Sec. 279. General Statement

Fraud is a false representation or non-disclosure of a material fact, made with intent to deceive and operating to deceive another party to his injury. Fraud may be committed not only by word of mouth, but by means of writings, pictures, maps, and the like. (Sec. 280, 281.)

Generally, mere silence is not fraud; neither can fraud be based upon mere expressions of hope, expectation and the like, nor upon promises solely, nor as a general rule upon naked assertions of value. (Sec. 282-291.)

Sec. 280. What Is Fraud?

Fraud has been aptly defined to be "a false representation of a material fact, or non-disclosure of a material fact under such circumstances that it amounts to a false representation made with knowledge of its falsity, or in reckless disregard of whether it is true or false, or as of personal knowledge, with the intention that it shall be acted upon by the other party, and which is acted upon by him to his injury." 1 Picture cards, maps, signs and photographs may be the instruments of fraudulent misrepresentations. As for instance, where they tend to mislead and produce a false impression as to the contiguity of the property to other highly developed and improved property.2

1 Clark on Contracts, 324; Maupin on Marketable Titles (2d Ed.). Ch. XI.

Fraud, to vitiate a contract, must be material and must relate distinctly and directly to the contract, and must affect its very essence and substance.3 Misrepresentation with intent to deceive is the legal equivalent of actual fraud.4 "Where a party to a contract in making a false representation is honestly mistaken, there is no ingredient of fraud in the case. This rule, however, does not permit him to make false statements recklessly or without some foundation for belief in them. Before one positively affirms the existence of a fact, he must proceed upon reasonable inquiry, and have some apparently good ground for his affirmation."5 A mistake or innocent misrepresentation is enough for rescission of the contract.6

Sec. 281. Broker's Frauds

To attempt to enter in detail into the forms which fraud and misrepresentation may take with respect to real estate transactions, would be an impossible task. It would require an exceedingly lively imagination to speculate as to the various methods by which fraud might be perpetrated. Yet it may be suggested that there are certain formulae in vogue in real estate transactions which are not infrequently resorted to and which are or may be fraudulent.

2 Scarsdale Pub. Co. v. Carter. 63 Misc. 277 (N. T. 1809).

3 Smith v. Countryman, 30 N. Y. 670 (1864) ; Press v. Hair, 133 111. App. 534 (1907); Meeks v. Garner, 11 L. R. A. 196 (Ala. 1890); Dawe v. Morris. 4 L. R. A. 158 (Mass. 1889).

4 Forsterv. Wilhusen, 14 Misc. 520 (N. Y. 1895), (citing Kley v. Healy. 127 N. Y. 555, 561 (1891).

5 Hammond v. Pennock. 61 N. Y. 150. 151 (1874) ; Erie City Iron Works v. Barber, 106 Pa. St. 138 (1884) ; Cabot v. Christie. 42 Vt. 121 (1869).

6 Forster v. Wilhusen, 14 Misc. 520 (N. Y. 1895), (citing Kountze v. Kennedy. 147 N. Y. 124 (1895) ; Crowe v. Lewln, 95 N. Y. 423 (1884) ). And see Maupin on Marketable Titles (2d Ed.), Sec. 105.

Those experienced in real estate matters, and very many with but a single experience, will find no difficulty in subscribing to the general statement that the methods sometimes invoked to bring about a sale, are not all that might be desired. Many vendors - not to mention real estate brokers - insist that the truth should always be told, but it must be admitted that all the truth is not always told.