Another remedy is applicable also for a particular kind of fraud. Where a writing owing to the fraud of one of the parties, and mistake of the other fails to express the agreement at which they arrived, reformation will be allowed. 32

§ 1526. Time allowed for election of remedies.

It is generally said that a defrauded party must elect whether he will affirm the fraudulent transaction or rescind it. But a transaction though induced by fraud is not on that account void, it is only voidable. Consequently if nothing is done the transaction is not avoided, and the rights of the parties will be fixed by the agreement which they made without any manifestation of election. The right to sue for deceit which is based on the assumption that the fraudulent transaction is to stand does not, therefore, require prompt action by the injured party.33 The Statute of Limitations alone prevents excessive delay, though it is obvious that delay in asserting a right of action for fraud will tend to show both that no fraud was perpetrated and, in connection with other circumstances, that if there was fraud, any right of action that may have existed has been discharged. Setting a fraudulent bargain aside, however, is an alternative right given on equitable principles to the injured party and, therefore, if this remedy is desired it must be sought with reasonable promptness after the fraud has been discovered.34 But

32 Rhode Island v. Massachusetts, 15 Pet. 233, 10 L. Ed. 721; Medical Society v. Gilbreth, 208 Fed. 899; Trenton Terra Cotta Co. v. Clay Shingle Co., 80 Fed. 46; Hand v. Cox, 164 Ala. 348, 51 So. 519; Hansford v. Freeman, 99 Ga. 376, 27 S. E. 706; Dazey v. Binkley, 285 Ill. 513, 121 N. E. 165; Koons v. Blanton, 129 Ind. 383, 27 N. E. 334; Scott v. Spurr, 169 Ky. 575, 184 S. W. 866; Hitchins v. Pettingill, 58 N. H. 386; Hayes v. Stiger, 29 N. J. Eq. 196; Green v. Stone, 54 N. J. Eq. 387, 34 Atl. 1099, 55 Am. St. 577; Walker v. Bourgeois, 88 N. J. Eq. 124, 102 Atl. 250; Cleveland v. Bateman, 21 N. Mex. 675, 158 Pac. 648, Ann. Cas. 1918 E.

1011; Welles v. Yates, 44 N. Y. 525;Kyle v Fehley, 81 Wis. 67, 29 Am. St. Rep. 866, 51 N. W. 257; Moehlenpah v. Mayhew, 138 Wis. 561, 119 N. W. 826.

33 Cottrill v. Krum, 100 Mo. 397, 13 S. W. 753, 18 Am. St. Rep. 549; Huber Mfg. Co. v. Hunter, 99 Mo. App. 46.

34 Clough v. London, etc., Ry. Co., L. R. 7 Ex. 26; Upton v. Tribilcock, 91 U. S. 45, 23 L. Ed. 203; Pence v. Langdon, 99 U. S. 578, 25 L. Ed. 420; Mudsill Mining Co. v. Watrous, 61 Fed. 163, 22 U. S. App. 12, 9 C. C. A. 415; Blank v. Aronson, 187 Fed. 241, 109 C. C. A. 327; Bowden v. Spellman, 59 Ark. 251, 259, 27 S. W. 602; Board

"The question of how much time a party to a contract has permitted to elapse is not necessarily determinative of the right to rescind; the immediate consideration being whether the period has been long enough to result in prejudice to the other party.' "In the case of an executory contract a refusal to perform any obligation thereunder and the defence of an action brought thereon are all that the defrauded party can do by way of asserting his right to disaffirm the contract, and, unless

his silence or delay has operated to the prejudice of the other party, he may first assert his right when his adversary first asserts his claim by action. The failure of the vendee to disaffirm the contract might sometimes prevent the vendor from selling to another." 36

§ 1527. Acts manifesting election.

The defrauded party may lose his right of rescission by any act done after discovery of the fraud which indicates a willingness to allow the transaction to stand, such as the acceptance or demand of any benefit under the transaction.37 As it is entirely possible for a defrauded person to take the position that if payment or security is at once made he will let the transaction stand, but otherwise will claim the right to rescind, a demand of security does not necessarily indicate affirmance of the contract.38 But if security is actually obtained with knowledge of the fraud this will amount to affirmance, 39 as will retention of goods by the seller as security for an unpaid balance of the price.40 Delay or action assuming the validity of the transaction will not prevent rescission if the fraud had not been discovered prior thereto, even though considerable time has elapsed. 42 The election to rescind must be communicated either by bringing legal proceedings, asserting ownership of

36 Roberts v. James, 83 N. J. L. 492, 85 Atl. 244, Ann. Cas. 1914 B. 859. See also supra, § 1461.

37 Clough v. London, etc., Ry. Co., L. R. 7 Ex. 26, 34; Bulkley v. Morgan, 46 Conn. 393; O'Donald v. Constant, 82 Ind. 212; Stokes v. Burns, 132 Mo. 214, 33 S. W. 460; Fowler v. Bowery Bank, 113 N. Y. 450, 21 N. E. 172, 4 L. R. A. 145, 10 Am. St. Rep. 479; Bach v. Tuch, 126 N. Y. 53, 26 N. E. 1019; Genet v. Delaware Canal Co., 170 N. Y. 278, 296, 63 N. E. 350; Davis v. Gifford, 182 N. Y. App. D. 99, 169 N. Y. S. 492; O'Bryan v. Glenn, 91 Tenn. 106, 17 S. W. 1030, 30 Am. St. Rep. 862. But see Flower v. Brumbach, 131 Ill. 646, 23 N. E. 335.

38 Cortland Mfg. Co. v. Platt, 83

Mich. 419, 47 N. W. 330; Boyd v.
Shiffer, 156 Pa. St. 100, 27 Atl. 60.

39 Bridgeford v. Adams, 45 Ark. 136; Joslin v. Cowee, 52 N. Y. 90.

40 James Music Co. v. Bridge, 134 Wis. 510, 114 N. W. 1108.

41 Woonsocket Rubber Co. v. Loewenberg, 17 Wash. 29, 48 Pac. 785, 61 Am. St. Rep. 902. And see decisions cited in previous notes.

42 In Armstrong v. Jackson, [1917] 2 K. B. 822, 830, an action for rescission because of fraud, McCardie, J., said: "I may point out that mere lapse of time is no answer to a plea of rescission. Here some six years elapsed before the plaintiff claimed to rescind. But in Rothschild v. Brookman, 5 Bli. (N. S.) 165, and in Oelkers v. Ellis, [1914] 2 K. B. 139, six years

property fraudulently conveyed, or otherwise. 43 And such election when once made is conclusive, and precludes remedies based on a continued existence of the transaction.44

1528. Exclusive character of remedies.

Though the cases are in some conflict, it seems clear on principle that it is an election to affirm the contract to bring an action for deceit. Such an action can be based only on the assumption that the plaintiff has been induced to enter into a transaction to his damage. This is inconsistent with an assertion of the nullity of the transaction.45 It has sometimes been had also elapsed; and in York Buildings Co. v. Mackenzie, 3 Paton App. Cas. 378, eleven years had elapsed, in Gillett v. Peppercorne, 3 Beav. 78, fourteen years had elapsed, and in Oliver v. Court, 8 Price, 127, fifteen years had elapsed before the plaintiffs respectively commenced their proceedings to set aside the transaction complained of. In cases like the present the right of the party defrauded is not affected by the mere lapse of time so long as he remains in ignorance of the fraud: see per Lord Westbury in Rolfe v. Gregory (1865), 4 D. J. & S. 576, 579.

43 Reese River Silver Min. Co. v. Smith, L. R. 4 H. L. 64, 73; Clough . London, etc., Ry. Co., L. R. 7 Ex. 26; Hammond v. Pennock, 61 N. Y. 145, 155; Potter v. Taggart, 54 Wis. 395, 11 N. W. 678.

"Wright v. Zeigler, 70 Ga. 501; Kearney Milling Co. v. Union Pacific Ry. Co., 97 Iowa, 719, 66 N. W. 1059, 59 Am. St. Rep. 434; Farwell v. Myers, 59 Mich. 179, 26 N. W. 328; Powers v. Benedict, 88 N. Y. 605.

45 In making an order after breach of a contract, Jessel, M. R., said: "The plaintiffs could not at the same time obtain an order to have the agreement rescinded and claim damages against the defendant for breach of the agreement." Henty v. Schröder, 12 Ch. D. 666, 667. The following cases seem rather to support the view that it is not

necessarily a conclusive affirmance of the contract to bring an action for deceit: Emma Silver Mining Co. v. Emma Silver Mining Co. of New York, 7 Fed. 401; Cohoon v. Fisher, 146 Ind. 583, 44 N. E. 664, 45 N. E. 787, 36 L. R. A. 193; Gutheil v. Goodrich, 160 Ind. 92, 94; Kimball v. Cunningham, 4 Mass. 502, 505, 3 Am. Dec. 230; Percy v. Benedict, 15 Hun, 282. See also Williamson v. Hannan, 200 Mich. 658, 166 N. W. 829; Russell v. Wilber, 150 N. Y. App. D. 52, 134 N. Y. S. 463 (cf. Strong v. Strong, 102 N. Y. 69, 5 N. E. 799, and earlier New York decisions there cited). But the statement of Sanborn, J., in Stuart v. Hayden, 72 F d 402, 411, 36 U. S. App. 462, 18 C. C. A. 618, affd. in 169 U. S. 1, 42 L. Ed. 639, 18 S. Ct. 274, is unanswerable: "One who is induced to make a sale or trade by the deceit of his vendee has a choice of two remedies upon his discovery of the fraud. He may affirm the contract, and sue for his damages; or he may rescind it, and sue for the property he has sold. The former remedy counts upon and affirms the validity of the transaction; the latter repudiates the transaction, and counts upon its invalidity. The two remedies are utterly inconsistent, and the choice of one rejects the other, because a sale cannot be valid and void at the same time." In Nash v. Minnesota Title & Trust Co., 163 Mass.

held that if special damages have been suffered, an action based on deceit may be maintained in spite of a prior rescission.46 Where all that the injured party seeks in the way of rescission is to refuse performance or further performance on his own part, this seems admissible.47 If a man is induced by fraud to enter into a contract with A, instead of with B, and the fraud is discovered only after it is too late to make a similar contract, the defrauded person may say: "I should not be compelled to perform or to continue to perform the contract with A. I wish to rescind; but his fraud has done me an injury in spite of the rescission since I cannot now make a contract with B." But if instead of such merely negative rescission, the injured party seeks positive relief by way of restitution, this seems to exclude a right to recover damages. To meet a practical difficulty, it has been suggested that where a defrauded seller has reclaimed such part of the goods as he can reach, he should be allowed to recover damages for the remainder in an action of deceit, and some decisions, at least, allow this.48 But the only theory upon which part of the goods can be reclaimed is that the whole contract is rescinded. If the whole contract is rescinded the seller's remedy for goods which he cannot reach is not an action for deceit but for conversion, or, on principles of quasi-contract, for the value of the goods.49 Though it is true that full redress for the injury cannot always be obtained by rescission, it must 574, 40 N. E. 1039, 28 L. R. A. (N. S.) 753, 47 Am. St. Rep. 489, rescission allowed against one party to a fraud, without satisfaction of judgment was held no bar to an action of deceit against another party. In Cohoon v. Fisher, 146 Ind. 583, a distinction was attempted between an action begun for rescission and one begun for deceit. It was suggested that in the latter case there was perhaps a conclusive election to affirm the contract, whereas in the former case there was no conclusive election to set it aside. The distinction seems untenable.

48 See cases in the following two notes.

47 Warren v. Cole, 15 Mich. 265; Moran v. Tucker, 40 R. I. 485, 101

Atl. 327. See also Atlanta &c. R. v.
Hodnett, 29 Ga. 461.

48 See Lenox v. Fuller, 39 Mich. 268; American Pure Food Company ". Elliott, 151 N. C. 393, 396, 66 S. E. 451, 31 L. R. A. (N. S.) 910.

49 Farwell v. Myers, 64 Mich. 234, 31 N. W. 128; Sleeper v. Davis, 64 N. H. 59, 6 Atl. 201, 10 Am. St. Rep. 377; Powers v. Benedict, 88 N. Y. 605. See also Re Hirschman, 104 Fed. 69; Singer v. Schilling, 74 Wis. 369, 43 N. W. 101. The seller cannot sue on the contract for the agreed price of the remainder of the goods. Reed v. McConnell, 133 N. Y. 425, 435, 31 N. E. 22; American Woolen Co. v. Samuelsohn, 226 N. Y. 61, 123 N. E. 154.