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 principal: may be liable for fraud though the agent is innocent, as where he authorizes the agent to make a statement but suppresses information which results in a false statement by the agent, contrary to the information possessed by the principal.6 This principle does not apply if the representation is made by an agent who is acting in excess of his real authority and of his apparent authority in making such statement.7 If a contract contains a provision that no agent has authority to make any representation or warranty not contained in the contract, a representation by the salesman of the manufacturer to the effect that an engine which is rated as a twelve horse power engine will develop as much power as any fifteen horse power simple engine, is not a fraudulent statement for which such contract can be avoided.8
The fact that the fraud of the agent did not concern the subject-matter does not prevent such fraud from being operative as against the principal.9 A fraudulent statement of a realty broker to the effect that he was solvent and that he would assume the contract at any time within a year if the vendee wished him. to do so is fraud for which specific performance may be denied to the principal.1
1 United States. Grieson v. Winey, 240 Fed. 691, 153 C. C. A. 489.
Indiana. Nichols v. Colgan, 130 Ind. 341, 30 N. E. 301.
Kentucky. Smith v. Jones, 173 Ky. 776, L. R. A. 1917C, 890, 191 S. W. 500.
Michigan. Coryell v. Hotchkiss (Mich.), 91 N. W. 162.
New York. Indianapolis, etc., Ky. Co. v. Tyng, 63 N. Y. 653.
Pennsylvania. Erie, etc., Works v. Barber, 106 Pa. St; 125, 51 Am. Rep. 508.
Texas. Bank v. Cruger, 91 Tex. 446, 44 S. W. 278.
Wisconsin. Beetle v. Anderson, 98 Wis. 5, 73 N. W. 560.
2 Andrew v. Whitwer (Neb.), 90 N. W. 924.
3 California. Riser v. Walton, 78 Cal. 490, 21 Ac. 362.
Massachusetts. Atlantic Cotton Mills v. Mills, 147 Mass. 268, 9 Am. St. Rep. 698, 17 N. E. 496.
New York. Fairchild v. McMahon, 139 N. Y. 290, 36 Am. St. Rep. 701, 34 N. E. 779.
Tennessee. Barnard v. Iron Co., 85 Tenn. 139, 2 S. W. 21.
Wisconsin. Gunther v. Ullrich, 82 Wis. 222, 33 Am. St. Rep. 32, 52 N. W. 88.
4 Ely v. Stannard, 46 Conn. 124; Wolfe v. Pugh, 101 Ind. 293; Stoney Creek Woolen Co. v. Smalley, 111 Mich. 321, 69 N. W. 722.
So where a wife seeks to take advantage of her husband's fraud, Hofecker v. Pfeil, 193 Pa. St. 288, 44 Atl. 421.
5 Witherwax v. Riddle, 121 111. 140, 13 N. E. 545.
6 Schram v. Straus (Tex. Civ. App.), 28 S. W. 262.
7 J. I. Case Threshing Machine Co. v. Broach, 137 Ga. 602, 73 S. E. 1063.
8J. I. Case Threshing Machine Co. v. Broach, 137 Ga. 602, 73 S. E. 1063.
Questions as to whom a fraudulent representation can be made are discussed elsewhere.11