FRAUD. Where untrue conclusions have been induced by representa tions of one party, made with a knowledge of their un truth, and with the intention of deceiving, it is fraud. (Anson, Cont. p. 121.) The essential features which constitute Fraud are: (a) A false representation of fact, (b) made with a knowledge of its falsehood, or in reckless disregard whether it be true or false, (c) with the intention that it should be acted upon by the complaining party, (d) and actually inducing him to act upon it. (Anson, p. 154-5.) We shall consider each of these elements briefly.
(a) False Representation of Fact. Mere innocent non-disclosure does not constitute fraud; there must be a false statement, or one true in part, but which, be cause of the parts concealed, makes it convey a false impression.
So it is held that where the defendant rented a house which he knew was desired for immediate occupation, and knew that it was in an unfit and dangerous state, but did not disclose this fact to the plaintiff, the action for fraud would not lie. This was so because there was no representation, or warranty, expressed or implied that the house was fit for occupation. (Keates v. Lord Cadogan, io C. B. 591.) But it is the duty of the landlord to inform the tenant of the existence of any nuisance on a premise which may be prejudicial to life or health, and if this information is not given an action for fraud or deceit will lie. (Caesar v. Karutz, 6o N. Y. 229; Lucas v. Caulter, 104 Ind. 8i.) It must be a representation of fact, and not a mere expression of opinion or intention, if it is to constitute fraud. A representation by the seller that the article is worth a given sum, is a mere expression of opinion and not a representation of fact. (Noetting v. Wright, 72 Ill. 390; Cagney v. Cuson, 77 Ind. 494.) So statements as to the cost of an article are treated as mere opinions unless made under such circumstances as justify the buyer in relying on them as statements of fact. (Cooper v. Lovering, io6 Mass. 79; Markel v. Mondy, i i Neb. 213.) As regards intention, it is to be observed that while a statement of future intention is not a statement of fact, a false expression of present intention is such a fraud as invalidates the contract. For example, the purchase of goods with the intention not to pay for them is held to be a fraudulent misrepresentation. (An son on Cont. p. 136; Donaldson v. Farwell, 93 U. S. 631; Talcott v. Henderson, 31 0. St. 162.) (b) Made with Knowledge of Its Falsehood or in Reckless Disregard of Its Truth or Falsity. If a rep resentation is made without knowledge of its being false, and without such recklessness of statement as constitutes bad faith, the party injured has no right of action. (Cole v. Cassidy, 138 Mass. 437; Terrell v. Bennett, i8 Ga. 404; Cox v. Higby, too Pa. St. It is not necessary that a dishonest motive be present to constitute fraud. Misrepresentations in fact false, though believed or hoped to be true, if not justified by the knowledge of the party making them, will consti tute fraud. (Polhill v. Walter, 3 B. & Ad. 14.) (c) Made with Intention to Be Acted Upon by the Complaining Party. This does not require the state ments to be made to the injured party, and if damage results from the false statement as a direct consequence, the party guilty of the fraud is responsible to the party injured.
Where a druggist negligently labels poison so that it appears as a harmless medicine and sells it to dealers in such articles, he is liable to any one who buys it and is injured by its use, providing there is no negligence on the part of the retailers. (Davidson v. Nichols, II Allen 519.) So it is held that representations made to commer cial agencies by business firms as to their financial standing and responsibility for the purpose of securing credit and a rating, if untrue, will form the basis of an action for deceit by a person dealing with the firms on the strength of the representations. (Eaton v. Avery, 83 N. Y. 3r; Genesee Co. Says. Bk. v. Mich. Barge Co., 52 Mich. 164.) (d) The Representation Must Induce the Party to Act. "In an action of deceit the plaintiff cannot estab lish a title to relief simply by showing that the defend ants have made a fraudulent statement; he must also show that he was deceived by the statement and acted upon it to his prejudice."—Per Cotton L. j., in Ark. wright v. Newbold, 17 Ch. D. 324. (Marshall v. Hub bard, t17 U. S. 415; Branham v. Record, 42 hid. 181; Bartlett v. Blaine, 93 Ill. 25.) The Effect of Fraud. The effect of fraud upon the contract is to be distinguished from the right given the injured party, both at common law and in equity, to re cover from the injuring party the loss occasioned by the fraud. The perpetration of a fraud gives the in jured party a right to recover independent of contract, and also affects the rights of the parties under the con tract. It is the effect which fraud has on the contract that we wish to consider.
The party to the contract who has been injured by the fraud of the other party, has a two-fold right; he may, on discovery of the fraud, affirm the contract, re tain the article or goods sold, and sue for the damage sustained because of the fraud. Or, he may elect to rescind the contract, and may then resist an action brought upon it at common law, or for specific per formance in equity; or obtain a judicial avoidance of it in equity. (Anson on Cont. p. 163.) The contract, Until the injured party has elected his remedy, is voidable, and not void. The right is limited in this, that it moat be exercised before accepting a benefit with knowledge of the fraud. and before deal ing with the subject-matter of the contract so that the position of the parties cannot be restored, and also be fore innocent third parties have acquired an interest for value under the contract. See Dean v. Yates, 220 St. 388; Cochran v. Stewart, 31 Minn. 435.