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practical test of fraud as opposed to mere misrepresentation is that fraud gives rise to an action for deceit, while innocent misrepresentation does not.

Misrepresentations made by one party to another, or innocent non-disclosure of facts, only affect the validity of certain contracts in which the greatest of good faith between the contracting parties is required. Examples are contracts of insurance, sales of land, and purchase of shares in companies.3 As a rule, subject to the exceptions noticed, misrepresentation does not affect the validity of the contract.

"The strong tendency of the courts has been to bring, if possible, every statement, which, from its importance, could affect consent, into the terms of the contract. If a representation cannot be shown to have had so material a part in determining consent as to have formed, if not the basis of the contract, at any rate an integral part of its terms, such a representation is set aside altogether.

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The contracts which are affected in their formation by misrepresentation or non-disclosure are of a nature that one of the parties must rely upon information furnished by the other, and more confidence must of necessity be placed in the party making the disclosures. Such contracts are said to be uberrimae fidei; that is, of the most abundant good faith.5

Marine insurance. In McLanahan v. Universal Ins. Co., the court, speaking of marine insurance,

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3 Anson, Contracts (English ed.), p. 137.

4 Anson, Contracts (English ed.), p. 139. See Wilcox v. The Iowa Wes

leyan University, 32 Ia. 367, LEADING ILLUSTRATIVE CASES.

5 Walden v. La. Ins. Co., 12 La. 134, LEADING ILLUSTRATIVE CASES. 61 Pet. 170 (U. S.).

holds that "the contract of insurance is one of mutual good faith; and the principles which govern it are those of enlightened moral policy. The underwriter must be presumed to act upon the belief that the party procuring insurance is not, at the time, in possession of any fact material to the risk, which he does not disclose." Every fact which would influence the acceptance or rejection of the risk by the underwriter, is material, and must be communicated. Any concealment, although resulting from accident or mistake, will, when material, avoid the policy."

Fire insurance. In the contract of fire insurance the description of the premises is a representation on the truth of which the validity of the contract depends. But it is said that not so high a degree of good faith and diligence is required in fire insurance as in marine insurance, and the rule of marine insurance that the insured is bound, without inquiry, to disclose every fact within his knowledge material to the risk, does not apply to its full extent. Now, where applicants for insurance fill out the inquiries submitted, in writing, an innocent failure to communicate facts about which the insured was not asked, will not avoid the policy of insurance.10

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Life insurance. The contract of life insurance differs from those of marine and fire insurance in this respect: untruth in the representations made to the insurer as to the life insured will not affect the val

7 Lexington Ins. Co. v. Paver, 16 Ohio St. 324; see subject, Insurance. 8 Anson, Contracts (Huffcut's 2d ed.), § 212.

• Wood, Fire Insurance, § 196, note.

10 Washington Mills Co. v. Weymouth Ins. Co., 135 Mass. 505; Browning v. Home Ins. Co., 71 N. Y. 508. See subject, INSURANCE.

idity of the contract, unless they be made fraudulently, or unless their truth be made an express condition of the contract. But in Vose v. Eagle Life & Health Ins. Co.,11 it is said: "An untrue allegation of a material fact will avoid the policy, though such allegation or concealment be the result of accident or negligence or design." The rule seems to be that if the representations were material to the risk and falsely made, they avoid the policy.12

Sale of land. In agreements of this nature a misdescription of the premises sold or the terms to which they are subject, though made without any fraudulent intention, will vitiate the contract.13 In this

situation the contract is not strictly uberrimae fidei, (of greatest good faith); although latent defects in the title should be disclosed by the vendor, yet if the vendor has said or done nothing to throw the purchaser off his guard or to conceal a patent defect, there is no fraudulent concealment on the part of the vendor. The purchaser has an opportunity of inspecting and judging for himself; and the principle of caveat emptor (let the buyer beware) applies.

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Purchase of shares in companies. Those who issue a prospectus holding out to the public the great advantage which will accrue to persons who will take shares in a proposed undertaking, and inviting them to take shares on the faith of the representations

116 Cush. 42 (Mass.).

12 Campbell v. New Eng. Mutual Life Ins. Co., 98 Mass. 396. See subject, INSURANCE. Phoenix Mutual Life Ins. Co. v. Raddin, 120 U. S. 183, LEADING ILLUSTRATIVE CASES.

13 Anson, Contracts (Huffcut's 2d ed.), § 214. 14 Addison, Contracts, vol. II, p. 914.

therein contained, are bound to state everything with strict and scrupulous accuracy, and not only to abstain from stating as fact that which is not so, but to omit no one fact within their knowledge the existence of which might in any degree affect the nature, extent and quality of the privileges and advantages which the prospectus holds out as inducements to take shares.15

44. Expressions of opinion.-Generally, the representation must be a representation of fact. An expression of an opinion is not such a representation. Thus, commendatory expressions as are ordinarily used to induce purchasers to buy are not treated as fatal representations, although occurring in the special contracts just mentioned, and more extravagant than correct.16 But a statement of opinion in regard to facts peculiarly within the knowledge of the party making the statement may amount to a representation that the party making the statement knows facts which justify his opinion.17

45. Representations of law.-A representation as to what is the law ordinarily does not affect the contract.18 But a statement of fact which involves a conclusion of law is nevertheless a statement of fact.19 Ordinarily, A is not justified in relying upon B's representation in regard to the law. If B occupies a fiduciary position with reference to A, or if from

15 Per Kindersley, V. C. in New Brunswick & Canada Ry., etc., Co. v. Muggeridge, 1 Drew & S. 363.

16 Anson, Contracts (Huffcut's 2d ed.), §§ 208, 209.

17 French v. Ryan, 104 Mich. 625.

18 Fish v. Cleland, 33 Ill. 237, LEADING ILLUSTRATIVE CASES.

19 Motherway v. Wall, 168 Mass. 333.

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B's superior means of information, A is reasonably entitled to accept the former's statements in regard to the law, the representation has the same effect as in the case of a statement of fact.20 The law of a foreign jurisdiction being a question of fact, a representation thereunto would be a representation of fact.21

46. Misrepresentation-Conditions-Warranties. -If a representation is a part of the contract itself, and does not merely affect the formation of the contract, it becomes a condition or a warranty. In such event, the fact that the representation is false operates either to discharge the injured party from his obligation, or to give to him a right of action based on the contract for loss sustained by reason of the untruth of the statement. The statement, in such a case, has become a term of the contract itself.22

"Properly speaking, a representation is a statement or assertion, made by one party to the other, before or at the time of the contract, of some matter or circumstance relating to it. Though it is sometimes contained in the written instrument, it is not an integral part of the contract, and consequently the contract is not broken, though the representation proves to be untrue. A question, however, may arise whether a descriptive statement in the written instrument is a mere representation, or whether it is a substantive part of the contract. This

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20 Ross v. Drinkard's Adm'r, 35 Ala. 434, LEADING ILLUSTRATIVE Cases, Sims v. Ferrill, 45 Ga. 585.

21 Wood v. Roeder, 50 Neb. 476.

22 See § 166, Chap. XIII.

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