Fraud in the inducement affects the validity of the offer and acceptance which form the contract. It is also a tort. The injured party has a choice of the following remedies: (1) an action of deceit in tort; (2) in proper cases an informal rescission of the contract at law and a recovery of what he has parted with thereunder; (3) in proper cases a formal decree of rescission or cancellation in equity and a recovery of what he has parted with thereunder; (4) a defense against the enforcement of his executory promise induced by fraud.1 The election of one of these remedies is a waiver of the others.2 Thus where the fraud is committed by the adversary party to the contract, the injured party may elect between his right to avoid the contract, and his right to affirm it and to sue in tort in the action of deceit,3 and the election of either remedy,4 as suing for

9 Grieson v. Winey, 240 Fed. 6M, 153 CCA. 489.

10 Grieson v. Winey, 240 Fed. 691, 153

C.C. A. 489.

11 See Sec. 318.

1 United States. First Nat. Bank v. Terry, 135 Fed. 621.

Alabama. Hartley v. Frederick, 191 Ala. 175, 67 So. 983.

Arkansas. Grayling Lumber Co. v. Ebbitt, 134 Ark. 175, 203 S. W. 686.

Illinois. Felt v. Bell, 205 111. 213, 68 N. . 794.

Kansas. Bice v. Kelson, 180 Ac. 206.

Massachusetts. Moors v. Bird, 190 Mass. 400, 77 N. E. 643.

2 Hartley v. Frederick, 191 Ala. 175, 67 So. 983.

3 Grayling Lumber Co. v. Ebbitt, 134 Ark. 175, 203 S. W. 686.

4 Moors v. Bird, 190 Mass. 400, 77 N. E. 643.

5 Grayling Lumber Co. v. Ebbitt, 134 Ark. 175, 203 S. W. 686.

6 Bice v. Neteon (Kan.), 180 Ac. 206.

1 Siltz v. Springer, 236 111. 276, 85 N. E. 748; Corse v. Minnesota Grain Co., 94 Minn. 331, 102 N. W. 728; Ett-linger v. National Surety Co., 221 N. Y. 467, 117 N. E. 945.the purchase price after discovery,5 or suing on the contract after discovery of the fraud,6 or bringing an action to recover damages sustained by reason of such fraud,7 or encouraging the receiver of the fraudulent purchaser of the goods to sell them,8 or treating the contract as rescinded,9 bars the other. If the defrauded party elects to avoid a contract for the purchase of goods, he can not recover damages for the breach of such contract, but only the special damages caused by such fraudulent representations as to the quality of such goods.10 The fact that the defrauded party proves his claim for the goods sold against the purchaser's estate in bankruptcy proceedings does not prevent him from bringing action subsequently against the vendor to recover damages for fraudulent representations as to his financial condition.11 A suit in equity for a decree of rescission is a bar to a subsequent action at law for damages for breach of the contract.12 If, however, after rescission by the defrauded party, the party guilty of fraud refuses to return the property received by him, he may be considered as having con-verted it to his own use and be held for its value.13 "Where the fraud is committed by a third person, rescission does not bar a right of action if the defrauded party is not placed in statu quo thereby.14 Commencing an action for deceit does not waive the right to rescind in equity.15 If damages are sought as a remedy for fraud, such relief can not be had in equity but the injured party must sue at law.16

2 United States. Arzuaga v. Gonzalez, 239 Fed. 60, L. R. A. 1917D, 697.

Connecticut. Gustafscn v. Ruste-meyer, 70 Conn. 125, 66 Am. St. Rep. 92, 39 L. R. A. 644, 39 Atl. 104.

Georgia. Silvey v. Tift, 123 Ga. 804, 1 L. R. A. (N.S.) 386, 51 S. E. 748,

Iowa. Seeley v. Seeley-Howe-Le Van Co., 130 la. 626, 114 Am. St. Rep. 452, 105 N. W. 380.

Nebraska. Building & Loan Association v. Cameron, 48 Neb. 124, 66 N. W. 1109.

Hew York. Strong v. Strong, 102 N. Y. 69, 5 N. E. 799; Vail v. Reynolds, 118 N. Y. 297, 23 N. E. 301; Pryor v. Foster 130 N. Y. 171, 29 N. E. 123.

North Carolina. American Pure Food Co. v. Elliott, 151 N. Car. 393, 31 L. R. A. (N.S.) 910, 66 S. E. 451.

Tennessee. Grizzard v. Fite, 137 Tenn. 103, L. R. A. 1917D, 652, 191 S. W. 969. See also Sec. 359.

3 United States. Moline Plow Co. v. Carson, 72 Fed. 387, 18 C. C. A. 606.

Arkansas. Bank v. Frank, 63 Ark. 16, 58 Am. St. Rep. 65, 37 S. W. 400; Binghampton Trust Co. v. Auten, 68 Ark. 299, 82 Am. St. Rep. 295, 57 S. W. 1105.

Colorado. Norris v. Honestone Co., 22 Colo. 162, 43 Ac. 1024.

Connecticut. Gustafson v. Rustemeyer, 70 Conn. 125, 66 Am. St. Rep. 92, 39 L. R. A. 644, 39 Atl. 104.

Illinois. Endsley v. Johns, 120 111. 469, 60 Am. Rep. 572, 12 N. E. 247.

Iowa. Stanhope v. Swafford, 80 la. 45, 45 N. W. 403.

Massachusetts. Sweet v. Kimball, 166 Mass. 332, 55 Am. St. Rep. 406, 44 N. E. 243.

Minnesota. Hedin v. Minneapolis, etc., Institute, 62 Minn. 146, 54 Am. St. Rep. 628, 35 L. R. A. 417, 64 N. W. 158.

Nebraska. Pollock v. Smith, 49 Neb. 864, 69 N. W. 312.

New Hampshire. Pastore v. Priori, 103 Atl. 977.

New York. Yeomans v. Bell, 151 N. Y. 230, 45 N. E. 562; Pryor v. Foster, 130 N. Y. 171, 29 N. E. 123.

Oregon. Scott v. Walton, 32 Or. 460, 52 Ac. 180.

Pennsylvania. Hexter v. Bast, 125 Pa. St. 52, 11 Am. St. Rep. 874, 17 Atl. 252.

Tennessee. Mining Co. v. Mcllvein, 97 Tenn. 225, 36 S. W. 1094.

Texas. Ford v. Oliphant (Tex. Civ. App.), 32 S. W. 437.

Utah. Le Vine v. Whitehouse, 37 Utah 260, 109 Ac. 2.

Virginia. Wilson v. Hundley, 96 Va. 96, 70 Am. St. Rep. 837, 30 S. E. 492.

Washington. Griffith "v. Strand, 19 Wash. 686, 54 Ac. 613.

Wisconsin. Smeesters v. Schroeder, 123 Wis. 116, 101 N. W. 363.

4 Arkansas. Bank v. Frank, 63 A.k. 16, 58 Am. St. Rep. 65, 37 S. W. 400.

Iowa. Seeley v. Seeley-Howe-Le Van Co., 130 la. 626, 114 Am. St. Rep. 452, 105 N. W. 380.

Nebraska. Pollock v. Smith, 49 Neb. 864, 69 N. W. 312.

New York. Yeomans v. Bell, 151 N. Y. 230, 45 N. E. 552.

Tennessee. Mining Co. v. Mcllvein, 97 Tenn. 225, 36 S. W. 1094.

5Arzuaga v. Gonzalez, 239 Fed. 60, L. R. A. 1917D, 697; Bank v. Frank, 63 Ark. 16, 58 Am. St. Rep. 65, 37 S. W. 400.

6 Ayres v. Mitchell, 11 Mies. (3 Sm. & Mar.) 683; Edwards v. Roberts, 15 Miss. (7 Sm. & Mar.) 544.

7 Wheeler v. Dunn, 13 Colo. 428, 22 Ac. 827.

8 Seeley v. Seeley-Howe-Le Van Co., 130 la. 626, 114 Am. St. Rep. 452, 105 N. W. 380.

9 Cheney v. Dickinson, 172 Fed. 109, 96 C. C. A. 314, 28 L. R. A. (N.S.) 359; Westerfeld v. New York Life Ins. Co., 129 Cal. 68, 58 Ac. 92, 61 Ac. 667; Whiteside v. Brawley, 152 Mass. 133, 24 N. E. 1088; Smeesters v. Schroeder, 123 Wis. 116, 101 N. W. 363.

10 American Pure Food Co. v. Elliott, 151 N. Car. 393, 31 L. R. A. (N.S.) 910, 66 S. E. 451.

11 Talcott v. Friend, 179 Fed. 076, 103 C. C. A. 80, 43 L. R. A. (N.S.) 649.

12 Grizzard v. Fite, 137 Tenn. 103, L. R. A. 1917D, 652, 191 S. W. 969.

13 Stewart v. Hollingsworth, 129 Cal. 177, 61 Ac. 936.

14 Nash v. Trust Co., 163 Mass. 574, 47 Am. St. Rep. 489, 28 L. R. A. 753, 40 N. E. 1039.

15 Ludington v. Patton, 111 Wis. 208, 86 N. W. 571.

It is the defrauded party and not the party making the false statements that has this right of election.17 Hence, the offer of the party guilty of fraud to place the other in the same position that he would have had if the representation had been true does not bar the right of the defrauded party to rescind and recover what he has parted with,18 nor does the offer to rescind bar him from retaining the property conveyed to him and suing in damages.19 If before rescission the defrauded party is placed in the condition that he would have been in had the representation been true, no damage exists and hence there is no fraud.20

A stranger to a contract can not set up fraud in the inducement as a ground for avoiding a collateral transaction.21

Separate fraudulent purchases give rise to distinct causes of action; and an election of a remedy on one cause of action does not bar the election of a different remedy on another cause.22 The defrauded party can not treat the fraudulent representations as terms of the contract. They are merely grounds for avoiding liability thereunder.23 If the defrauded party does not elect to rescind he may be held liable on the contract subject to a right to reduce the amount of recovery by the amount of damage caused him by the fraud.24 An ineffectual attempt by the defrauded party to assert a remedy to which he is not entitled is not an election either to affirm or disaffirm the contract.25 If the owner of personal property, who has been induced to enter into a contract of sale by fraud, brings an action against the purchaser and against others to whom he has subsequently sold such property to recover damages for their conspiracy to defraud the owner, and such action is dismissed upon the pleadings, such action is not a bar to a subsequent action by the seller against the purchaser for recovering the unpaid portion of the purchase price, since the seller had no right to elect the remedy which he sought in the original action.26

16 Curriden v. Middleton, 232 U. S. 633, 58 L. ed. 765.

17 Gunther v. Ullrich, 82 Wis. 222, 33 Am. St. Rep. 32, 52 N. W. 88.

18 Delouche v. Ins. Co., 69 N. H. 587, 45 Atl. 414.

19 Gunther v. Ullrich, 82 Wis. 222, 33 Am. St. Rep. 32, 52 N. W. 88.

20 Barber v. Kilbourn, 16 Wis. 485.

21 Beauchamp v. Bertig, 90 Ark. 351, 23 L. R. A. (N.S.) 659, 119 S. W. 75; Herndon v. Wakefield-Moore Realty Co., - La. - , 79 So. 318.

22Reid v. Ferris, 112 Mich. 693, 67 Am. St. Rep. 437, 71 N. W. 484. (Hence replevin may be brought for one fraud and trover for another.) Lee v. Kendal], 56 Hun (N. Y.) 610.

23 Norris v. Honestone Co., 22 Colo. 162, 43 Ac. 1024.

"A fraudulent misrepresentation although sufficient to sustain an action for damages can not be converted into a contract to be enforced as such. Neither will it furnish the measure by which a written contract may be reformed." Glass v. Hulbert, 102 Mass. 24, 38, 3 Am. Rep. 418.

24 Upton v. Levy, 39 Neb. 331, 58 N. W. 95; Rogers v. Baker, 66 N. J. L. 56, 48 Atl. 1003; May v. Loomis, 140 N. Car. 350, 52 S. E. 728; Linerode v. Rasmussen, 63 O. S. 545, 59 N. E. 220.

25 Henry v. Herrington, 193 N. Y. 218, 20 L. R. A. (N.S.) 249, 86 N. E. 29.