facts not discoverable by the other upon the exercise of reasonable diligence. This is well illustrated by the "texas fever" case, as follows: Example 36. A has cattle which he knows to be afflicted with "texas fever," a disease not apparent upon any examination one could be expected to make upon buying cattle on the market. He sells them to B for a sound price, B examining them and not discovering the disease. This is fraud and B may on account thereof rescind the contract or have damages.57 Sec. 42. SILENCE AS FRAUD-CONTRACT ONE UBERRIMAE FIDEI. If a contract is of such a nature that it presupposes full disclosure non-disclosure is fraud. This has been applied to cases of suretyship and insurance. But there is difference of opinion among courts as to the operation of this rule. It is said that certain classes of contracts are based upon the presumption of the highest good faith in making them, and this has been often said as to contracts of insurance and suretyship. But perhaps the true reason for the rule requiring full disclosure in such cases is the fact a risk is taken and the risk is determined by the actual facts and in order to cover this risk the actual facts must be known. In other words, if I ask an insurance company to insure my life, what they assume to undertake is not a sham risk which I can make them believe exists but a real risk based upon facts as we both know them. The importance of this principle is largely diminished in life insurance cases by the fact that such insurance is written only after a list of questions is an 57. Grigsby v. Stapleton, 94 Mo. 423. swered and the applicant may generally assume that the omitted questions are those whose answer the insurer does not care for. Nevertheless, even in such a case, a failure to disclose a material fact which the applicant must know is material amounts to fraud according to many cases. Example 37. A desires insurance upon his house. He is acquainted with the fact that incendiary fires have been attempted upon his property very recently. He must inform the insurance company of his knowledge to get valid insurance.58 Example 38. A desires to obtain a bondsman for his employee, and seeks a fidelity company for that purpose. The employee has been a defaulter and is so known to A. A must so inform the company. Sec. 43. SILENCE AS FRAUD - RELATIONSHIPS OF TRUST AND CONFIDENCE. If one stands to another in a relationship of trust and confidence, any contract made by him with the other party must be upon full disclosure of all material facts known by him, for the reason that the other party because of such relationship is not upon his guard. The rule that one contracting party need not acquaint the other with material facts which might affect his decision to contract were they known to him is based at least partially upon the fact that the parties are at arm's length and one owes no duty to protect the other. In those relationships in which there is a duty of protection and for that reason the party is off his guard and not at 58. Pelzer Mfg. Co. v. St. Paul Co., 41 Fed. 271. (There is a difference of opinion as to this rule and its application in the American courts.) arm's length in the bargain, the law requires full disclosure. This is true of the following relationships: principal and agent, attorney and client, guardian and ward, trustee and beneficiary, and director and corporation. Example 39. P employs A to sell his real estate for him. A states that he will buy it himself. If he knows of any material fact that P does not know which affects the bargain he must so inform P.59 CONSTITUTES Sec. 44. SUMMARY OF WHAT FRAUD. Below is a table summarizing what constitutes fraud. (For disaffirmance and ratification in cases of fraud see sections 47 and 48.) Fraud consists in I. Positive statements of fact or any affirmative representation by which the truth is distorted. Not mere opinions and predictions. 2. 3. 234 Active concealment of material facts. Not mere silence or nondisclosure, unless b. Contract is one assumed upon the theory of ship. c. Relationship of trust and confidence. -attorney and client. -principal and agent. —guardian and ward. -director and corporation. 59. Brooke v. Berry, 2 Gill (Md.) 83. (b) Duress Sec. 45. DURESS DEFINED ITS EFFECT. Duress consists in securing a contract from another by imprisonment or by fear induced by threats regarding his personal safety or liberty or his property whereby the free exercise of his will is overcome. A contract must not be secured from another by threat or force. The theory of contract is that it is an obligation freely assumed by agreement. If it is forced from another, he may avoid it. Mere persuasion, no matter how constant or unpleasant, is not duress. There must be force or fear. Duress by Imprisonment. Actual imprisonment may be duress whether the imprisonment is lawful if procured for the purpose of extorting a contract and a contract is thereby extorted. "Though a person is arrested under a legal warrant by a proper officer, yet if one of the objects of the arrest is thereby to enforce the settlement of a civil claim, such arrest is a false imprisonment and a release and conveyance of property by means of such arrest is void." 60 But it has been held that a contract will not be set aside though procured under duress if it expresses or settles a real indebtedness.61 Duress by Threats (per Minas). It was once said that a threat would not amount to duress unless it was of such a nature that it would overcome the will of a constant and courageous man; later, that it was duress if it would overcome the will of a person of ordinary firmness; but the latest development is that it is duress if it is used for the purpose of overcoming, and actually does overcome the will of the person involved.62 60. Jordan v. Beecher, L. R. A. 1915 D. 1122 (Ga.) 61. Kronmeyer v. Buck, 258 Ill. 586. 62. Galusha v. Sherman, 81 N. W. (Wis.) 495. Example 40. Anna Voboril gave notes to pay her husband's indebtedness upon threat that if she would not do so her husband would be imprisoned. Being sued on the notes she claims they were obtained from her by duress. Plaintiff contends that the alleged threat, even if true, could not constitute duress as the husband had done nothing for which he could be arrested. But it appeared that Anna Voboril was an illiterate foreigner, ignorant of our laws, a mother of seven children, unversed in business affairs, and the court held that such a threat was calculated to induce in her a fear which would destroy the freedom of her will in making the contract in question.63 It was formerly held that duress by threatening injury to one's property was not duress, but this absurd view is abandoned.64 To threaten a person with arrest for a crime that he is believed to have committed is duress according to the weight of authority; except that it has been held that a promise to pay or the payment of a real indebtedness (as in case of embezzlement) will not be disturbed when so secured.65 (c) Undue influence. Sec. 46. UNDUE INFLUENCE DEFINED. ITS EFFECT. Undue influence consists in an abuse of influence or power which one by reason of a fiduciary relationship or of the sickness, infirmity or necessitous distress of the other, has over that other, thereby to induce him to enter into a 63. Voboril v. International Harv. Co., 187 Fed. 973. 64. Spaids v. Barrett, 57 Ill. 289. 65. Kronmeyer v. Buck, 258 Ill. 586. |