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to contract of infants, insane and drunken persons, 66 married women, aliens, and corporations."



§ 132. Reality of Consent-Mistake, Fraud, etc. The mutual consent which is essential to every agreement, and, therefore, to every contract, must be real. There may be no real consent, and therefore no contract, because of (1) mistake, (2) misrepresentation, (3) fraud, (4) duress, or (5) undue influence.70

Mistake. Mistake is where the parties do not mean the same thing, or where one or both, while meaning the same thing, form untrue conclusions as to the subject-matter of the agreement. Mistake avoids the contract in the following cases only: (1) Where the mistake is as to the nature of a written contract, the execution of which is induced or procured by misrepresentation; (2) where the mistake is as to the identity of the person with whom the contract is made; (3) where the subject-matter of the contract, unknown to the parties, does not exist; (4) where two things have the same name, and the parties, owing to the identity of the names, do not mean the same subject-matter; or (5) where one of the parties is mistaken as to the nature of the promise made, and the other party knows, or has good reason to know, of the mistake. This, however, it seems, renders the contract merely voidable, and not void as in other cases of mistake.7


A man who has executed an instrument cannot avoid its operation by saying that he did not put his mind to it, or that he did not suppose it would have any legal effect. He must have been induced to execute it by some mistake or misrepresentation. If a man can read and does not read the document which he signs, or if, being unable to read, he signs without having it read, he will not be heard to say that the contract is void because he did not know or understand its provisions, unless he was prevented from reading it or having it read by fraudulent repre sentation or other fraud.72

Mistake, where it has any effect, as a rule renders a contract absolutely void. At common law the contract may be repudiated if it is executory, or, if it has been executed in whole or in part, what has been paid or delivered under it may be recovered back. In equity a suit for specific performance may be brought, or suit may be brought to declare the contract void, or, if the mistake

65. See infra, § 177.

66. See infra, §§ 184, 186.

67. See infra, § 155.

68. See infra, § 188.

69. See infra, § 239.

70. Clark Contr. (2d ed.) 195; 9

Cyc. 388.

71. Clark Contr. (2d ed.) 196; 9 Cyc. 388 et seq.

72. Clark Contr. (2d ed.) 196, 197;

9 Cyc. 388 et seq.

is merely in drawing up the contract, suit may be brought to reform the instrument. 73

Misrepresentation.- Misrepresentation is an innocent misstatement or non-disclosure of facts, and must be distinguished from (1) fraud, which is a false representation with knowledge of falsity, or what is equivalent to such knowledge, and from (2) conditions and warranties, which are representations constituting terms of a contract. Mere misrepresentation has at law no effect on a contract, except in the case of certain contracts which are said to be uberrimae fidei, in which, from their nature, or from the particular circumstances, one party must rely on the other for his knowledge of the facts, and the other is bound to the utmost good faith, as in the case of contracts of marine, fire, or life insurance; and contracts between persons occupying a confidential relation, as between attorney and client, principal and agent, guardian and ward, trustee and beneficiary, etc. Where misrepresentation has any effect at all, as in the cases mentioned, it renders the contract voidable at the option of the party injured, and not, like mistake, absolutely void."

Fraud. Fraud in connection with contracts is substantially the same as the tort deceit already considered. It is a false representation of a material fact, or non-disclosure of a material fact under such circumstances that it amounts to a false representation, made with knowledge of its falsity, or in reckless disregard of whether it is true or false, or as of personal knowledge, with the intention that it shall be acted upon by the other party, and which is acted upon by him to his injury. In detail:

(1) There must, as a rule, be a false representation, and not mere silence; but non-disclosure or concealment of a material fact is equivalent to a false representation (a) where active steps are taken to prevent discovery of the truth; (b) where, although the representation is true as far as it goes, the suppression of facts renders it in fact untrue; or (c) where, under the circumstances, as in the case of a confidential relation, there is a duty to disclose the facts suppressed, so that failure to disclose them is an implied representation that they do not exist.76

(2) The representation must, as a general rule, be of a past or existing fact; and therefore fraud cannot ordinarily result from (a) mere expressions of opinion, belief, or expectation; (b)

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promises or expressions of intention; although a representation that a certain intention exists, when it does not exist, is a false representation of an existing fact; or (c) representations as to law, as a general rule."

(3) The misrepresentation must be of a material fact.78

(4) The representation must be of such a character, or made under such circumstances, that the other party has a right to rely upon it. Fraud, therefore, cannot be predicated upon (a) commendatory expressions as to value, prospects, and the like, sometimes spoken of as mere puffing", or "trade talk"; or (b) in some jurisdictions, although not in others, false representations in cases where the means of knowledge are at hand, but the other party does not take advantage of them."

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(5) The representation must be made with knowledge of its falsity; but it is regarded as "knowingly" false (a) if it is actually known to be false; (b) if it is made in reckless disregard of whether it is true or false; or (c) in most jurisdictions, if the fact is susceptible of knowledge and the representation is made as of the party's personal knowledge.80

(6) The representation need not be made directly to the other party, but it must be intended to reach him, and to be acted upon by him.81

(7) The representation must deceive; that is, it must be relied upon by the other party and must induce him to act.82 Thus, if a party does not believe a false representation, or disregards it and makes inquiries for himself, or if he knows that the representation is false, there is no fraud.83

(8) It is also necessary that the false representation shall result in injury to the party complaining.84

Fraud renders a contract, not void, as in the case of mistake, but merely voidable at the option of the party injured. Therefore: (1) He may affirm the contract and sue for damages for the deceit, or, if sued on the contract, he may set up the fraud in reduction of the demand by way of counter-claim. Or (2) he may rescind the contract, and (a) sue for damages for the deceit; (b) sue to recover what he has parted with; (c) resist an action at law

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on the contract by setting up the fraud in defense; (d) resist a suit in equity for specific performance by setting up the fraud; or (e) sue in equity to have the contract avoided judicially.


There are the following limitations to a party's right to rescind a contract for fraud: (1) He cannot rescind after affirming it by accepting its benefits, or by suing or otherwise acting upon it, after discovery of the fraud. (2) Delay in rescinding after discovery of the fraud, or after it should have been discovered, may amount to an affirmance at law, and may bar relief in equity on the ground of laches. (3) As a general rule the consideration must be returned as a condition precedent to the right to rescind; and as a rule, there can be no rescission if the subject-matter of the contract has been so dealt with that the parties cannot be placed in statu quo, that is, in the position which they originally occupied. As to this, however, there are some exceptions.87 And (4) the right to rescind may be defeated by a third person's having acquired an interest under the contract for value, and without notice of the fraud.88

Duress.- Duress is actual or threatened violence or imprisonment, by reason of which a person is reasonably forced to enter into a contract; and when it has any effect it renders a contract voidable at his option, and not void. To affect the contract, however, (1) it must have been against or of the contracting party, or his or her wife, husband, parent, child, or other near relative; (2) it must have been inflicted or threatened by the other party to the contract, or by one acting with his knowledge or on his behalf; and (3) it must have induced the party to enter into the contract. By the weight of authority, the unlawful detention of another's goods under oppressive circumstances, or their threatened destruction, may constitute duress called "duress of goods."


Undue Influence.- Undue influence is a species of fraud. It may be said generally to consist: (1) In the use by one in whom confidence is reposed by another, or who holds a real or apparent authority over him, of such confidence or authority for the purpose of obtaining an undue advantage over him; (2) in taking an unfair advantage of another's weakness of mind; or (3) in taking a grossly oppressive and unfair advantage of another's necessities. and distress. Undue influence renders a contract voidable at the option of the injured party."

86. Clark Contr. (2d ed.) 234; 9 Cvc. 431 et seq.

87. Clark Contr. (2d ed.) 234; 236; 9 Cyc. 435 et seq.

88. Clark Contr. (2d ed.) 234; 238; 9 Cyc. 442.

89. Clark Contr. (2d ed.) 240; 9 Cyc. 443 et seq.


90. By this is meant weakness of mind not amounting to insanity. As to insane persons see infra, § 184. 91. Clark Contr. (2d ed.) 246; 9 Cyc. 454.

§ 133. Illegal Agreements. An agreement is void and not enforceable at law, and therefore does not result in a contract, if its object or consideration is illegal; that is, in violation of law.92 Unlawful agreements may be classified, according to their matter or object, as (1) agreements in violation of positive law; and (2) agreements contrary to public policy.93

As to the first, it is the rule that any agreement which involves the doing of an act which is positively forbidden by law, whether by the common law or by statute, or what amounts to the same thing, the omission to do an act which is positively enjoined by law, is illegal and void. Thus, agreements involving the commission of a crime, and those involving the commission of a civil wrong, are illegal and void as a breach of rules of the common law.94 Among the statutes prohibiting agreements or rendering them void, may be mentioned statutes regulating the conduct of a particular trade, business, or profession, or statutes regulating dealings in particular articles of commerce; statutes regulating the traffic in intoxicating liquors; statutes prohibiting labor, business, etc., on Sunday; statutes prohibiting the taking of usury; statutes prohibiting gaming and wagers, including the buying and selling of stocks or commodities for future delivery, where the parties intend not an actual delivery, but a settlement by paying the difference between the market and the contract price; and statutes prohibiting lotteries.95

So also any agreement which is contrary to the policy of the law, or public policy, because of its mischievous nature or tendency, is illegal and void, although the acts contemplated may not be expressly prohibited either by the common law or by statute.96 The test of public policy must be applied in each case as it arises, and therefore agreements which have been or may be declared contrary to public policy cannot be exclusively classified. The most general are: (1) Agreements tending to injure the public service, such as agreements for the sale of or traffic in a public office or its emoluments, agreements to influence legislation by personal solicitation of the legislators, or other objectionable means, etc.; (2) agreements involving or tending to the corruption of private citizens with reference to private matters, such as agreements tending to impair the integrity of public elections; (3) agreements tending to pervert or obstruct public justice, such as an agreement to stifle a

92. Clark Contr. (2d ed.) 254; 9 Cyc. 465 et seq.

93. Clark Contr. (2d ed.) 255; 9 Cyc. 466.

94. Thus, an agreement involving the compounding of a felony or the publication of a libel, or the perpetration of a fraud upon creditors, or

a fraud in connection with sales at auction, or a trespass, is illegal and void on this ground. Clark Contr. (2d ed.) 255, 256; 9 Cyc. 466.

95. Clark Contr. (2d ed.) 263; 9 Cyc. 475 et seq. 96. Clark Contr 9 Cyc. 481 et seq.

(2d ed.) 281;

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