§ 406. 407. CHAPTER XX SALES OF PERSONAL PROPERTY Rescission or Modification by Agreement of Parties. 408. Fraud and Misrepresentations. 410. 409. Same; Fraud and False Representations by Purchaser. Purchase and Sale of Corporate Stock. Non-Payment of Price. 411. 412. Same; Sale for Delivery in Installments. 413. Conditional Sales. § 406. Rescission or Modification by Agreement of Parties. When a contract of sale of personal property has been completed by the delivery of the goods, it cannot be rescinded by either of the parties alone, against the will or without the consent of the other,1 unless a right of rescission has been expressly reserved to one of the parties, it being always competent for them to include such a stipulation in their agreement, or where the property is sold on trial or on approval, or with a privilege to the buyer to return it if it shall be unsatisfactory. But a written contract for the sale of a chattel may subsequently be modified or changed by the mutual consent of the parties in any way they may desire. Thus, it may be turned into a bailment, with an alternative for future conversion into an outright sale on compliance with stipulated conditions, or it may be made a conditional sale, with a provision that the seller shall retain title and possession until payment of the price." But where the contract contemplates successive sales and deliveries of specified goods, at a fixed price and on given terms and conditions, but without any limitation as to time or for no fixed period, it is terminable at the will of either 1 Ziehme v. Metz, 157 Ill. App. 543; Adams Mining Co. v. Senter 26 Mich. 73. 2 See, infra, §§ 512-520. 3 Miller v. Grove, 18 Md. 242. Sale with privilege of return if not satisfactory, see, supra, § 192. 4 John F. Byers Mach. Co. v. Risher, 41 Pa. Super. Ct. 469. Lamb v. Utley, 146 Mich. 654, 110 N. W. 50. See Cooper v. Payne, 186 N. Y. 334, 78 N. E. 1076. party, without liability for damages. And where a contract of this kind contains a provision that either party may terminate it upon a violation of its conditions by the other, if one of the parties complains of an alleged breach and announces his intention to terminate the contract, the other will be justified in accepting such declaration and treating the contract as rescinded.' § 407. Rescission for Cause.-Many of the rules governing the rescission of contracts of sale, for legally sufficient cause, have been adverted to in the discussion of general principles in the earlier chapters of this work. Thus, it has been shown that fraud perpetrated by either of the parties upon the other will justify a rescission of the sale (§§ 20-57), including the fraudulent substitution of a different article from that which the purchaser intended to buy and supposed he was to receive (§ 29), and it may be remarked that these principles apply to an exchange of chattels, as well as to a sale. Also it has been shown that the fraudulent concealment of material facts will furnish ground for the rescission of a sale (§§ 58-67), and more especially where a duty of full disclosure is imposed by the fact that the parties occupy a confidential or fiduciary relationship (§ 40), although due allowance must be made. for the application of the rule of caveat emptor (§ 61), the application of which becomes particularly important where the complaint is of latent defects (§ 64). We have seen that the concealment of pertinent facts by the purchaser of property, known to him but not to the seller, is not ordinarily fraudulent in law, unless some special reason requires him to disclose what he knows (§§ 66, 67), although it is a fraud for an insolvent purchaser to obtain goods on credit when he has no intention or reasonable expectation of paying for them (§ 31). False representations of material facts, if justifiable reliance was placed on them and they were effective in deceiving the party, will likewise. warrant the rescission of a sale (§§ 68–126. And see § • Victor Talking Mach. Co. v. Lucker, 128 Minn. 171, 150 N. W. 790. 'D. R. Vivian Mfg. Co. v. Robertson, 176 Mo. 219, 75 S. W. 644. Norton v. Young, 3 Me. (3 Greenl.) 30. 408). But "puffing," "dealer's talk," or exaggerated praise of an article which one has for sale is not fraudulent (§ 85). The subject of a want or failure of consideration, as ground for rescinding a sale, and also of inadequacy of consideration, has been fully discussed (§§ 157-175), including the doctrine of "lesion beyond moiety," derived from the civil law and applicable in Louisiana, which may be invoked where the seller has received less than half the actual value of his property." We have also considered the subject of rescission of a sale on account of deficiency in the quantity or quality of the subject-matter (§§ 177-195), including the case of sales by sample (§ 182), sales with all faults (§ 183), sales by the producer or manufacturer of the article in question (§ 189), sales of property for a known and specified use (§ 190), and sales with the privilege of return if not satisfied (§ 192). Attention has also been given to the question of a right of rescission based on failure, refusal, or impossibility of performance of the contract of sale (§§ 196–220), including the case of a performance rendered impossible by the destruction or perishing of the subject-matter of the sale (§ 209), and of the position of a party who has disabled himself to perform (§ 210), as, by a sale of the subject of the contract to a third person (§ 211), or who has explicitly declared his intention not. to perform (§ 204). A breach of the terms or conditions of a contract of sale may also warrant its rescission or justify the party not in fault in treating it as rescinded. 10 And this is the case where the buyer refuses to accept delivery of the goods contracted for and to pay for them, except upon conditions which he has no right to prescribe,11 and even without such Supra, § 176. Suits to annul sales of personalty for lesion beyond moiety are disfavored, where the contract was not induced by fraud. Smith v. Huie-Hodge Lumber Co., 129 La. 28, 55 South. 698. 10 Goodrich v. Lafflin, 1 Pick. (Mass.) 57. See Taussig v. Southern Mill & Land Co., 124 Mo. App. 209, 101 S. W. 602; St. Regis Paper Co. v. Santa Clara Lumber Co., 31 Misc. Rep. 695, 66 N. Y. Supp. 59; Id., 55 App. Div. 225, 67 N. Y. Supp. 149. 11 The Treasurer, 1 Spr. 473, Fed. Cas. No. 14,159; Wight v. Gardner, 66 Ill. 94; Dwinel v. Howard, 30 Me. 258; McEachron v. attempt to import new terms into the contract, a neglect to take and pay for the goods at the appointed time may be ground for rescinding the sale, especially if even a short delay may be disadvantageous to the seller, on account of the perishable nature of the subject-matter or the existence of other conditions which threaten its loss or depreciation.12 There may also be such an anticipatory breach of a contract as will warrant its rescission.13 And where the plaintiff had a contract with a manufacturer giving him the exclusive right to purchase and market the manufacturer's output, although it did not bind the plaintiff to buy any specified quantity until the third year, yet where the plaintiff discontinued advertising, reduced his force of salesmen, and directed the manufacturer to stop making the goods, it was held that there was a breach of an implied condition entitling the manufacturer to terminate the contract.1 Again, where the contract of sale sought to be rescinded consists of several purchases, the seller is entitled to treat them as independent sales, and all payments made by the buyer on account may be applied to the first purchase, unless otherwise expressly designated, and the seller will be entitled to rescind as to the other sales without returning or tendering the payments received on the first.15 § 408. Fraud and Misrepresentations.-A contract for the purchase of personal property will not be enforced against the purchaser, but may be rescinded by him, if he was induced to enter into it by fraud practised upon him by the seller.16 And the rule is the same where the fraud consists in the substitution of a different or inferior article for that which the purchaser bargained for and expected Randles, 34 Barb. (N. Y.) 301; Hurlburt v. Simpson, 25 N. C. 233; Granberry v. Frierson, 2 Baxt. (Tenn.) 326. 12 Smyth v. Sutton, 24 Grat. (Va.) 191. 13 Supra, § 203. 14 Phoenix Hermetic Co. v. Filtrine Mfg. Co., 164 App. Div. 424, 150 N. Y. Supp. 193. 15 Friend Bros. Clothing Co. v. Hulbert, 98 Wis. 183, 73 N. W. 784. 16 Eldorado Jewelry Co. v. Werner, 156 Ill. App. 315; Rogers v. Weatherford, 1 Bibb (Ky.) 456. And see, supra, §§ 20-57. to receive.1 It is also a form of fraud invalidating a contract of sale where the seller unjustifiably conceals from the purchaser facts within his knowledge concerning the property which, had they been disclosed, would have deterred the purchaser from making the bargain,18 as, for example, that there are debts chargeable against the property in question, which do or may constitute liens upon it, or that it is subject to a chattel mortgage for its full value.19 Again, a sale may be rescinded on account of false and fraudulent representations made by the seller. But it must be shown that the alleged representation was made in reference to a material matter of fact; that it was false; that the seller had knowledge of its falsity, or made his assertion recklessly and without any knowledge of the truth; that he made it in order to have it acted on by the other party; and that it formed the inducement to the sale, and was so acted on by the buyer to his prejudice, in ignorance of its falsity, and in justifiable reliance upon it.20 To instance a few out of many possible examples, it may be said that, the foregoing conditions being met, a sale of · worthless bonds or stock may be rescinded on account of fraudulent representations as to the value of the property,21 that there may also be a rescission on account of material misrepresentations as to the grade, quality, or condition of the article sold, 22 and that a statement in a bill of 17 People v. O'Brien, 209 N. Y. 366, 103 N. E. 710. And see, supra, §§ 177-195. 18 Supra, §§ 58-67. 19 McIndoo v. Wood (Tex. Civ. App.) 162 S. W. 488; A. D. Baker Co. v. Smedley, 55 Ind. App. 79, 100 N. E. 307. 20 Zineman v. Harris, 6 Pa. Super. Ct. 303; Journal Printing Co. v. Maxwell, 1 Pennewill (Del.) 511, 43 Atl. 615; May v. Loomis, 140 N. C. 350, 52 S. E. 728; Stockham v. Adams, 96 Ill. App. 152. For a general discussion of the essential elements of fraud perpetrated by means of false representations, see, supra, §§ 68-126; and in particular, as to nature of misrepresentations justifying rescission, §§ 6992; falsity of representations, § 100; knowledge of falsity, §§ 102107; intention to deceive or mislead, § 108; effect of representations as deceiving party and inducing contract, §§ 109, 111; resulting loss or injury, § 112; reliance on representations made, and duty to investigate, §§ 113-126. 21 Mayne v. Griswold, 5 N. Y. Super. Ct. 463. 22 Pitcher v. Webber, 103 Me. 101, 68 Atl. 593. |