regarded as not in itself a fraud,64 though it would seem that a gesture or even an expression of the face might be enough in such a case to constitute actionable deceit.65 And one who after making an innocent misrepresentation discovers the truth, yet thereafter silently allows another to act on the misrepresentation is guilty of fraud." "In effect he is continuing the representation with knowledge of its falsity." 67 It is necessary, especially where a written contract is in question of which equity might take jurisdiction, to consider in connection with such cases not only whether the party who keeps silent has in effect made a fraudulent representation which will afford ground for an action of deceit as well as a right of rescission, but whether even if this is not true there is such a mistake as to justify rescission. Unilateral mistake even apart from knowledge of the other party to the transaction of the mistake, has been held in some cases to justify relief; 68 and it has been held with obvious justice that mistake by one party and knowledge of the mistake by the other, will justify relief as fully as mutual mistake.69 The importance of distinguishing whether the transaction can be called fraudulent as distinguished from one based on mistake without fraud, even where no other remedy than rescission is sought, lies in the fact that fraud as to any circumstances actually inducing a bargain may justify re

Lloyd, 4 Comm. (Australia) 572. A contrary decision is Davis v. Reisinger, 120 N. Y. App. Div. 766, 105 N. Y. S. 603, where one who had agreed to buy Bassein rice like a sample which owing to the seller's mistake was Java rice, a more valuable kind, was not allowed to enforce the contract because he knew the sample was Java rice. The Civil Code of Georgia provides that "where one party knows that the other party is laboring under a delusion in respect to the property sold or the condition of the other party, and yet keeps silence" such silence amounts to fraud. See Marietta Fertilizer Co. v. Beckwith, 4 Ga. App. 245, 61 S. E. 149.

64 Laidlaw v. Organ, 2 Wheat. 178, 4 L. Ed. 214.

65 A false denial of knowledge is unquestionably fraudulent. Dunlap v. Richmond &c. R., 81 Ga. 136, 7 S. E. 283.

6 Reynell v. Sprye, 1 D. M. & G. 656, €60, 709, 712; Davies v. London Ins. Co., 8 Ch. D. 469, 475; Redgrave v. Hurd, 20 Ch. D. 1, 12, 13; Loewer v. Harris, 57 Fed. 368, 6 C. C. A. 394; Mudsill Min. Co. v. Watrous, 61 Fed. 163, 189, 9 C. C. A. 415. Cf. Pettigrew v. Chellis, 41 N. H. 95.

67 Wald's Pollock Cont. (3d Am. ed.), 682.

68 See infra, § 1578.

69 See infra, §§ 1548, n. 47, 1557,

lief,70 while mistake must be as to a matter which formed a fundamental basis of the bargain.7

71

§ 1498. Silence as to quality of goods sold may be fraudulent. There are exceptions to the general rule that silence cannot amount to fraud. While it is nowhere held that collateral circumstances tending to enhance the value of the subject of the sale must be disclosed in the absence of some special relation between the parties, it is held in many States that if the subject-matter of the sale is materially defective to the knowledge of the seller, and the defect is latent, an action of deceit or other remedy based on fraud will lie in favor of a buyer who purchases the goods on the assumption that they are what they seem.72 One who knowingly transfers for value the negotiable paper of an insolvent,73 or pays a debt with a worthless check 74 or counterfeit money,75 is similarly chargeable. On the other hand, it has been held that a person who knows that there is a mine on the land of another, of which the latter is ignorant, may, nevertheless, buy the land without disclosing the existence of the mine; 76 though such nondisclosure may afford ground for

See supra, § 1490.

71 See infra, § 1544.

72

Armstrong v. Huffstutler, 19 Ala. 51; Turner v. Huggins, 14 Ark. 21; Parrish v. Thurston, 87 Ind. 437; Raeside v. Hamm, 87 Ia. 720, 54 N. W. 1079; Downing v. Dearborn, 77 Me. 457, 1 Atl. 407; Sebastian May Co. v. Codd, 77 Md. 293, 26 Atl. 316; Marsh v. Webber, 13 Minn. 109; Barron v. Alexander, 27 Mo. 530; Grigsby v. Stapleton, 94 Mo. 423, 7 S. W. 421; Joplin Water Co. v. Bathe, 41 Mo. App. 285; Hanson v. Edgerly, 29 N. H. 343; Wheeler v. Metropolitan Stock Exchange, 72 N. H. 315, 320, 56 Atl. 754; Jeffrey v. Bigelow, 13 Wend. 518, 28 Am. Dec. 476; Nichthauser v. Friedman, 161 N. Y. S. 199, 200; Hadley v. Clinton County Importing Co., 13 Ohio St. 502; Puls v. Hornbeck, 24 Okl. 288, 103 Pac. 665, 29 L. R. A. (N. S.) 202; Salmonson v. Horswill, 39 S. Dak. 402, 164 N. W. 973; Cardwell v. Mc

Clelland, 3 Sneed, 150; Paddock v.
Strobridge, 29 Vt. 470; Maynard
v. Maynard, 49 Vt. 297. See also
Stewart v. Wyoming Ranche Co., 128
U. S. 383, 9 S. Ct. 101, 32 L. Ed. 439;
Marcotte v. Allen, 91 Me. 74, 77, 39
Atl. 346, 40 L. R. A. 185; Elliott v.
Clark (Tex. Civ. App.), 157 S. W. 437.
But see contra, Ward v. Hobbs, 3 Q. B.
D. 150, 4 A. C. 13; Morris v. Thompson,
85 Ill. 16; Paul v. Hadley, 23 Barb. 521.
73 See supra, § 1162, infra, § 1572.
74 Ibid. See also Commercial Bank
v. Varnum, 176 Mo. App. 78, 162 S. W.
1080.

75 Ibid.

76 Fox v. Mackreth, 2 Bro. Ch. 400, 420; Falcke v. Gray, 38 L. J. Ch. 28, 31; Smith v. Beatty, 2 Ir. Eq. 456; Caples v. Steel, 7 Or. 491; Harris v. Tyson, 24 Pa. St. 347, 64 Am. Dec. 661. And see Williams v. Spurr, 24 Mich. 335; Burt v. Mason, 97 Mich. 127, 56 N. W. 365; Guaranty &c. Trust Co. v.

a court of equity to refuse specific performance of a contract." It may perhaps fairly be said that the offer of goods which appear to be of a certain character is itself a representation that they are what they seem.78 But it is more difficult, where the buyer is guilty of fraudulent concealment, to regard his offer as a representation that the seller's property is what it seems, and it is impossible to say that an offer by either party amounts to a representation that all collateral circumstances are what the other party supposes. It is certainly true that any active conduct or words which tend to produce an erroneous impression may amount to fraud, and half the truth may be a lie in effect.79

§ 1499. Other instances where silence may be fraudulent. Active concealment of the facts, also, would be held fraudulent by some courts which would not hold mere silence sufficient, though it may seem difficult to make out an actual misrepresentation from acts of concealment unknown to the other party.80

Liebold, 207 Pa. 399, 56 Atl. 951; Crompton v. Beedle, 83 Vt. 287, 75 Atl. 331, 30 L. R. A. (N. S.) 748. In the Pennsylvania and in the second Michigan case cited the purchaser knew of collateral facts likely to increase largely the value of the lands. The law is otherwise between partners. Hanley v. Sweeny, 109 Fed. 712, 48 C. C. A. 612.

" See supra, § 1426.

78 Paddock v. Strobridge, 29 Vt. 470, and cases cited. Supra, n. 72. 1

79 Peck v. Gurney, L. R. 6 H. L. 377, 392, 403; Gluckstein v. Barnes, [1900] A. C. 240; Stevenson v. Marble, 84 Fed. 23; Fay v. Hill, 249 Fed. 415, 161 C. C. A. 389; Macdonald v. Roeth (Cal.), 176 Pac. 38; Kenner v. Harding, 85 Ill. 264, 28 Am. Rep. 615; Coles v. Kennedy, 81 Ia. 360, 46 N. W. 1088, 25 Am. St. 503; Henry v. Vance, 23 Ky. L. Rep. 491, 63 S. W. 273; State v. Fox, 79 Md. 514, 29 Atl. 601, 24 L. R. A. 679, 47 Am. St. Rep. 424; Potts v. Chapin, 133 Mass. 276; Burns v. Dockray, 156 Mass. 135, 30 N. E. 551; Van Houten

v. Morse, 162 Mass. 414, 38 N. E. 705, 26 L. R. A. 430, 44 Am. St. Rep. 373; Newell v. Randall, 32 Minn. 171, 19 N. W. 972, 50 Am. Rep. 562; Melick v. Metropolitan L. Ins. Co., 84 N. J. L. 437, 87 Atl. 75; Wegenaar v. Dechow, 33 N. Y. App. Div. 12, 53 N. Y. S. 240; Hadley v. Clinton Importing Co., 13 Ohio St. 502, 513, 82 Am. Dec. 454; Gidney v. Chapple, 26 Okl. 737, 110 Pac. 1099; Croyle v. Moses, 90 Pa. St. 250, 35 Am. Rep. 654; George v. Johnson, 6 Humph. 36, 44 Am. Dec. 288; Mallory v. Leach, 35 Vt. 156, 168, 82 Am. Dec. 625; Crompton v. Beedle, 83 Vt. 287, 75 Atl. 331; Tolley v. Poteet, 62 W. Va. 231, 57 S. E. 811.

80 "In an action of deceit, it is true that silence as to a material fact is not necessarily, as matter of law, equivalent to a false representation. But mere silence is quite different from concealment; aliud est tacere, aliud celare; a suppression of the truth may amount to a suggestion of falsehood; and if, with intent to deceive, either party to a contract of

In some contracts, such as insurance 81 and, to a less extent, guaranty 82 failure to disclose material facts is already recognized by the law as fraudulent, and the tendency in the law of sales, as well as in other contracts, is doubtless toward requiring a somewhat higher degree of good faith than formerly, especially where the opportunities for information are not equally open to both parties.83 In case a fiduciary relation exists between the parties, as that of trustee and cestui que trust, guardian and ward, lawyer and client, there is a positive duty, a failure to observe which is constructively fraudulent; 84 and the nature of the transaction or the relation of the parties may be such that as to the particular transaction in question, the duties of a fiduciary are imposed upon one or the other party,

sale conceals or suppresses a material fact, which he is in good faith bound to disclose, this is evidence of and equivalent to a false representation, because the concealment or suppression is in effect a representation that what is disclosed is the whole truth. The gist of the action is fraudulently producing a false impression upon the mind of the other party; and if this result is accomplished, it is unimportant whether the means of accomplishing it are words or acts of the defendant, or his concealment or suppression of material facts not equally within the knowledge or reach of the plaintiff." Stewart v. Wyoming Ranche Co., 128 U. S. 383, 388, 9 S. Ct. 101, 32 L. Ed. 439, per Gray, J. See also Tooker v. Alston, 159 Fed. 599, 86 C. C. A. 425; Roseman v. Canovan, 43 Cal. 110; Kenner v. Harding, 85 Ill. 264; Timmis v. Wade, 5 Ind. App. 139, 31 N. E. 827; Raeside v. Hamm, 87 Iowa, 720, 54 N. W. 1079; Sherman v. Smith (Ia.), 169 N. W. 216; Singleton's Admr. v. Kennedy, 9 B. Mon. 222; Phelps v. Jones, 141 Mo. App. 223, 124 S. W. 1067; Barrett v. Lewiston &c. R., 110 Me. 24, 85 Atl. 306; Sockman v. Keim, 19 N. Dak. 317, 124 N. W. 64; Croyle v. Moses, 90 Pa. St. 250, 35 Am. Rep. 654.

81 In marine insurance non-disclosure of a material fact though without fraudulent intent vitiates the policy. Ionides v. Pender, L. R. 9 Q. B. 531, 537; McLanahan v. Insurance Co., 1 Pet. 170, 185, 7 L. Ed. 98; Hart v. British Ins. Co., 80 Cal. 440, 22 Pac. 302; Fiske v. New England Ins. Co., 15 Pick. 310, 316. The rule is the same in fire insurance, though applied less strictly. Clark v. Manufacturers' Ins. Co., 8 How. 235, 12 L. Ed. 1061; Daniels v. Hudson River F. Ins. Co., 12 Cush. 416, 59 Am. Dec. 192; Clarkson v. Western Assur. Co., 33 N. Y. App. D. 23, 53 N. Y. S. 508; McFaul v. Montreal Inland Ins. Co., 2 U. Can. Q. B. 59. In life insurance the universal practice of requiring answers to a great number of questions seems to have made the only duty of the insured to answer fully and truthfully. See Phenix Ins. Co. v. Raddin, 120 U. S. 183, 192, 30 L. Ed. 644.

82 See supra, § 1249.

83 See Gottschalk v. Kircher, 109 Mo. 170, 184, 17 S. N. 905.

84 Haviland v. Willetts, 141 N. Y. 35, 35 N. E. 958. As to how far the position of betrothed persons brings them within the same principle, see In re Malchow's Est., (Minn. 1919), 172 N. W. 915.

and such a relation involves a duty of disclosure.85 In many cases where the silence of a party to the contract is not such as to amount to actionable fraud or to justify the rescission of contract, a court of equity will, nevertheless, refuse to enforce specific performance of the contract, since this relief is in many cases denied where the bargain is inequitable even though legally enforceable.86

§ 1500. Rescission is allowable for honest misrepresentation. It is not necessary in order that a contract may be rescinded for fraud or misrepresentation that the party making the misrepresentation should have known that it was false. Innocent misrepresentation is sufficient. For though the representation may have been made innocently, it would be unjust to allow one who has made false representations even innocently, to retain the fruits of a bargain induced by such representations.87 This is