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.
The cases already given are for the most part actions at law for deceit. It seems clear on principle that one who wishes to recover damages must show damages. Whether the same rule applies where rescission is sought in equity or is effected informally at law by an action to recover the property parted with is not so clear. In some cases rescission is refused where no actual damage exists.1 The allegation that a quarry is undeveloped does not conflict with another that it is of great value, so as to make demurrable a bill to annul a conveyance of the property secured by fraud;2 as inducing purchase of coal land by false statements as to the output where the land is as valuable as represented,3 or where the land is sold for the average price of similar lands in the neighborhood, although the vendee has been guilty of fraud and the land is underlaid with valuable mineral deposits.4
This rule can not be sustained on sound principle. To hold that one must accept a legal right different from that promised him because it is as valuable in money is to ignore a fundamental principle of contract law. Accordingly, many courts hold that false representation made knowingly with intent to deceive, causing deception and thereby inducing one to make a contract that he would not otherwise have made, are grounds for rescission though no actual damage follows.5 In this connection the term "damage" does not imply financial loss, but only a legal injury; that is, a failure to obtain the thing as it was represented.6 Where one does not, by reason of fraud, obtain a legal right which he is promised, as where a different tract of land is pointed out from that conveyed,7 or where a remedy such as foreclosure is lost by such fraud, though the mortgagor is solvent,8 rescission may be had without showing any pecuniary loss. Equity will not give specific performance of a contract to one who has been guilty of false representations.9 Eescission will be granted for a false representation as to the variety of trees in an orchard, even if such orchard contained trees which were as valuable as the variety which the vendor said were planted therein.10 Informal rescission for fraud has been allowed at law though no injury is shown to have resulted therefrom.11 Thus where A induced B to buy certain stock food by falsely stating that B's brother had recommended its purchase, and B gave his note there-tor, B was allowed to avoid liability to A on the note by disaffirming the contract and refusing to accept the food.12 So in the meaning of this rule damage exists where there is a false statement as to the amount of a mortgage on the property conveyed, though the grantee did not assume it and the mortgagor is personally liable on the mortgage debt;13 or where there is a false statement as to who is surety on a bond, though the party defrauded may have so acted as to release all sureties on such bond;14 or where a person is induced to make a new mortgage when other- security for such debt is released, throwing a greater burden on the land;15 or where a woman is deceived by a representation of A that he is unmarried, by which she is induced to marry him;16 or where one who buys on credit falsely represents that he owns certain specific property, even though he is solvent.17
2 Hannibal, etc., Ry. v. Nortoni, 154 Mo. 142, 55 S. W. 220.
So inducing A, who owns one-half of a stock certificate, to sell the entire certificate by false representations is no ground for an action by B, the owner of the other half, since the sale is void as to B. Moynahan v. Prentiss, 10 Colo. App. 295, 51 Ac. 94.
3 See ch. LXIX.
1 Whitesides v. Taylor, 105 111. 496; American, etc., Association v. Bear, 48 Neb. 455, 67 N. W. 500; Chamberlain v. Coal Co., 92 Tenn. 13, 20 S. W. 345.
2 Crompton v. Beedle,, 83 Vt. 287, 30 L. R. A. (N.S.) 748, 75 Atl. 331.
3 Chamberlain v. Coal Co., 92 Tenn. 13, 20 S. W. 345.
4 Storthz v. Arnold, 74 Ark. 68, 84 S. W. 1036.
5 United States. Mather v. Barnes, 146 Fed. 1000.
Alabama. Baker v. Maxwell, 09 Ala. 558, 14 So. 408.
Iowa. Barnes v. Century Savings Bank, 149 Ia. 367, 128 N. W. 541; Dimond v. Peace River Land & Development Co., 165 N. W. 1032.
Minnesota. MacLaren v. Cochran, 44 Minn. 255, 46 N. W. 408; Pennington v. Roberge, 122 Minn. 295 [sub nomine, Pennington v. Roberg, 142 N. W. 710]; Fawkes v. Knapp, 138 Minn. 384, 165 N. W. 236.
Montana. Stillwell v. Rankin, - Mont. - , 174 Ac. 186.
New York. Harlow v. La Brun, 151 N. Y. 278, 45 N. E. 859.
Oregon. McGowan v. Willamette Valley Irrigated Land Co., 79 Or. 454, 155 Ac. 705.
Pennsylvania. Williams v. Kerr, 152 Pa. St. 560, 25 Atl. 618.
"It is true that, if the false representations were made as charged, if they came to the knowledge of the plaintiff, if she relied upon them, and made her purchase relying upon them, if the representations were false, and if the land was not as represented, she would be entitled to rescind and recover back the purchase price, even if the land were of the value which she contracted to pay for it. The instruction was only prejudicial to the plaintiff. By this instruction she was prevented from rescinding and recovering back, notwithstanding the fraud practiced upon her, if the land she received was not less in value than the amount she agreed to pay therefor; that is, if all the other elements were found in her favor, she could not rescind unless the land was of less value than she agreed to pay for it. Now, her right to rescind did not depend upon the value of the land, but upon the truth of the representations made to her through which the sale was consummated. She could have rescinded, though the land was of equal value, if not as represented, because of the fraud practiced upon her inducing the purchase. Though the instruction is not good law, we hardly see where any complaint can be lodged against it on the part of the defendants. It surely did not operate to the prejudice of the defendants. The party purchasing is entitled to what he buys, and is entitled to have it of the character represented, and is not bound to take it and hold it, even though it is not of less value than the amount he agreed to pay for it." Dimond v. Peace River Land & Development Co. (la.), 165 N. W. 1032.
6 Stillwell v. Rankin, - Mont. - , 174 Ac. 186.
7 Nelson v. Carlson, 54 Minn. 90, 55 N. W. 821.
8 Baker v. Maxwell, 99 Ala. 558, 14 So. 468.
9 Kelly v. R. R., 74 Cal. 557, 5 Am. St. Rep. 470, 16 Ac. 386.