Sec. 314. Remedies For Fraud. Action To Rescind

"A person who has been induced by fraudulent representations to become the purchaser of property has upon discovery of the fraud three remedies open to him, either of which he may elect. He may rescind the contract absolutely and sue in an action at law to recover the consideration parted with upon the fraudulent contract. * * * He may bring an action in equity to rescind the contract and in that action have full relief.19 Such an action is not founded upon a rescission, but is maintained for a rescission,20 and it is sufficient, therefore, for the plaintiff to offer in his complaint to return what he has received and make a tender of it on the trial. Lastly, he may retain what he has received and bring an action at law to recover the damages sustained." 21

It may be observed that in the case just quoted from,22 the court said that "no question was raised by answer or during the trial as to the jurisdiction of the court and neither party demanded a trial by jury. Both parties tried the case on the theory that if the facts alleged in the complaint were established the plaintiff would be entitled to equitable relief of some kind," but we fail to see how any objection as to the jurisdiction of a court of equity could prevail where the action is brought for the relief secondly above mentioned.

Sec. 315. Liability On Contract In Case Of Fraud

" Whatever facts would enable a party to avoid a contract, are equally available to enable him to defeat one sought to be enforced against him."23 "If a vendee of land who was induced to purchase by means of false representations, does not rescind, and offer to reconvey, he may only sue for damages for the fraud, or plead a counterclaim for such damages in an action against him for the purchase price. He cannot exonerate himself from liability for the purchase price, except by rescinding and offering to reconvey on discovering the fraud. Krumm v. Beach, 96 N. Y. 398 (1884)."24

19 Citing Allerton v. Allerton, 50 N. Y. 670.

20 See Sec. 310 infra.

21 Davis v. Rosenzwelg Realty Co., 192 N. Y. 128 (1908), quoting from Vail v. Reynolds, 118 N. Y. 297. See also Prince v. Jacobs, 80 App. Div. 243 (N. Y. 1903).

22 Davis v. Rosenzwelg Realty Co., 192 N. Y. 132 (1908).

23 Smith v. Countryman, 30 N. Y. 670 (1864); Pryor v. Foster, 130 N. Y. 176 (1892); Johnson v. Sheridan Lumber Co., 93 Pac. 473 (Ore. 1908).

Sec. 316. Rescission

A party who would rescind a contract upon the ground of fraud, must act promptly,25 and restore or offer to restore to the other party what he received under it.26 But delay in rescinding may be explained, and ordinarily a person cannot be charged with delay in rescinding until after he has discovered the fraud. The vendee's rescission of the contract for the fraud of the vendor, dissolves it ab initio.27 " The election to rescind a contract for fraud evidenced by the bringing of an action based thereon is irrevocable and prevents the bringing of an action on the contract itself, and vice versa, when the plaintiff has knowledge of the fraud."28

"Rescission has to be made in advance of an action to recover back money paid on a fraudulent contract of purchase, but not to bring a suit for a rescission. Such a suit is not based on a previous rescission; it is for a rescission, and it suffices that the complaint itself is a rescission by necessary offers to tender, to restore, etc.29 The distinction between an action based on a rescission and one for a rescission seems to be obscured or lost sight of by the language of some opinions."30

24 Soper v. St. Regis Paper Co., 38 Misc. 294 (N. Y. 1902); aff'd, 76 App. Div. 409 (N. Y. 1902).

25 Mestler v. Jeffries, 145 Mich. 603 (1906). See also Sec. 310 supra.

26 Hammond v. Pennock, 61 N. Y. 152, 153 (1874).

27 Whalen v. Stuart, 194 N. Y. 503 (1909).

28 Realty Transfer Co. v. Cohn Co., 132 App. Div. 286 (N. Y. 1909).

29 Citing Vail v. Reynolds, 118 N. Y. 297; Berrv v. A. C. Ins. Co., 132 N. Y. 49.

30 McGowan v. Blake, 134 App. Div. 165, 166 (N. Y. 1909).