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.
A misrepresentation is a false statement of a material fact made by one party to a contract to the adversary party, with intent to influence his action, which such adversary party believes and in reliance on which he acts to his damage.1 Misrepresentation is to be distinguished from mistake in that the erroneous belief in misrepresentation is due to the false statement of the other party to the contract, while in mistake such erroneous belief must be due to some other cause.2 It is distinguished from fraud in that in fraud the party making the false statement has actual or constructive knowledge of its falsity,3 and makes the statement with intent to deceive the person to whom it is made;4 while misrepresentation is essentially a bona fide misstatement. It differs from non-disclosure in that in misrepresentation the erroneous belief of one party is caused by the acts of the other; while in non-disclosure it is caused by his omission to speak. While eminent authority treats misrepresentation as in part mistake and in part fraud,5 it possesses peculiarities of its own, and is best discussed as a separate topic. Still it must be admitted that the courts often call it mistake.6 Misrepresentation is said to be "a material mistake of fact caused by the fault of the other party,"7 but such qualification removes the ambiguity arising out of the use of the term "mistake." To add to the confusion, some courts call misrepresentation "legal fraud"8 "construe tive fraud,"9 or ex post facto fraud;10 and definitions are not infrequently found which suggest that the particular authority which framed them looked upon fraud and misrepresentation as synonymous.11
Secondly. That such representation is false;
Thirdly. That such representation was not actually believed by the defendant, on reasonable grounds, to be true; a
Fourthly. That it was made with intent that it should be acted on;
Fifthly. That it was acted on by complainant to hie damage; and,
Sixthly. That in so acting on it the complainant was ignorant of its falsity, and reasonably believed it to be true":
Southern Development Co. v. Silva, 125 U. S. 247, 31 L. ed. 678.
10 Chesterfield v. Janssen, 2 Ves. Sr. 125, 1 Atk. 301, 1 Wife. 286; quoted in Hodges v. Wilson, 105 N. Car. 323, 81 S. E. 340.
11 See ante, this section.
12 See Sec. 641 et seq. 13 See ch. XVI.
14 See ch. XVII.
15 See ch. XXIX and ch. XXX. 16 See Sec. 220 and ch. XIV.
1 Keli v. Trenchard, 142 Fed. 16, 73 C. C. A. 202 [modifying Trenchard v. Kell, 127 Fed. 596]; Vanderbilt v. Bishop, 188 Fed. 971.
2 Hewey v. Metropolitan Life Ins. Co., 100 Me. 523, 62 Atl. 600; Pennington v. Roberge, 122 Minn. 295, 142 N. W. 710.
3 See Sec. 217.
4 See Sec. 317 et seq.
5 Bishop on Contracts, enlarged edition, Sec. 663.
6 Selby v. Matson, 137 la. 97, 114 N. W. 609; Freeman v. Croom, 172 N. Car. 524, 90 S. E. 523; Orowe v. Lewin, 95 N. Y. 423. (In this case rescission was allowed because of misrepresentation as to the identity of the realty conveyed.) Bigham v. Madison, 103 Tenn. 358, 47 L. R. A. 267, 52 S. W. 1074.
7 Martin v. Hill, 41 Minn. 337, 43 N. W. 337; Pennington v. Roberge, 122 Minn. 295, 142 N. W. 710.
8 Schofield, etc., Co. v. Schofield, 71 Conn. 1, 40 Atl. 1046; Newman v. Claflin Co., 107 Ga. 89, 32 S. E. 943; Walters v. Eaves, 105 Ga. 584, 32 8. E. 609; Totten- v. Burhans, 91 Mich. 495, 51 N. W. 1119; Zunker v. Kuehn, 113 Wis. 421, 88 N. W. 605.
By statute in Georgia an innocent misrepresentation if acted on is a "legal fraud": Walters v. Eaves, 105 Ga. 684, 32 S. E. 609.
9 Prewitt v. Trimble, 92 Ky. 176, 36 Am. St. Rep. 586, 17 S. W. 356; Vaughn v. Smith, 34 Or. 54, 55 Ac. 99.
10 "He who would avail himself of his own misrepresentation, even where it was unintentional, is as much open to an imputation of fraud as if its falsity had been known to him": Tyson v. Passmore, 2 Pa. St. 122, 44 Am. Dec. 181.