FRAUD 409 



the party to enter into the contract which he seeks to rescind; but when 

 there has been an innocent misrepresentation or misapprehension, it does 

 not authorize a rescission unless it is such as to show that there is complete 

 difference in substance between what was supposed to be and what was 

 taken, so as to constitute a failure of consideration. For example, when 

 a horse is bought under the belief that it is sound, if the purchaser was 

 induced to buy by a fraudulent representation as to the horse's soundness, 

 the contract may be rescinded. If it was induced by an honest mis- 

 representation as to its soundness, though it may be clear that both the 

 vendor and purchaser thought they were dealing about a sound horse 

 and were in error, yet the purchaser must pay the whole price, unless 

 there was a warranty." 



Formerly there could be no warranty against future unsoundness, and 

 so Blackstone lays down; but the law now is different, and in Eden v. 

 Parkinson (2 Douglas, 732) it is distinctly stated, " There is no doubt 

 you may warrant a future event". 



FRAUD 



Fraud has already been incidentally adverted to as vitiating a contract 

 of sale. 



As, however, fraud, or deceit, as it is alternatively called, is a word of 

 somewhat vague import, and actionable fraud differs considerably from 

 what is commonly regarded as fraud, some consideration of it in a work 

 of this kind is necessary. 



As commonly understood, fraud is a much more heinous offence against 

 morality than the law requires to form the ground of an action for deceit. 

 It appears, however, to be now well settled that some amount of moral 

 delinquency is necessary to support such an action. What amount of 

 moral delinquency is necessary to render a misrepresentation fraudulent 

 was fully discussed in the celebrated case of Derry v. Peck (L.R. appeal 

 cases, H.L. p. 337 foil.), in which it was finally settled that to support an 

 action for deceit there must be an intention to defraud. " No honest mis- 

 take, no mistake not prompted by a dishonest intention is fraud" (Derry 

 v. Peck, supra p. 339). A statement " may be inaccurate, yet if the 

 defendants honestly, though mistakenly, believed that it substantially 

 represented the truth, there is no fraud, and an action for deceit will not 

 lie". In other words, there must be moral culpability; and therefore the 

 fact that a statement was unreasonable will not render it fraudulent if a 

 belief in its truth was honestly entertained by the person making it. " To 

 believe without reasonable grounds is not moral culpability, but mental 



