of a transaction in the hands of his attorney. he cannot complain of misrepresentations as to facts which the attorney could and should have discovered.55 Moreover, where representations are made in a written contract for the sale or hire of an article, but at the same time a clause is added stating that "particulars are not guarantied," it is notice to the purchaser or hirer not to rely on the representations, but to use his own judgment or inform himself otherwise.656

657

A person who has taken proper precautions to guard himself against fraud or deception, by making an examination or inspection, is generally justified in relying on the situation continuing as he found it, and completing his contract on that assumption. But this does not hold good where a partial examination of goods purchased discloses a defect (which is thereupon remedied), but the purchaser, not taking the warning, omits to make a further examination which, had he made it, would have brought to light additional defects.658

§ 114. Same; Decisions Repudiating or Modifying Rule.-A very great number of decisions (particularly among the later ones) altogether repudiate the rule stated in the preceding section, or else restrict it to cases where the representations were not made with any willful purpose to deceive. According to these authorities, when a party to a contract intentionally and fraudulently misrepresents or conceals facts within his knowledge, or which may be assumed to be within his knowledge, and the other relies thereon and is misled to his injury, the latter is entitled to rescind irrespective of any effort on his part to discover the truth of the matter in question, and the defrauding party will not be heard to say in defense that his victim might have discovered the truth if he had exercised due care and prudence. "Every contracting party," says

6 59

655 Freeman v. Evans, 159 Fed. 26, 86 C. C. A. 216.

656 The Hurstdale (D. C.) 169 Fed. 912.

657 Nelson v. Title Trust Co., 52 Wash. 258, 100 Pac. 730.

658 Winelander v. Jones, 77 Iowa, 401, 42 N. W. 333.

659 McAlister v. Barry, Fed. Cas. No. 8,656; Baker v. Maxwell,

99 Ala. 558, 14 South. 468; King v. Livingston Mfg. Co., 180 Ala.

the court in New York, "has an absolute right to rely on the express statement of an existing fact, the truth of which is known to the opposite party and unknown to him, as the basis of a mutual engagement, and he is under no obligation to investigate and verify statements to the truth of which the other party to the contract, with full means of knowledge, has deliberately pledged his faith." *** "There is no rule of law which requires men, in their business transactions, to act upon the presumption that all

118, 60 South. 143; Wilks v. Wilks, 176 Ala. 151, 57 South. 776; Crandall v. Parks, 152 Cal. 772, 93 Pac. 1018; Maxon-Nowlin Co. v. Norswing, 166 Cal. 509, 137 Pac. 240; Vance v. Supreme Lodge of Fraternal Brotherhood, 15 Cal. App. 178, 114 Pac. 83; Whitaker v. State, 11 Ga. App. 208, 75 S. EL 258; La Salle Pressed Brick Co. v. Coe, 65 Ill. App. 619; Judy v. Jester, 53 Ind. App. 74, 100 N. E 15; Hetland v. Bilstad, 140 Iowa, 411, 118 N. W. 422; Howerton v. Augustine, 145 Iowa, 246, 121 N. W. 373; Murray v. Davies, 77 Kan. 767, 94 Pac. 283; Exchange Bank of Kentucky v. Gaitskill, 18 Ky. Law Rep. 532, 37 S. W. 160; Rahm v. Bunger, 28 Ky. Law Rep. 806, 90 S. W. 257; Smith v. Commonwealth, 153 Ky. 385, 155 S. W. 1125; Eastern Trust & Banking Co. v. Cunningham, 103 Me. 455, 70 Atl. 17; Whiting v. Price, 172 Mass. 240, 51 N. E. 1084,. 70 Am. St. Rep. 262; Smith v. Werkheiser, 152 Mich. 177, 115 N. W. 964, 15 L. R. A. (N. S.) 1092, 125 Am. St. Rep. 406; Yanelli v. Littlejohn, 172 Mich. 91, 137 N. W. 723; Smith v. McDonald, 139 Mich. 225, 102 N. W. 738; Erickson v. Fisher, 51 Minn. 300, 53 N. W. 638; McCarty v. New York Life Ins. Co., 74 Minn. 530, 77 N. W. 426; Van Metre v. Nunn, 116 Minn. 444, 133 N. W. 1012; Thaler v. Niedermeyer, 185 Mo. App. 257, 170 S. W. 378; Judd v. Walker, 114 Mo. App. 128, 89 S. W. 558; State v. Donaldson, 243 Mo. 460, 148 S. W. 79; Davis v. Forman, 229 Mo. 27, 129 S. W. 213; Brown v. Kansas City South. Ry. Co., 187 Mo. App. 104, 173 S. W. 73; Turner v. Kuehnle, 70 N. J. Eq. 61, 62 Atl. 327; Mead v. Bunn, 32 N. Y. 275; Fox v. Duffy, 95 App. Div. 202, 88 N. Y. Supp. 401; Delano v. Rice, 21 Misc. Rep. 714, 48 N. Y. Supp. 130; White Sewing Mach. Co. v. Bullock, 161 N. C. 1, 76 S. E. 634; Halsell v. First Nat. Bank (Okl.) 150 Pac. 489; Lake v. Weber, 6 Pa. Super. Ct. 42; United States Gypsum Co. v. Shields (Tex. Civ. App.) 106 S. W. 724; Western Cottage Piano & Organ Co. v. Anderson, 45 Tex. Civ. App. 513, 101 S. W. 1061; Foix v. Moeller (Tex. Civ. App.) 159 S. W. 1048; Benton v. Kuykendall (Tex. Civ. App.) 160 S. W. 438; Hammel v. Benton (Tex. Civ. App.) 162 S. W. 34; Underwood v. Jordan (Tex. Civ. App.) 166 S. W. 88; Crompton v. Beedle, 83 Vt. 287, 75 Atl. 331, 30 L. R. A. (N. S.) 748, Ann. Cas. 1912A, 399; Lowe v. Trundle, 78 Va. 65; Jordan v. Walker, 115 Va. 109, 78 S. E. 643; Gilluly v. Hosford, 45 Wash. 594, 88 Pac. 1027; Fischer v. Hillman, 68 Wash. 222, 122 Pac. 1016, 39 L. R. A. (N. S.) 1140.

660 Mead v. Bunn, 32 N. Y. 275. And see Farley v. Wiess, 76 Neb. 402, 107 N. W. 561.

defense to the action.682 For another illustration of this principle, we may cite the case where a plaintiff, doing business under the name of the "Committee of Distribution," sent his agent to obtain defendant's order for certain books, and the agent falsely represented and induced the defendant to believe that he was purchasing the books from a committee of the United States congress, that the books could be obtained only on the recommendation of a congressman, and that he had been recommended by the congressman from his district. It was held that the defendant was under no obligation to take the books, even although they were in every respect as good as represented.683

But on the other hand, where a purchaser receives what he has actually bargained for, and bases his right to rescind on some false representation as to quality, condition, or matter affecting its value, he must show that such representation was material, that he was misled by it, and that he has thereby sustained some loss or damage. For instance, a purchaser of a right to vend a patented article in a certain territory cannot defeat a recovery on the ground of a misrepresentation as to the number of such articles already sold in that territory, in the absence of a showing that he was injured by the false representation. So, a purchase of a machine cannot be rescinded because of false representations that S. was the local agent of the seller and would keep repair parts for the machine, where it appears that such parts were kept by another, and it is not shown that the purchaser will suffer any loss by reason of S. not being such agent.636 Again, a misrepresentation by the purchaser of property as to his own identity is not ground for rescission unless it is shown to have caused some loss

632 Jackson v. Foley, 53 App. Div. 97, 65 N. Y. Supp. 920. 633 Barcus v. Dorries, 64 App. Div. 109, 71 N. Y. Supp. 695.

634 Jakway v. Proudfit, 76 Neb. 62, 106 N. W. 1039, 109 N. W. 388, 14 Ann. Cas. 258; Gilfillen v. Moorehead, 73 Conn. 710, 49 Atl. 196; Donnelly v. Baltimore Trust & Guarantee Co., 102 Md. 1, 61 Atl. 301; Storthz v. Arnold, 74 Ark. 68, 84 S. W. 1036. And see Bewley v. Moremen, 162 Ky. 32, 171 S. W. 996.

635 Rice v. Gilbreath, 119 Ala. 424, 24 South. 421.

636 Aultman, Miller & Co. v. Nilson, 112 Iowa, 634, 84 N. W. 692.

or damage. On the same principle, it is not fraud to induce a party to sign an instrument of one kind by representing it to be an instrument of another kind, where it accomplishes exactly the same result and does not work any injury to the party misled.638 So, each of the subscribers to the stock of a corporation (the whole being required to be subscribed before any subscription becomes binding) has a right to rely on the genuineness and validity of the other subscriptions. But though some of them may be forged and others obtained by false pretences, yet a subscriber is not entitled to repudiate his contract, if he does not stand in danger of any actual loss or injury.639 And a subscription to pay money to certain associates in consideration of their erecting a pork-packing house is not affected by contemporaneous parol misrepresentations that men of great wealth would take part and that collateral improvements would be made, when the house is erected according to the undertaking.640 Furthermore, the loss or injury must be actual or inevitable, not merely conjectural. Thus, an author is not justified in his refusal to permit a publisher to publish his book, as he had contracted to do, merely because of his doubts as to the publisher's solvency.641

§ 113. Duty to Investigate Truth of Representations.— It is a rule of great antiquity and supported by a great body of authorities that a person about to enter into a contract or assume an obligation should exercise reasonable care and prudence in the matter of accepting at their face value representations concerning the subject-matter made to him by the opposite party; and although the representations were false and fraudulent, and he was deceived by them and misled to his injury, yet he cannot rescind or repudiate his contract on that ground, if it appears that he might have discovered their falsity by mere inspection of the subject,

637 Turchin Sheffield Plate & Sterling Silver Co. v. Baugh (Sup.) 117 N. Y. Supp. 137.

638 Hays v. Hays, 179 Pa. 277, 36 Atl. 311.

639 Haney & Campbell Mfg. Co. v. Adaza Co-operative Creamery Co., 108 Iowa, 313, 79 N. W. 79.

640 Paddock v. Bartlett, 68 Iowa, 16, 25 N. W. 906.

641 Jewett Pub. Co. v. Butler, 159 Mass. 517, 34 N. E. 1087.

or by the exercise of reasonable diligence in recurring to sources of information which were equally open to him as to the other party.642 There are exceptions to this rule (which will be discussed in the succeeding sections), where a fiduciary relationship subsisted between the parties, where the matter was exclusively within the knowledge of one of them, where an examination of the subject-matter would require unusual pains, expense, or trouble, or involve spe

642 King v. Lamborn, 186 Fed. 21, 108 C. C. A. 123; Great Western Mfg. Co. v. Adams, 176 Fed. 325, 99 C. C. A. 615; Dalhoff Const. Co. v. Block, 157 Fed. 227, 85 C. C. A. 25, 17 L. R. A. (N. S.) 419; Metropolitan Life Ins. Co. v. Goodman, 10 Ala. App. 446, 65 South. 449; Nelson v. Brown, 164 Ala. 397, 51 South. 360, 137 Am. St. Rep. 61; Delaney v. Jackson, 95 Ark. 131, 128 S. W. 859; Lion v. McClory, 106 Cal. 623, 40 Pac. 12; Lee v. McClelland, 120 Cal. 147, 52 Pac. 300; Brandt v. Krogh, 14 Cal. App. 39, 111 Pac. 275; Gratz v. Schuler, 25 Cal. App. 117, 142 Pac. 899; Gustafson v. Rustemeyer, 70 Conn. 125, 39 Atl. 104, 39 L. R. A. 644, 66 Am. St. Rep. 92; Stephens v. Orman, 10 Fla. 9; Hunt v. Hardwick, 68 Ga. 100; Miller v. Roberts, 9 Ga. App. 511, 71 S. E. 927; Nelson v. Hudgel, 23 Idaho, 327, 130 Pac. 85; Hand v. Waddell, 167 Ill. 402, 47 N. E. 772; Jones v. Foster, 175 Ill. 459, 51 N. E. 862; Moore v. Recek, 163 Ill. 17, 44 N. E. 868; Stedman v. Boone, 49 Ind. 469; Williamson v. Hitner, 79 Ind. 233; Wood v. Wack, 31 Ind. App. 252, 67 N. E. 562; Anderson Foundry & Machine Works v. Myers, 15 Ind. App. 385, 44 N. E. 193; King v. Williams, 71 Iowa, 74, 32 N. W. 178; Exchange Bank v. E. B. Williams & Co., 120 La. 901, 45 South. 935; Rocchi v. Schwabacher, 33 La. Ann. 1364; Stone v. Pentecost, 206 Mass. 505, 92 N. E. 1021; De Grasse v. Verona Min. Co. (Mich.) 152 N. W. 242; Buford v. Caldwell, 3 Mo. 477; Champion Funding & Foundry Co. v. Heskett, 125 Mo. App. 516, 102 S. W. 1050; Brown v. Kansas City Southern Ry. Co., 187 Mo. App: 104, 173 S. W. 73; Osborne v. Missouri Pac. Ry. Co., 71 Neb. 180, 98 N. W. 685; Wustrack v. Hall, 95 Neb. 384, 145 N. W. 835; Industrial Sav. & Loan Co. v. Plummer (N. J.) 92 Atl. 583, L. R. A. 1915C, 613; Dambmann v. Schulting, 75 N. Y. 55; Creamer v. Peshkin, 81 Misc. Rep. 167, 142 N. Y. Supp. 333; Saunders v. Hatterman, 24 N. C. 32, 37 Am. Dec. 404; Waymire v. Shipley, 52 Or. 464, 97 Pac. 807; Wheelwright v. Vanderbilt, 69 Or. 326, 138 Pac. 857; Griffith v. Herr, 17 Pa. Super. Ct. 601; Baum v. Raley, 53 S. C. 32, 30 S. E. 713; Winter v. Johnson, 27 S. D. 512, 131 N. W. 1020; Perkins v. McGavock, Cooke (Tenn.) 415; Corbett v. McGregor (Tex. Civ. App.) 131 S. W. 422; Equitable Life Assur. Soc. v. Maverick (Tex. Civ. App.) 78 S. W. 560; Mutual Life Ins. Co. v. Hargus (Tex. Civ. App.) 99 S. W. 580; Stewart v. Larkin, 74 Wash. 681, 134 Pac. 186; Francois v. Cady Land Co., 149 Wis. 115, 135 N. W. 484; Morgan v. Hodge, 145 Wis. 143, 129 N. W. 1083; Shaw v. Gilbert, 111 Wis. 165, 86 N. W. 188. Compare Maxon-Nowlin Co. v. Norswing, 166 Cal. 509, 137 Pac. 240.