there are certain exceptions to this rule. In the first place, where the fraud inheres in the execution of a release of a cause of action, and is of such a character as to prevent the formation of any valid contract in the first instance (as, where the claimant is fraudulently induced to believe that he is signing an instrument of an entirely different character, and has no intention of executing a release), a plaintiff thus imposed on need not pay or tender the consideration received as a prerequisite to his right to sue on the cause of action released, since he neither affirms a release nor seeks its cancellation, but proceeds on his cause of action as though no contract of compromise had ever been made.113 In the next place, the rule depends on the estoppel of the person giving the release, and it does not apply if such person, because of mental deficiency, could not be charged with actual or constructive notice of the character of the instrument which he has executed and of the consideration received for it.114 Again, if the claimant, before discovering that he was defrauded, has spent a large part of the consideration received, and has no other means, it would be unjust to require him to restore more than he is able before allowing him to sue on his cause of action; and in such a case it is held that substantial justice may be done by requiring the restoration of so much as the plaintiff is able to refund and providing that the balance be applied Stevenson, 71 Mo. App. 427; McMichael v. Kilmer, 76 N. Y. 36; Kreuzen v. Forty-Second St., etc., Ry. Co. (City Ct.) 13 N. Y. Supp. 588; Stewart v. Houston & T. C. Ry. Co., 62 Tex. 246. But compare Chicago, R. I. & P. R. Co. v. Lewis, 109 Ill. 120. And see Marple v. Minneapolis & St. L. Ry. Co., 115 Minn. 262, 132 N. W. 333, Ann. Cas. 1912D, 1082. 113 Roberts v. Colorado Springs & I. Ry. Co., 45 Colo. 188, 101 Pac. 59; Babcock v. Farwell, 245 Ill. 14, 91 N. E. 683, 137 Am. St. Rep. 284, 19 Ann. Cas. 74; See v. Carbon Block Coal Co., 159 Iowa, 413, 138 N. W. 825, 141 N. W. 1048; St. Louis & S. F. R. Co. v. Ault, 101 Miss. 341, 58 South. 102; Malkmus v. St. Louis Portland Cement Co., 150 Mo. App. 446, 131 S. W. 148; Genest v. Odell Mfg. Co., 75 N. H. 365, 74 Atl. 593; Scully v. Brooklyn Heights R. Co., 155 App. Div. 382, 140 N. Y. Supp. 260; Joslyn v. Empire State Degree of Honor, 145 App. Div. 14, 129 N. Y. Supp. 563. 114 McKittrick v. Greenville Traction Co., 84 S. C. 275, 66 S. E. 289; Bearden v. St. Louis, I. M. & S. Ry. Co., 103 Ark. 341, 146 S. W. 861. in reduction of any judgment which he may obtain.115 Again, if it is admitted (or is evident) that the plaintiff will be entitled to recover a larger sum than that which he received as the consideration for a release which he now impeaches for fraud, or if it is conceded or is apparent that he will at least be entitled to retain so much as he has received, no previous tender or offer of restoration is necessary, as the amount can be credited to the defendant at the trial or deducted from the judgment recovered.116 Thus, for instance, in order to support an action to set aside a release of a judgment, as having been procured by the fraud of the defendant, the judgment debtor, the plaintiff need not of fer to return the costs paid by the defendant as a consideration for such release, since he is entitled to such costs in either event.117 And where the plaintiff has offered to return the consideration for the release relied on by defendant, and the offer has been refused, a failure to renew the tender at the trial is not fatal, at least where the jury are properly instructed to deduct the consideration from the amount of the damages.118 And it has been held that there was a sufficient restoration of the amount paid the plaintiff on an invalid compromise and settlement of his claim, to authorize his continuing prosecution of his action on the claim, where his attorneys gave their check to the clerk of the court, and he accepted it, and an order was made reciting that the amount was paid into court.119 § 397. Ratification and Estoppel.-Though a release may be voidable for fraud or other legally sufficient cause, yet it may be ratified by the releasor, and if this is done, 115 Rase v. Minneapolis, St. P. & S. S. M. Ry. Co., 118 Minn. 437, 137 N. W. 176; Texas & P. Ry. Co. v. Jowers (Tex. Civ. App.) 110 S. W. 946. 116 Reynolds v. Westchester Fire Ins. Co., 8 App. Div. 193, 40 N. Y. Supp. 336; Ross v. Oliver Bros., 152 Ky. 437, 153 S. W. 756; Richards v. Farmers' & Merchants' Bank, 7 Cal. App. 387, 94 Pac. 393; Putnam v. Boyer, 173 Mo. App. 394, 158 S. W. 861; Johnson v. Chicago, M. & St. P. R. Co. (D. C.) 224 Fed. 196. 117 Kley v. Healy, 127 N. Y. 555, 28 N. E. 593. But see Haydon v. St. Louis & S. F. R. Co., 117 Mo. App. 76, 93 S. W. 833. 118 Butler v. Gleason, 214 Mass. 248, 101 N. E. 371. 119 Interstate Coal Co. v. Trivett, 155 Ky. 825, 160 S. W. 728. he will afterwards be estopped from repudiating it; and 120 McConaughy v. Camden, 18 W. Va. 140. See Russell v. Dayton Coal & Iron Co., 109 Tenn. 43, 70 S. W. 1. 121 Mensforth v. Chicago Brass Co., 142 Wis. 546, 126 N. W. 41, 512, 135 Am. St. Rep. 1084. 122 Bramble v. Cincinnati, F. & S. E. R. Co., 132 Ky. 547, 116 S. W. 742. 123 Madison Coal Co. v. Caveglia, 122 Ill. App. 415. CHAPTER XIX NOTES AND BILLS $398. Right of Rescission or Cancellation in General 399. Fraud and False Representations. 403. Duress and Undue Influence. 404. Voidability as Against Bona Fide Holder for Value. 405. Jurisdiction of Equity to Order Cancellation. § 398. Right of Rescission or Cancellation in General.— The parties to a negotiable instrument have the right to rescind the promise and agreement which it embodies, by their mutual consent, so long as the instrument remains within their own control. Thus, an indorser and indorsee may agree to rescind or modify the contract evidenced by the indorsement, and an agreement so made will control the indorsement. Moreover, if a legally sufficient ground exists for the rescission of a note or bill, such as fraud, mistake, or duress, the person liable on it, instead of defending an action on it on the ground of its invalidity, may sue to have it surrendered and canceled, at least as against the original payee, or against any person if it is not negotiable in form, upon complying with such terms and conditions as are usual in the rescission of contracts, including the restoration of any consideration or benefit received,3 and upon showing loss or injury to himself. For a debtor who gives his note to his creditor for a valid and subsisting debt, induced to do so by certain statements of the creditor, cannot set up in defense to the note, or as a ground for 1 Young v. Fuller, 29 Ala. 464. 2 Campodonico v. Grossini, 66 Cal. 358, 5 Pac. 609; Jones v. Dana, 24 Barb. (N. Y.) 395; Domingo v. Getman, 9 Cal. 97; Hodson v. Eugene Glass Co., 156 Ill. 397, 40 N. E. 971; Manning v. Berdan (C. C.) 135 Fed. 159; City of Paterson v. Baker, 51 N. J. Eq. 49, 26 Atl. 324; Breathwit v. Rogers, 32 Ark. 758; Sipola v. Winship, 74 N. H. 240, 66 Atl. 962. Berenson v. Conant, 214 Mass. 127, 101 N. E. 60. Bank of Commerce v. Broyles, 16 N. M. 414, 120 Pac. 670. its cancellation, that such statements were false and fraudulent, without also showing injury. Again, if a note has been paid, satisfied, or otherwise discharged, but remains outstanding, there is jurisdiction in a court of equity to order its cancellation. And it appears that where a note includes an unconscionable overcharge, it may be at least reduced in amount, if not canceled, by the aid of the courts." § 399. Fraud and False Representations.-Where the execution of a promissory note, bill, draft, or check is induced by fraud, deceit, fraudulent concealment, false representations, or false pretences, the maker may defend against it on that ground, or, in proper cases, maintain an action for its cancellation, saving the rights of holders in good faith for value without notice and before maturity, a case which will be considered later. And, according to the general current of the authorities, the fraud, concealment, or false representations which will constitute a defense to an action on a note, or warrant its cancellation, may be such as relate to the consideration for the note, in respect to its existence, character, value, amount, or other particulars," 5 Bowen v. Waxelbaum, 2 Ga. App. 521, 58 S. E. 784. 6 Supra, § 162. 7 Cutler v. How, 8 Mass. 257; Haycock v. Rand, 5 Cush. (Mass.) 26. 8 House v. Martin, 125 Ga. 642, 54 S. E. 735; Turner v. Ware, 2 Ga. App. 57, 58 S. E. 310; Gehlbach v. Carlinville Nat. Bank, 83 Ill. App. 129; McCrea v. Murphy, 90 Ill. App. 434; People's State Bank v. Ruxer, 31 Ind. App. 245, 67 N. E. 542; Kernodle v. Hunt, 4' Blackf. (Ind.) 57; Stouffer v. Alford, 114 Md. 110, 78 Atl. 387; Roberts v. Sholes, 144 Mich. 215, 107 N. W. 904; McNeill v. Bay Springs Bank, 100 Miss. 271, 56 South. 333; Anderson v. Stapel, 80 Mo. App. 115; Bank of Ozark v. Hanks, 142 Mo. App. 110, 125 S. W. 221; Mueller v. Buch, 71 N. J. Law, 486, 58 Atl. 1092; Times Square Automobile Co. v. Rutherford Nat. Bank, 77 N. J. Law, 649, 73 Atl. 479, 134 Am. St. Rep. 811; Douglass v. Richards, 116 App. Div. 27, 101 N. Y. Supp. 299; Bristor v. Manhattan Real Estate Co., 75 Misc. Rep. 632, 133 N. Y. Supp. 1000; Helms v. Holton, 152 N. C. 587, 67 S. E. 1061; Kingman Colony Irr. Co. v. Payne (Or.) 152 Pac. 891; Benson v. Keller, 37 Or. 120, 60 Pac. 918; Kirby v. Berguin, 15 S. D. 444, 90 N. W. 856; Hall v. Grayson County Nat. Bank, 36 Tex. Civ. App. 317, 81 S. W. 762; Hynes v. Plastino, 45 Wash, 190, 87 Pac. 1127; Aukland v. Arnold, 131 Wis. 64, 111 N. W. 212. On the general subject of fraud as ground for rescission or cancellation of contracts, see, supra, §§ 20-57. As to false representations justifying rescission or cancellation, see, supra, §§ 68-126. 9 Alabama Nat. Bank v. Halsey, 109 Ala. 196, 19 South. 522; Bark |