The rule that one who has been induced by fraud or forced by some sort of constraint to enter into an unlawful contract will be relieved from his engagement and allowed to recover money or property with which he has parted in its performance, is probably salutary. But the reason usually given for the rule - that the parties to such a contract are not in pari delicto - is unsatisfactory. One who is constrained to make an unlawful contract by duress or undue influence, it is true, is not an intentional offender against the law. The same may be said of one who is induced by fraudulent representations of a character that conceals the illegality of the transaction. Thus, a British subject who is induced to contract with an American during a war between England and the United States by the representation of the American that he is a subject of Spain, is not a wilful lawbreaker.1 But one who, although induced to contract by fraud, is fully aware that he is embarking upon an unlawful adventure, offends just as seriously as if there were no fraud. For example, one who deliberately enters into a contract for the purpose of defrauding his creditors is by no means absolved from blame by the fact that he is persuaded to make the contract by false representations as to the condition of his estate.2 It may be contended that while in such a case the offense of the victim is not mitigated by the fraud, the offense of the perpetrator is aggravated. Perhaps this justifies the conclusion that the parties to an illegal contract tainted with fraud or improper constraint are not in pari delicto. It would seem, however, that the real underlying reason for permitting a recovery in all cases of fraud or constraint is not that the plaintiff's delinquency is less than the defendant's, but that the policy of denying relief to parties who have engaged in unlawful transactions is overborne by the more important policy of protecting persons from fraud, duress, and undue influence. In other words, the true doctrine is that one whose consent to a contract or to the performance of a contract is secured by fraud or constraint will not be denied the assistance of the courts in obtaining restitution, even though in making the contract he wittingly or unwittingly violates the law. This theory of the rule, while not generally accepted, appears to have been adopted by the Supreme Court of the United States in the case of National Bank and Loan Company v. Petrie,1 in which Mr. Justice Holmes said:
1 Catts p. Phalen, 1844, 2 How. (U. S.) 376, (lottery prize paid for a ticket fraudulently drawn); Northwestern Mut. Life Ins. Co. v. Elliott, 1880, 7 Saw. (U. S. C. C.) 17, 5 Fed. 225, (money paid on anillegal insurance policy upon fraudulent representations of death of insured); Stewart v. Wright, 1906, 147 Fed. 321; 77 C. C. A. 499, (money wagered on a fake foot race); Hobbs v. Boatright, 1906, 195 Mo. 693; 93 S. W. 934; 5 L. R. A. (N. S.) 906; 113 Am. St. Rep. 709, (money wagered on a fake foot race).
21826, 3 Pick. (Mass.) 446, 449; 15 Am. Dec. 235, (gambling). See also Schmitt v. Gibson, 1910, 12 Cal. App. 407; 107 Pac. 571, (fake fight).
1 See Musson v. Fales, 1820, 16 Mass. 332.
2 See Prewett v. Coopwood, 1855, 1 George (30 Miss.) 369.
"The right not to be led by fraud to change one's situation is anterior to and independent of the contract. The fraud is a tort. Its usual consequence is that as between the parties the one who is defrauded has the right, if possible, to be restored to his former position. That right is not taken away because the consequence of its exercise will be the undoing of a forbidden deed. That is a consequence to which the law can have no objection, and the fraudulent party, who otherwise might have been allowed to disclaim any different obligation from that with which the other had been content, has lost his right to object because he has brought about the other's consent by wrong." 2