1 3 Black. Comm. 166; 1 Story, Eq. Jur. § 202; 2 Kent, Comm. 482; Dig. Lib. 2, tit. 14, 1. 7, § 9; Dig. Lib. 18, tit. 1, 1. 43, § 2; Pothier, de Vente, 234, 237, 238; Cochran v. Cummings, 4 Dall. 250; Warner v. Daniels, 1 Woodb. & M. 91. As to the necessity of notice that the contract is repudiated, see Ripley v. Hazelton, 3 Daly, 329.
1 Fisher v. Mellen, 103 Mass. 503 (1870). The party making the representations must have known or had reason to believe them false: Ober-lander v. Spiess, 45 N. Y. 175 (1871); Meyer v. Amidon, ib. 169; unless he makes them as of matters within his personal knowledge, as distinguished from opinion or belief. See Bennett v. Judson, 21 N. Y. 238; Marsh v. Falker, 40 N. Y. 562.
2 This doctrine has undergone many fluctuations, and the cases are so contradictory, that it is impossible to lay down any rule as a settled one. Wherever the misrepresentation is embodied in the contract, there is no doubt that it will vitiate the contract, whether it be wilful or not. But where the misrepresentation is not embodied in the contract, there seems to be a great conflict of authorities as to whether it is or is not necessary, that a person, who makes a misrepresentation, should make it with knowledge of its falseness, in order to enable the other party deceived to avoid the contract. In Pawson v. Watson, 2 Cowp. 785, one of the earliest cases, which was an action on a policy of insurance, alleged to have been made on a false verbal misrepresentation, Lord Mansfield said: "There is no distinction better known to those who are at all conversant in the law of insurance, than that which exists between a warranty or condition which makes part of a written policy, and a representation of the state of the case. Where it is a part of the written policy, it must be performed; as if there be a warranty of convoy, there it must be a convoy; nothing tantamount will do, or answer the purpose; it must be strictly performed, as being part of the agreement; for there it might be said, the party would not have insured without convoy. But as, by the law of merchants, all dealings must be fair and honest, fraud infects and vitiates every mercantile contract. Therefore, if there is fraud in a representation, it will avoid the policy, as a fraud, but not as a part of the agreement. If, in a life policy, a man warrants another to be in good health, when he knows at the same time he is ill of a fever, that will not avoid the policy; because by the warranty he takes the risk upon himself. But if there is no warranty, and he says, ' the man is in good health,' when in fact he knows him to be ill, it is false. So it is, if he does not know whether he is well or ill; for it is equally false to undertake to say that which he knows
On the contrary, although it is asserted by many of the most distinguished judges, it is denied in most of the late cases in nothing at all of, as to say that Is true which he knows is not true." In Hodgson v. Richardson, 1 W. Bl. 463, Yates, J., says: "The concealment of material circumstances vitiates all contracts upon the principles of natural law." In Haycraft v. Creasy, 2 East, 92, the question first directly arose, as to whether the knowledge of the person making a representation, that it was false, was necessary to constitute a fraud. In this case Lord Kenyon said: " It was enough to state that the case rested on this, that the defendant affirmed that to be true within his own knowledge which he did not know to be true. This is fraudulent, not perhaps in that sense which affixes the stain of moral turpitude on the mind of the party, but falling within the notion of legal fraud, such as is presumed in all the cases within the statute of frauds. The fraud consists, not in the defendant's saying that he believed the matter to be true, or that he had reason so to believe it, but in asserting positively his knowledge of that which he did not know. There are, it is true, some duties of imperfect obligation, as they are called, the breach or neglect of which will not subject a party to an action. If I know that one in whose welfare I am interested is about to marry a person of infamous character, or to enter into commercial dealings with an insolvent, it is my duty to warn him; but no action lies if I omit it; but if any one becomes an actor in deceiving another; if he lead him by any misrepresentations to do acts which are injurious to him; I learn from all religious, moral, and social duties that such an action will lie against him to answer in damages for his acts. And when I am called to point out legal authorities for this opinion, I say that this case stands on the same grounds of law and justice as the others which have been decided in this court on the same subject." In Schneider v. Heath, 3 Camp. 506, Sir James Mansfield said: "It signifies nothing whether a man represents a thing to be different from what he knows it to be, or whether he makes a representation which he does not know, at the time, to be true or false, if in point of fact it turns out to be false." So, also, Mr. Chief Justice Best, in Adamson v. Jarvis, 4 Bing. 66, says: " He who affirms either what he does not know to be true, or knows to be false, to another's prejudice and his own gain, is, both in morality and law, guilty of falsehood, and must answer in damages." Again, the House of Lords held the same doctrine in the case of Humphrys v. Pratt, 5 Bligh (n. s.), 154. So also in Railton v. Mathews, 10 CI. & Finn. 934, there is a dictum of Lord Tottenham to the same effect. In Cornfoot v. Fowke, 6 M. & W. 358, there was a difference of opinion among the judges. This was a question as to whether a misrepresentation as to certain leased premises, which was made by an agent innocently, while his principal knew that the representation was false, would avoid the lease Mr. Baron Parke (with whom were the majority of the court) held that it would not: he said: "It is, I think, justly said, that it is not enough to support the plea that the representation is untrue; it must be proved to have been fraudulently made. As this representation is England. It may be said to be established, that a contract will be invalidated by any misrepresentation made either with not embodied in the contract itself, the contract cannot be affected, unless it be a fraudulent representation, and that is the principle on which the plea is founded. Now the simple facts, that the plaintiff knew of the existence of the nuisance, and that the agent, who did not know of it, represented that it did not exist, are not enough to constitute fraud; each person is innocent, because the plaintiff makes no false representation, and the agent, though he makes one, does not know it to be false; and it seems to me to be an untenable proposition that if each be innocent, the act of either or both can be a fraud." Lord Abinger, on the contrary, said, after citing the cases of Williamson v. Allison, 2 East, 446, and Hodgson v. Richardson, 1 W. Bl. 463: "Nothing is more certain than that the concealment or misrepresentation, whether by principal or agent, by design or by mistake, of a material fact, however innocently made, avoids the contract on the ground of a legal fraud. But though I consider this case as coming fully within the meaning of a legal fraud, even if the agent is presumed to be ignorant of the falsehood of his misrepresentation, I am very far from conceding that it is a case void of all moral turpitude." In Smout v. Ilbery, 10 M. & W. 1, the same court held a different doctrine, and agreed with Lord Abinger. In this case, Baron Alderson said: " There is a third class, in which the courts have held that where a party making the contract as agent bona fide believes that such authority is vested in him, but has in fact no such authority, he is still personally liable. In these cases, it is true the agent is not actuated by any fraudulent motives, nor has he made any statement which he knows to be untrue. But still his liability depends on the same principles as before. It is a wrong, differing only in degree, but not in its essence, from the former case, to state as true what the individual making such statement does not know to be true, even though he does not know it to be false, but believes, without sufficient grounds, that the statement will ultimately turn out to be correct. And if that wrong produces injury to a third person, who is wholly ignorant of the grounds on which such belief of the supposed agent is founded, and who has relied on the correctness of his assertion, it is equally just that he who makes such assertion should be personally liable for its consequences." So also in Railton v. Mathews, 10 CI. & Finn. 934, the same doctrine was asserted on appeal to the House of Lords. This was a case where the respondents, though cognizant of certain material facts affecting an agent's credit, had not communicated them to the plaintiff, who became his cosurety on a bond to the respondents; and in the course of the judgment Lord Cottenham said: "In my opinion there may be a case of improper concealment or non-communication of facts which ought to be communicated, which would affect the situation of the parties, even if it was not wilful and intentional, and with a view to the advantage the parties were to receive." This doctrine was again reversed in Moens v. Heyworth, 10 M. & W. 147, and in Taylor v. Ashton, 11 M. & W. 401, and the rule was intent to defraud, or with knowledge of its falsity; but whether an action will lie for a misrepresentation mistakenly made and stated, "That independently of any contract between the parties, no one can be made responsible for a representation of this kind [namely, that a certain banking company was in a prosperous condition], unless it be fraudulently made." The doctrine of Smout v. Ilbery is, that there is liability for a misrepresentation without moral fraud. In Taylor v. Ashton, it is asserted that there must be knowledge that the misrepresentation is false, or, in other words, moral fraud. In Polhill v. Walter, 3 B. & Ad. 114, a middle ground was taken. The court thought that "corrupt motive" was not necessary, but a statement known to be untrue, though uttered with no intention to defraud, was sufficient to invalidate a contract. "If the defendant," Lord Tenterden says, "had good reason to believe his representation to be true, he would have incurred no liabilitv, for he would have made no statement which he knew to be false; a case very different from the present, in which it is clear that he stated what he knew to be untrue, though with no corrupt motive." But the misrepresentation in this case was by the defendant that he had authority to pass a bill, in consequence of which it was accepted, and as the court say, " he no doubt believed the acceptance would be ratified," but he should have " done no more than make a statement of that belief." There was, therefore, scarcely an intentional falsehood, and certainly not a corrupt motive. Yet the contract was held to be invalidated thereby. See also Foster v. Charles, 6 Bing. 396; 7 Bing. 105, in which Tindal, C. J., said: " It is fraud in law if a party makes representations which he knows to be false, and injury ensues, although the motives from which the representations proceeded may not have been bad; the person who makes such representations is responsible for the consequences." The knowledge of the party making a representation that it is false is admitted to be necessary in Freeman v. Baker, 5 B. & Ad. 806. In Evans v. Collins, 5 Q. B. 804, the sheriff brought an action against an attorney for false representation as to the identity of a person to be taken in execution by him, in consequence of which he arrested the wrong person, and was forced to pay damages, and the defendants pleaded that they had reason to believe their representation to be true, and made it in good faith; and the jury found for the defendants on the issue joined on this plea. Lord Denman, however, gave judgment for the plaintiff, notwithstanding the verdict, and said: "One of two persons has suffered by the conduct of the other. The sufferer is wholly free from blame; but the party who caused his loss, though charged neither with fraud nor with negligence, must have been guilty of some fault when he made a false representation. He was not bound to make any statement, nor justified in making any which he did not know to be true; and it is just that he, not the party whom he has misled, should abide the consequence of his misconduct. The allegation that the defendant knew his representation to be false is, therefore, immaterial." This judgment, however, was overruled by the Court of Exchequer (Collins v. Evans, 5 Q. B. 820), without intention to defraud, but nevertheless completely false, is rendered doubtful by the late cases. But in all cases of this on the ground that there was no fraud, and that the representation was honestly made. See also Fuller v. Wilson, 3 Q. B. 58, in which Lord Den-man had previously asserted the same doctrine - which had been also overruled, in error on other points, by the Court of Exchequer, in Wilson v. Fuller, 3 Q. B. 68. See Lord Denman's remarks in Barley v. Walford, 9 Q. B. 206. In Rawlings v. Bell, 1 C. B. 959, Tindal, C. J., said: "On the part of the plaintiff it was contended that the falsehood of the statement was sufficient to support the action, although it was made without any intention to mislead, and without any knowledge of its falsehood. But it seems to us that a statement false in fact, but not false to the knowledge of the party making it, - as in Polhill v. Walter, 3 B. & Ad. 114, -nor made with any intention to deceive, will not support an action, unless from the nature of the dealing between the parties, a contract to indemnify can be implied.