courts have found no difficulty in giving equitable relief against contracts or conveyances where a case of constructive fraud was made out (without showing a dishonest trick or artifice or any evil intent) from the existence of confidential or fiduciary relations between the parties, or from the exertion of duress or undue influence, or from mental weakness being matched against superior shrewdness or cunning, or from the illegality of the subject-matter of the contract, supposing, in the latter case, that the parties were not equally in fault.39 40 § 23. Same; Breach of Warranty Distinguished.— Fraud is distinguished from breach of warranty in this respect, that, in the case of fraud, there is a guilty knowledge of the falsity of the representation on the part of the party making it, while in a breach of warranty there is not this guilty knowledge. "The same transaction cannot be characterized as a warranty and a fraud at the same time. A warranty rests on contract, while fraud or fraudulent representations have no element of contract in them, but are essentially a tort. When judges or law writers speak of a fraudulent warranty, the language is neither accurate nor perspicuous. If there is a breach of warranty, it cannot be said that the warranty was fraudulent with any more propriety than any other contract can be said to have been fraudulent because there has been a breach of it. On the other hand, to speak of a false representation as a contract of warranty, or as tending to prove a contract of warranty, is a perversion of language and of correct ideas." 41 § 24. Essential Elements of Actionable Fraud.-The rule is often stated that five things are essential elements of a fraud or deceit sufficient to warrant an action for deceit or the rescission of a contract, which are (1) a trick, device, or representation, (2) its false or fraudulent character, (3) scienter, that is, knowledge or conscious purpose on 39 Forster v. Wilshusen, 14 Misc. Rep. 520, 35 N. Y. Supp. 1083; Dorris v. McManus, 3 Cal. App. 576, 86 Pac. 909. And see, infra, Chapters 10, 11, and 13. 40 Marshall v. Gray, 39 How. Prac. (N. Y.) 172. 41 Rose v. Hurley, 39 Ind. 77. And see Ross v. Reynolds, 112 Me. 223, 91 Atl. 952. 42 the part of the one practising it, (4) deception, delusion, or misleading of the other party, and (5) resulting injury to such other party. But this enumeration is not quite exhaustive. There must also be an intention to deceive or delude, or an intention that the fraud practised shall influence the action of the other party, and there must be the fact that it did influence him and induce him to enter into the contract or obligation. And further, it is necessary that the fraud, artifice, or representation should have been a material inducement to the contract. "If the fraud be such that, had it not been practised, the contract could not have been made or the transaction completed, then it is material to it; but if it be made probable that the same thing would have been done if the fraud had not been practised, it cannot be deemed material."4 43 First of all it is necessary that there should have been a trick, device, artifice, false pretense, misrepresentation, or fraudulent concealment. Without something of this kind there can be no such "fraud" as will justify rescission." 42 Grosjean v. Galloway, 82 App. Div. 380, 81 N. Y. Supp. 871; Blumenfeld v. Stine, 96 App. Div. 160, 89 N. Y. Supp. 85; Taylor v. Scoville, 54 Barb. (N. Y.) 34; Urtz v. New York Cent. & H. R. R. Co., 202 N. Y. 170, 95 N. E. 711; Mussiller v. Rice (City Ct.) 116 N. Y. Supp. 1028; Miller v. John, 111 Ill. App. 56; Foster v. Oberreich, 230 Ill. 525, 82 N. E. 858; Mizell v. Upchurch, 46 Fla. 443, 35 South. 9; Edwards v. Noel, 88 Mo. App. 434; Whitehurst v. Life Ins. Co. of Virginia, 149 N. C. 273, 62 S. E. 1067; Southern Express Co. v. Fox, 131 Ky. 257, 115 S. W. 184, 117 S. W. 270, 133 Am. St. Rep. 241; Ray County Sav. Bank v. Hutton, 224 Mo. 42, 123 S. W. 47; Moore v. Carrick, 26 Colo. App. 97, 140 Pac. 485; Lembeck v. Gerken, 86 N. J. Law, 111, 90 Atl. 698. 43 Greene v. Mercantile Trust Co., 128 App. Div. 914, 112 N. Y. Supp. 1131; Remmers v. Remmers, 217 Mo. 541, 117 S. W. 1117; Milwaukee Worsted Mills v. Winsor, 157 Wis. 538, 147 N. W. 1068. 44 McAleer v. Horsey, 35 Md. 439; Cruess v. Fessler, 39 Cal. 336; Rev. Civ. Code La., § 1847. Gray v. Koch, 2 45 Parker v. Boyd, 108 Ark. 32, 156 S. W. 440; Mich. N. P. 119; Belden v. Henriques, 8 Cal. 87; 91 Ill. App. 347; Wilson v. Wills, 154 N. C. 105, 69 S. E. 755; New v. Jackson, 50 Ind. App. 120, 95 N. E. 328; Rev. Civ. Code La., § 1847. Deceit can be grounded on evasions and acts as well as on direct misrepresentations. Providence Oil & Gas Co. v. Allen, 186 Ala. 282, 65 South. 329. Fraud may consist of conduct as well as of words, but must be predicated on material existing facts. Firebaugh v. Trough, 57 Ind. App. 421, 107 N. E. 301. Thus, for example, the fact that an option for the purchase of land is taken for the purpose of speculation does not constitute fraud or unfair dealing on the part of the person taking the option towards a person to whom he sells the land.46 So, where it cannot be shown that a contract sought to be set aside had its inception in the fraud of the party against whom the relief is sought, but he is merely making an unconscientious use of the statute to keep an advantage obtained through the reliance of the opposite party on his good faith, no relief can be granted. So again, where a corporation desired to obtain a lease of a certain property, but persuaded the owner to make the lease in the name of one of its employés, instead of the corporation itself, representing to him that its business would be injuriously affected if it was publicly known that it had leased the premises, it was held that this did not make out a case of fraud, though the nominal tenant was irresponsible and the corporation disclaimed any liability on the lease.*8 Again, since, in equity, only what is plainly injurious to good faith is considered as fraud, a party cannot have his contract set aside merely on the ground that he repents of it because he did not use good business judgment in entering into it, or that it is improvident, harsh, or unjust." Further, the fraud must have been inherent in, or at least contemporary with, the very transaction which is sought to be set aside.50 Thus, where a merchant sells goods at various times to the same customer, a fraud practised upon him of such a nature as to justify the rescission of a sale of goods made at one time will not be sufficient to authorize a recovery of goods bought at another time, the last transaction being free from fraud.51 And again, contemplated or intended future fraud is not enough, but there must be fraud executed at the time of making the contract or relating to 46 Saxby v. Southern Land Co., 109 Va. 196, 63 S. E. 423. 47 Wilson v. Watts, 9 Md. 356. 48 Zinsser v. Ruppel, 63 Misc. Rep. 575, 118 N. Y. Supp. 627. 49 Hirschman v. Hodges, O'Hara & Russell Co., 59 Fla. 517, 51 South. 550; Poe v. Ulrey, 233 Ill. 56, 84 N. E. 46. 50 Brown v. Brown, 64 Mich. 75, 31 N. W. 34. 51 Pelham v. Chattahoochee Grocery Co., 146 Ala. 216, 41 South. 12, 8 L. R. A. (N. S.) 448, 119 Am. St. Rep. 19. a state of affairs then existing. This distinction is sometimes very delicate, as may be seen in a case in Illinois, where it was ruled that the intention of a party insured to burn the property and collect the insurance is a fraud which will authorize the insurance company to declare an immediate cancellation of the policy, because it is a fraud (the concealment of a fraudulent and criminal purpose) contemporary with the making of the contract; but that, after a loss has occurred, the policy cannot be rescinded on account of such original nefarious purpose, because, if the loss was accidental, the fraud was never executed, and if it was brought about by the assured's own act, then the fraud consisted, not in the original design, but in the execution of it, and in this aspect was not contemporary with the contract.52 Again, when it is said that the fraud must inhere in the contract or relate to its execution, it is implied (and such is the law) that fraud is not made out by merely showing that the other party has violated the agreement or failed to fullfil his engagements." This is illustrated by a case in New Jersey, where it appeared that the complainant, having given considerable study to the situation with reference to a certain industry, conceived and formulated a plan for combining in one company the various plants engaged in it. With this view, he obtained options for the purchase of some of the plants and opened negotiations for the others. As the whole plan would require several millions of dollars, and was therefore beyond his own financial ability, he sought the aid of the defendant, a capitalist, proposing on his own part to contribute a certain amount, if defendant would join in the plan and contribute enough to insure its 52 Imperial Fire Ins. Co. v. Gunning, 81 Ill. 236. But see Smith v. Lightner (Tex. Civ. App.) 26 S. W. 779, holding that if one who agrees to run a horse race acts so as to induce the belief that he intends to practise fraud in the race, the other party may declare the race off and recover the forfeit. 53 Caldwell v. Duncan, 87 S. C. 331, 69 S. E. 660; Wilson v. Irish, 62 Iowa, 260, 17 N. W. 511; Crane v. Conklin, 1 N. J. Eq. 346, 22 Am. Dec. 519. And see Maine Northwestern Development Co. v. Northern Commercial Co. (D. C.) 213 Fed. 103; Turner v. Bray, 72 Or. 334, 143 Pac. 1011. BLACK RESC.-4 Defendant expressed himself as willing to join in the enterprise, provided an examination of the plan and papers by his attorneys and experts should confirm what the complainant had told him, and as a matter of fact the examination did confirm such statements. But the defendant availed himself of the information which he had thus obtained and proceeded, on his own account entirely, to organize a company and by means of it to gain control of the plants in question, whereby he made large profits, but shutting out the complainant entirely. It was held that there might be a remedy by an action at law for the wrongful appropriation of the plan, but that equity could give no relief, because there had been no contract entered into, but merely a negotiation for the making of a definite agreement.5* But if there really is fraud, the right to rescind a contract on this ground depends on the existence of the fraud, and not on the party's knowledge of it when he exercises the right. "Although complainant acted on suspicion only, he was justified in rescinding, provided his suspicions of fraud were subsequently verified. The right of rescission depends on the existence of the fraud, and not on the accuracy or conclusiveness of the party's knowledge of it when he exercises the right." 55 And finally, to sustain an action for deceit, it is not necessary that the person guilty of the fraud should have derived any advantage from it.5o $ 25. Forged Instruments or Signatures.-A person who is tricked into parting with his money, or with any other valuable consideration, by means of a forged document, such as a deed, note, or bond, may rescind the transaction and recover back what he has paid or given, provided he acts with due promptness upon discovering the cheat, and his action is maintainable on either of the three grounds of fraud, mistake, or want of consideration." The 54 Haskins v. Ryan, 75 N. J. Eq. 330, 78 Atl. 566; Id., 75 N. J. Eq. 623, 73 Atl. 1118. But compare Mundy v. Foster, 31 Mich. 313. 55 Cunningham v. Pettigrew, 169 Fed. 335, 94 C. C. A. 457, citing Peterson v. Chicago, M. & St. P. R. Co., 38 Minn. 511, 39 N. W. 485. 56 Williams v. Goldberg, 58 Misc. Rep. 210, 109 N. Y. Supp. 15. 57 Westrop v. Solomon, 8 C. B. 345; Jones v. Ryder, 5 Taunt. 488; |