In order to establish a charge of this character the complainant must show by clear and decisive proof -
First. That the defendant has made a representation in regard to a material fact; one as the other. A fourth kind of fraud may be collected or inferred in the consideration of this court from the nature and circumstances of the transaction, as being an imposition and deceit on the other persons not parties to the fraudulent agreement."10 Under this classification the first type of fraud is substantially the same as fraud at common law.11 The second class of fraud as here given is the unconscionable contract.12 The third type of fraud includes constructive fraud,13 and possibly undue influence.14 The fourth type of fraud has nothing to do with the fraud which is exercised by one party to a contract to another and does not affect the validity of the assent in any way. It is an example of illegal subject-matter. In this type of fraud the parties to the contract agree to commit a fraud upon a third party, or upon the public at large, or upon the government.15
Fraud must be distinguished from other legal ideas. It differs from mistake in that the statement of the adversary party is the cause of the false impression in fraud, while it can not be so in mistake. It differs from misrepresentation in that a misrepresentation is made by one who believes it to be true and has reasonable ground for such belief, while fraud is committed by one who knows that his statement is false, or who makes it positively without reasonable grounds for believing it to be true. It differs from nondisclosure in that in fraud the party against whom relief is sought does something by word or deed to mislead the adversary party, while in non-disclosure he merely omits to give information.16