§ 632. Where a party designedly misrepresents a certain fact, for the purpose of misleading and imposing upon the other party, to his injury, he is guilty of positive fraud; dolum malum ad circumveniendum.1 Properly speaking, a representation is a statement, or assertion, made by one party to the other, before or at the time of the contract.2 Nor is it any should be responsible therefor.1 As regards third persons not privy to the contract, and deriving no interest therefrom, it may well be said that they should only be responsible for statements known by them to be false, or made in bad faith; but as regards the parties themselves, the case would be different. The parties have no such right to rely on the gratuitous representations of third persons, that they have to rely upon the representations of each other. In the one case, the statement is without a consideration to support it; in the other, the statement operates as inducement and consideration to make the contract. It cannot be said, however, that this doctrine is clearly settled.2
1 Laidlaw v. Organ, 2 Wheat. 178, 179; Pidcock v. Bishop, 3 B. & C. 605; Smith v. Bank of Scotland, 1 Dow, 272; 1 Story, Eq. Jur. § 192; Evans v. Bicknell, 6 Ves. 174, 182; Cochran v. Cummings, 4 Dall. 250; Prentiss v. Russ, 16 Me. 30; Smith v. Richards, 13 Peters, 26; Murray v. Mann, 2 Exch. 538; Watson v. Poulson, 15 Jur. 1111; 7 Eng. Law & Eq. 585.
. 2 Behn v. Burness, 3 B. & S. 753. " Though it is sometimes contained in the written instrument, it is not an integral part of the contract; and, consequently, the contract is not broken though the representation proves to be untrue; nor (with the exception of the case of policies of insurance, at all events marine policies, which stand on a peculiar anomalous footing) is such untruth any cause of action, nor has it any efficacy whatever, unless the representation was made fraudulently, either by reason of its being made with a knowledge of its untruth, or by reason of its being made dishonestly, with a reckless ignorance whether it was true or untrue. See Elliot v. Von Glehn, 13 Q. B. 632; Wheelton v. Hardisty, 8 El. & B. 232; on appeal, 8 ib. 285.
"If this be so, it is difficult to understand the distinction which is to be found in some of the treatises, and is in some degree perhaps sanctioned by judicial authority (see Barker, appellant, Windle, respondent, 6 El. & B. 675, 680), that a representation, if it differs from the truth to an unreasonable extent, may affect the validity of the contract. Where, indeed, the misrepresentation is so gross as to amount to sufficient evidence of fraud, it is obvious that the contract would on that ground be voidable.
"Though representations are not usually contained in the written instrument of contract, yet they sometimes are. But it is plain that their insertion therein cannot alter their nature. A question however may arise, whether a descriptive statement in the written instrument is a mere representation, or whether it is a substantive part of the contract. This is a question of construction which the court, and not the jury, must determine. If the matter by what means such misrepresentation is effected, whether by silence, by acts, or by words or signs, or artifices court should come to the conclusion that such a statement by one party was intended to be a substantive part of his contract, and not a mere representation, the often discussed question may, of course, be raised, whether this part of the contract is a condition precedent, or only an independent agreement, a breach of which will not justify a repudiation of the contract, but will only be a cause of action for a compensation in damages. In the construction of charter-parties, this question has often been raised, with reference to stipulations that some future thing shall be done or shall happen, and has given rise to many nice distinctions. Thus, a statement that a vessel is to sail, or be ready to receive a cargo, on or before a given day, has been held to be a condition (see Glaholm v. Hays, 2 Man. & Grang. 257; Oliver v. Fielden, 4 Exch. 135; Croockewit v. Fletcher, 1 H. & N. 893; Seeger v. Duthie, 8 C. B. (n. s.) 45); while a stipulation that she shall sail with all convenient speed, or within a reasonable time, has been held to be only an agreement (see Tarrabochia v. Hickie, 1 H. & N. 183; Dimech v. Corlett, 12 Moo. P. C. C. 199; Clipsham v. Vertue, 5 Q. B. 265). But with respect to statements in a contract descriptive of the subject-matter of it, or of some material incident thereof, the true doctrine, established by principle as well as authority, appears to be, generally speaking, that if such descriptive statement was intended to be a substantive part of the contract, it is to be regarded as a warranty, that is to say, a condition on the failure or non-performance of which the other party may, if he is so minded, repudiate the contract in toto, and so be relieved from performing his part of it, provided it has not been partially executed in his favor. If, indeed, he has received the whole or any substantial part of the consideration for the promise on his part, the warranty loses the character of a condition, or, to speak perhaps more properly, ceases to be available as a condition, and becomes a warranty in the narrower sense of the word; viz., a stipulation by way of agreement, for the breach of which a compensation must be sought in damages (see Ellen v. Topp, 6 Exch. 424-441; Graves v. Legg, 9 Exch. 709-716; adopting the observations of Serjeant Williams on the case of Boone v. Eyre, 1 H. Bl. 273, note a, in 1 Saund. 320 d, 6th ed.; Elliot v. Von Glehn, 13 Q. B. 632). Accordingly, if a specific thing has been sold, with a warranty of its quality, under such circumstances that the property passes by the sale, the vendee having been thus benefited by the partial execution of the contract, and become the proprietor of the thing sold, cannot treat the failure of the warranty as a condition broken (unless there is a special stipulation to that effect in the contract: see Bannerman v. White, 10 C. B. (n. s.) 844); but must have recourse to an action for damages in respect of the breach of warranty. But in cases where the thing sold is not specific, and the property has not passed by the sale, the vendee may refuse to receive the thing proffered to him in performance of the contract, on the ground that it does not correspond with the descriptive statement, or in of any kind; it is fraud, if the party upon whom they are practised be actually deceived thereby.1 Again, any material misrepresentation, although it be not embodied in the contract, is considered as a constructive or legal fraud, if it be known by the person making it to be false. Nor would it seem to be necessary to prove a fraudulent intent or motive on his part; for if a person be actually deceived by a misrepresentation, the practical result is the same, whether it were a wilful fraud or not. It would also seem, upon general principles, that where one party to a contract suffers injury from the false representation of the other party in respect to a material fact, he who has thereby occasioned the injury should bear the loss, whether his statement were known to him to be false, or were made through ignorance, mistake, or carelessness, and supposed to be true, - on the plain ground, that before one party undertakes to make a material statement vital to the contract and for his own interest, he is bound to ascertain whether it is true or false. This rule should of course be limited to cases where the false statement is in respect to a fact of which the party making it professes to have knowledge, and should not extend to statements merely of belief or opinion, made in good faith. But if a person assume to know a material fact, when he does not know it, and falsely represent it, it is difficult to see why he should not be responsible for the injury occasioned thereby, whether his representation were in good faith or not. The good faith seems to be of no consequence: it is the incorrectness of the statement which has induced the injury, and operated as a legal fraud. No person in making a contract is authorized to state a matter merely of belief as a matter of fact of which he has knowledge,- if he do so, and the fact he states be material, and operate as a distinct inducement to the contract, he other words, that the condition expressed in the contract has not been performed. Still, if he receives the thing sold, and has the enjoyment of it, he cannot afterwards treat the descriptive statement as a condition, but only as an agreement, for a breach of which he may bring an action to recover damages."