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.
If at the time that the goods are bought vendee's circumstances are such that he has no reasonable expectation of paying for them, and he buys on credit without disclosing his circumstances, this is held by some courts to be fraud, even if he had no intent of not paying for them, assuming such combination to be possible.1 It is not necessary that the purchaser should be insolvent within the meaning of the bankrupt act.2
9 Ditton v. Purcell, 21 N. D. 648, 36 L. R. A. (N.S.) 149, 132 N. W. 347.
1 United States. St. Louis & San Francisco Ry. Co. v. Johnston, 133 U. S. 566, 33 L. ed. 683; Gillespie v. Piles, 178 Fed. 886, 102 C. C. A. 120, 44 L. R. A. (N.S.) 1.
Alabama. Hutchinson v. National Bank, 145 Ala. 106, 41 So. 143.
Nebraska. Higgins v. Haydeh, 53 Neb. 61, 73 N. W. 280.
New York. Grant v. Walsh, 145 N. Y. 502, 45 Am. St. Rep. 626, 40 N. E. 200.
North Dakota. Widman v. Kellogg, 22 N. D. 396, 39 L. R. A. (N.S.) 563, 133 N. W. 1020.
Ohio. Orme v. Baker, 74 O. S. 337, 113 Am. St. Rep. 968, 78 N. E. 439.
Wisconsin. Hyland v. Roe, 111 Wis. 361, 87 Am. St. Rep. 873, 87 N. W. 252.
By statute, the duty to repay is said to rest on the officer who received the deposit. McGregor v. Battle, 128 Ga. 577, 13 L. R. A. (N.S.) 185, 58 S. E. 28. (See the Law Relating to Deposits Received by Insolvent Banks, by Albert S. Bollos, 43 L. R. A. (N.S.) 438.)
2 Corn Exchange National Bank v. Solicitors', etc., Co., 188 Pa. St. 330, 68 Am. St. Rep. 872, 41 Atl. 536.
3 People v. California Safe Deposit & Trust Co., 175 Cal. 756, L. R. A. 1918A, 1151, 167 Ac. 388.
4 People v. California Safe Deposit & Trust Co., 175 Cal. 756, L. R. A. 1918A, 1151, 167 Ac. 388.
1 Alabama. McKensie v. Rothschild, 119 Ala. 419, 24 So. 716.
Maryland. Standard Horseshoe Co. v. O'Brien, 88 Md. 335, 41 Atl. 898.
Missouri. Reid v. Lloyd, 52 Mo. App. 278.
New York. Whittin v. Fitzwater 129 N. Y. 626, 29 N. E. 298.
Other authorities hold that there can be no fraud in such cases unless there is a definite intention not to pay for the goods purchased, or a false statement as to solvency.3 A compromise by which vendee returned part of the goods sold, and vendor waived his right to replevin the rest for fraud in the contract of sale, where vendee meant to dispose of the goods and put the proceeds beyond the reach of vendor, so as to prevent his recovering the price, may be avoided for fraud.4