prospectus, and shares of the stock representing the difference are now transferred, part to the directors of the company who effected the purchase, which part is afterwards transferred to the company on complaint, and part to the solicitors in the transaction. This is not misrepresentation'.

The defendant cannot then escape liability by showing that the representation was, if literally taken, true, or true if taken in some forced or unnatural sense. So too the defendant cannot rely upon the truth of the actual language used, when that is but part of the whole state of facts, and what was suppressed would, had it been stated, have given to the language used a contrary effect. If the part suppressed would have made the part stated false, there is a false representation2; for it is to be remembered that a representation includes all that it reasonably imports. For example: The defendant, desirous of buying stock of the plaintiff, a lady, of the value of which he knows that she is ignorant, tells her of a fact calculated to depreciate the value of the stock, but omits to disclose to her other facts within his knowledge which would have given correct information upon the subject. This is a breach of duty to the plaintiff. Again: The plaintiff being about to supply the defendant's son with goods on credit, asks the defendant if his son has property to the value of £300, as the son has asserted. The defendant answers in the affirmative, stating that he has advanced the sum to his son, but failing to state that his son has given his promissory note for the amount. This is a false representation, though true in a literal sense1.

1 Arkwright v. Newbold, 17 Ch. Div. 301. 'Nobody was ever lucky enough to sell a property without having some considerable deduction made out of the gross price, there being such persons as auctioneers and solicitors to be paid.' James, L. J.

2 Peek v. Gurney, L. R. 6 H. L. 377, 403, Lord Cairns; Central Ry. Co. v. Kisch, L. R. 2 H. L. 99, 113.

3 Mallory v. Leach, 35 Vermont, 156.

4 Corbett v. Brown, 8 Bing. 33.

§ 3. DEFENDANT'S KNOWLEDGE OF FALSITY

In order to entitle a plaintiff to recover damages for misrepresentation, it is necessary, according to the common law

Innocent misrepresentation.

of England, for him to prove that the defendant made the false representation fraudulently. A contract may, indeed, in many cases be rescinded, or its enforcement successfully resisted, for an innocent misrepresentation, that is to say for a false representation justly believed to be true at the outset by the party who made it'; but if damages are sought, fraud in some sense must be proved, whether at law or in equity?. Negligence (apart from statute) is not enough, unless there was a distinct duty to know3, of which presently.

Fraud and its legal equivalents in deceit.

Fraud as a technical term, within the meaning of this rule, or fraud in the narrower sense', may be proved in any one of three ways, according to the nature of the case. It may be proved by showing (1) that the defendant made the representation with knowledge of its falsity; or (2) that he made it recklessly, without knowing whether it was true or false; or (3) that he made it under circumstances in which he was so specially related to the facts that it was his duty to know whether the representation was true or not5.

1 Arkwright v. Newbold, 17 Ch. Div. 301; Redgrave v. Hurd, 20 Ch. Div. 1. 2 Derry v. Peek, 14 App. Cas. 237, reversing 37 Ch. Div. 541; Joliffe v. Baker, 11 Q. B. D. 255; Arkwright v. Newbold, 17 Ch. Div. 301, 320; Redgrave v. Hurd, 20 Ch. Div. 1; Reese Mining Co. v. Smith, L. R. 4 H. L. 64; Childers v. Wooler, 2 El. & E. 287; Evans v. Edmonds, 13 C. B. 777, 786.

Proving the defendant's knowledge of the falsity of his representation is often called proving the scienter,' a term of the old common-law pleading.

6

3 Low v. Bouverie, 1891, 3 Ch. 82; Le Lievre v. Gould, 1893, 1 Q. B. 491; Derry v. Peek, 14 App. Cas. 327. But compare Lehigh Zinc and Iron Co. v. Bamford, 150 U. S. 665, 673; Chatham Furnace Co. v. Moffatt, 147 Mass. 403. See Pollock, Torts, 280-283, 6th ed. See also a valuable article by Professor Smith, on Liability for Negligent Language, in the Harvard Law Review for November, 1900, and the Directors' Liability Act, 53 & 54 Vict. c. 64, changing the law in cases like Derry v. Peek, supra.

4 The mental aspect of the larger idea of fraud as a means, i.e. as misrepresentation. See ante, p. 15.

5 There is at first sight an antinomy between law and equity on this pointthe scienter of the old law precedents; knowledge of falsity (or the legal

The third of these methods.

The third of these aspects of the case calls for a few remarks. There the defendant stands in a peculiar situation in regard to the facts; the facts are specially within his reach; they are not facts that others may, even by inquiry, know as well. The result is, that any representation made by him touching them is likely to carry great weight, greater, other things being equal, than representations made in other cases. This fact may indeed be held enough to govern his conduct, and to require him to know the truth of the representation; in a word, he may be held practically to have warranted the representation to be true, and, warranting it, he cannot require the party with whom he has dealt to prove that he knew it to be false when he made it'. Accordingly it is held that if a person assume to act for another in a matter over which he has no authority, he renders himself liable for misrepresentation, on the implied

equivalent) not being necessary in equity, in cases of false representation. But the conflict is not so great as it seems. In equity the injured party usually is suing for rescission of contract, or defending a suit for specific performance, the suit or the defence being based on misrepresentation (admitted for the sake of the question). The opposite party now at any rate knows that he has made a false representation; accordingly he ought not to consider the contract as binding, even in a suit for rescission, much less where he himself is suing for specific performance. Still it should be admitted that the usual way of putting the case in equity, is to say that a man ought to know the facts before making a statement of them. Redgrave v. Hurd, 20 Ch. D. 1, Jessel, M. R. But the way first stated is true, and removes the antinomy.

The question may however be put, why knowledge of falsity, or the legal equivalent, should in any case be required. Danger is observable where a man in negligence makes a false representation. That point has been much discussed. Derry v. Peek, 14 App. Cas. 327 (reversing 37 Ch. D. 541, holding negligence to be enough); Scholfield Pulley Co. v. Scholfield, 71 Connecticut, 1, 19 (groundless belief by defendant not enough). But it should be observed that the false representation is usually made, as in Pasley v. Freeman, 3 T. R. 1, upon an inquiry by the opposite party, to be answered at once; when it might well be too much to require diligence-e.g. that a man should recall and weigh correctly all the facts ever known by him-in a matter in which a man had no interest. A duty of diligence might exist where one had an interest (see 53 & 54 Vict. c. 64, Directors' Liability Act, which is on right lines) or where one volunteered the representation.

1 See Halbot v. Lens, 1901, 1 Ch. 344, Kekewich, J.; Collen v. Wright, 8 El. & B. 647, Ex. Ch. As to railway time tables see Denton v. Great Eastern Ry. Co., 5 El. & B. 860, giving a right of action to an intending passenger who suffers damage from an erroneous announcement of the departure of trains.

B. T.

5

warranty at least—perhaps not strictly in tort1-to the person whom he may thus have misled, though he may have honestly believed that he had the authority assumed. The matter of his authority was a fact peculiarly within his own means of knowledge, and it was therefore his duty to acquaint himself with the situation. The same may be said of a man's representations of his own power.

Cases falling under this phase of the subject appear however, apart from representations of authority, power, or the like, to stand upon narrow ground, and the principle of liability is not to be extended to cases not clearly within it. Thus the fact that a person allows his name to be used as director or trustee of a corporation or other company, in prospectuses containing false representations, does not, by the common law, impose upon him in law the duty to know the truth of the statements, and so subject him to liability. To prove such fact is not in any sense to prove fraud, or create liability.

What creates

What by the common law creates the duty to know the facts is a difficult question to answer. The following rule, laid down by an Irish judge, in a case of misduty to know. representation of power, is all perhaps that the nature of the case permits: What a man must know, it was in substance declared, must have regard to his particular means of knowledge, and to the nature of the representation; and this must be subject to the test of the knowledge which a man, paying that attention which every one owes to his neighbour in making a representation to be acted upon, ought to have known in the particular case by the use of such means3.

1 Halbot v. Lens, 1901, 1 Ch. 344, Kekewich, J. But see Jefts v. York, 10 Cushing (Mass.), 392, 396, Shaw, C. J.

2 Collen v. Wright, 8 El. & B. 647, 658; Coventry's Case, 1891, 1 Ch. 202, 211. See also Randell v. Trimen, 18 C. B. 786; Firbank v. Humphreys, 18 Q. B. D. 54, more fully reported 56 L. J. Q. B. 57; Oliver v. Bank of England, 1902, 1 Ch. 610; Seton v. Lafone, 19 Q. B. D. 68. The doctrine began in Collen v. Wright with supposed contract (brought about by the professing agent); but Firbank v. Humphreys and Oliver v. Bank of England have extended it to all transactions founded on representations of authority. See Law Quarterly Review, October, 1902, p. 364, for a criticism of the extension. 3 Doyle v. Hort, 4 L. R. Ir. 661.

4 Western Bank v. Addie, L. R. 1 H. L. Sc. 145; Derry v. Peek, 14 App. Cas. 327. But see the later statute, 53 & 54 Vict. c. 64, Directors' Liability Act. 5 Doyle v. Hort, 4 L. R. Ir. 661, 670, Palles, C. B.

§ 4. PLAINTIFF'S IGNORANCE OF FALSITY

The next element of the breach of duty is that requiring the plaintiff to show that he was ignorant of the truth of the matter concerning which the representation was made, and believed that it was true.

Ignorance and belief.

Both of these situations must, in general, be true of the plaintiff; he must have been ignorant of the true state of things, and have trusted the representation of them as made by the defendant. He must have been deceived; and to render the defendant liable, the plaintiff must have been deceived by the defendant. If the plaintiff had knowledge of the facts in question, or if without having knowledge of them he acted upon independent information, and not upon a belief of the truth of the defendant's representation, he is in the one case not deceived at all, and in the other is not deceived by the person of whom he complains.

Means of knowledge.

It was however at one time laid down, in effect, that if the means of knowledge be equally open to both parties, the plaintiff, as a prudent man, should be deemed to have availed himself of such means (or should not be excused if he has not done so), and hence that, in contemplation of law, he has not been deceived by the defendant's misrepresentation; the result being that, unless there was a warranty, no action could be maintained1. There is indeed no liability in any case standing upon ordinary footing, in which the defendant has not been guilty of fraud of any kind, and has made no warranty, even if the plaintiff had no means of knowledge. But the broad doctrine before stated has been abandoned.

It may be hard to believe that a plaintiff did not avail himself of means of knowledge, at any rate when directly at hand; but there is in principle, and by authority, nothing

1 Vernon v. Keys, 12 East, 632. Lord Ellenborough here said that a seller is liable to an action for deceit if he fraudulently misrepresent the quality of the property in some particular 'which the buyer has not equal means with himself of knowing.'