But a contract induced by fraud is not void, but voidable only at the option of the party defrauded (a).
(a) See per Crompton, J., in Clarke v. Dickson, E. B. & E. (96 E. C. L. R.) 148, 154; 27 L. J. (Q. B.) 223,226; Oakes v. Turquand, L. B. 2 H. of L. 325; 36 L. J. (Ch.) 949; Urquhart v. Macpherson, 3 App. Cas. 831; Benjamin on Sales, Bk. III. c. 2, ss. 1, 2, pp. 385, 393, 3rd ed.
The question then arises, how much less, if anything, than this will be sufficient for that purpose ?
The recent cases in England (of Collins v. Evans, 5 Q. B. (84 E. C. L. R.) 820; Moens v. HeyWorth, 10 M. & W. 147; Taylor v. Ashton, 1L lb. 401; and Ormrod v. Huth, 14 lb. 651, the doctrine of which cases was approved in the Exchequer Chamber, in Barley v. Walford, 9 Q. B. (58 E. C. L. R.) 197) have now decisively settled, in accordance with reason and previous authority, that in order to support an action on the case for fraudulent representations, it is not sufficient to show that a party made statements which he did not know to be true, and which were in fact false. Thus, in Evans v. Collins (when in the Court of Queen's Bench), the defendants having pleaded that they had reasonable and probable cause to believe, and did believe, their representation to be true, viz., as to the identity of a particular person who was to be arrested on a capias, the jury found for them on that plea, and when the Court (which in the previous case of Fuller v. Wilson, 3 Q. B. (43 E. C. L. R.) 58 (reversed in the Exchequer Chamber, on another point in lb. 68,1009), had taken a different view from that entertained by the majority of the Court of Exchequer) entered judgment for the plaintiffs, non obstante veredicto, that judgment was reversed by the Exchequer Chamber, which held that the verdict on the issue raised by that plea was material; and the propriety of the reversal seems to have been, in the recent case of Barley v. Walford, 9 Q. B. (58 E. C. L. R.) 206, acquiesced in by Lord Denman, who had delivered the opinion which was reversed. "We must admit," said he, "the reasonableness of the doctrine there at length laid down. For if every untrue statement which produces danger to another would found an action at law, a man might sue his neighbour for any mode of communicating erroneous information, such, for example, as having a conspicuous clock too slow, since the plaintiff might be thereby prevented from attending to some duty or acquiring some benefit. A doctrine creating legal responsibility in cases so numerous and so free from blame must be restrained within some limits." Hence the result of these authorities is, that in order to make a party liable on the ground of fraud, there must be fraud as distinguished from mere mistake, and to such a conclusion the reason and weight of American authority also tends: Russell v. Clark, 7 Cranch, 69; Young v. Covell, 8 Johns. 25; Hammatt v. Emerson, 27 Me. 309; Weeks v. Burton, 7 Vt. 67; Ewings v. Calhoun, lb. 79; Lord v. Colley, 6 N. H. 99; Allen v. Addington, 7 Wend. 10; 11 lb. 375; Tryon v. Whitmarsh, 1 Metc. 1; Ball v. Sively, 1 Dana, 370; Smith v. Babcock, 2 W. & M. 246; and in a recent case, which has appeared while these sheets are going through the press, the Supreme Court of the United States have distinctly affirmed the same doctrine, after most of the late English decisions referred to had been cited in argument. " The gist of the action," said the Court, "is fraud in the defendants, and damage to the plaintiff. Fraud means an intention to deceive. If there was no such intention, if the party honestly stated his own opinion, believing, at the same time, that he stated the truth, he is not liable in the form of action, although the representation turned out to be entirely untrue:" Lord et at. v. Goddard, 13 How. 198-211.
This being so, it is valid until rescinded where the rights of third parties intervene (b); and therefore in the case
(b) See per Ld. Colonsay in Oakes v. Turquand, L. R. 2 H. of L. 375; 36 L. J. (Ch.) 976.
The position of a defendant may, however, be such, that without the utterance of what is known to him to be an actual falsehood, he may still be liable in an action for deceit, viz., where he states material facts as of his own knowledge (and not as mere matter of opinion or general assertion) about which he has no knowledge whatever. Here it is held that this direct wilful statement, in ignorance of the truth, is the same as the statement of a known falsehood, and will constitute a scienter: Hazard v. Irwin, 18 Pick. 96; Lobdell v. Baker, 1 Metc. 193; s. c. 3 lb. 469; Stone v. Denny, 4 lb. 158; Medley v. Watson, 6 lb. 247; Daniel v. Mitchell, 1 Story, 172; Dogget v. Emerson, 3 lb. 700; Mason v. Crosby, 1 W. & M. 342; Hammett v. Emerson, 27 Me. 308; Gough v. St. John, 16 Wend. 646; Thomas v. M'Cann, 4 B. Mon. 601; Buford v. Caldwell, 3 Mo. 477; Lockridge v. Foster, 4 Scam. 570; M'Cormick v. Malin, 5 Blackf. 509; Joice v. Taylor, 6 Gill & J. 54; Munroe v. Pritchett, 16 Ala. 785.
Such a course of decision perfectly accords with the remark of Judge Story, that " the affirmation of what one does not know or believe to be true, is equally in morals and law as unjustifiable as the affirmation of what is known to be positively false;" while it is not at all inconsistent with the language quoted from Ormrod v. Huth, that "if the representation was honestly made, and believed at the lime to be true by the party making it, although not true in point of fact, it is not a fraudulent representation." The question of good faith is one, upon the evidence, for the jury : Lord v. Colley, 6 N. H. 99; Bokee v. Walker, 14 Pa. St. 139; and the plaintiff can recover, either by showing the positive statement and the defendant's knowledge of its falsity, or by showing the positive statement and proving that the defendant had not, and could not have had, any knowledge in the matter. Either of these presents a case of moral fraud, and both of them are very different from that of a statement false indeed in fact, yet honestly believed to be true.