In view of the fact that the exception to the parol-evidence rule under consideration is recognized in Pennsylvania, as in other jurisdictions, and the divergence of view of the courts of that state arises with respect to the parolevidence rule itself, it seems sufficient to call attention to the matter at this point, leaving the further citation of the Pennsylvania authorities to appropriate subdivisions of the annotation.

III. Effect of special contract provisions.

Cases involving the effect of special contract provisions are so related to the question under annotation as to render their inclusion desirable, and almost indispensable, to an adequate treatment of the subject. Cases similar on the facts may, however, be disposed of on grounds beyond the scope of the annotation; and, for that reason, it is covenant in the agreement, which is complete, such evidence to alter the terms cannot be received."

42 In Gridley v. Tilson (1928) — Cal. 262 Pae. 322, the court, after stating the rule that fraud in the inducement of a written contract may be shown, says that a well-settled exception arises in a case where the party seeking to rely on fraudulent representations of an agent has notice of the limitations of the agent's authority to make the representation; that a principal is bound only by the representations embodied in the written contract, where a provision in the contract notifies the prospective purchaser that the agent's authority goes no further. And this rule was applied in an action on notes 'given for the purchase price of corporate stock, in which the defense was that the contract was executed in reliance on false and fraudulent representations of the company's agent that the company had a permit to sell stock at a certain amount per share, and that the stock subsequently would be sold at that price, where the correct amount was stated in the subscription contract, and it was also therein stipulated that it was understood that the agreement contained the entire contract, that the subscriber had read the same, and that no representative had any power to change or modify the same, or to make any other terms or representations whatsoever than those therein stated;

not feasible within the limits of the present subject to treat exhaustively specific classes of cases, so far as the particular facts are concerned. Where alleged fraudulent representations are made by an agent, and the contract is subsequently reduced to writing which purports to negative reliance on any stipulations not contained in the written contract, or to limit the agent's authority to make any other representations than those expressly stated in the written agreement, the court may dispose of the question of the right to introduce parol or extrinsic evidence of the misrepresentations, on the ground that the agent was without authority to make the same, and that the party dealing with him had notice of the limitation of his authority, and had no right to rely on the representations. 42

And a distinction has been

also that the representative was acting as special agent, and that all representations not set out were deemed waived.

And it is held in Jones v. Bankers' Trust Co. (1916; D. C.) 235 Fed. 649, in a suit to annul a stock subscription on the ground of fraudulent representations by the agent of the corporation in procuring the subscription, that a defense was stated by a stipulation in the contract of purchase that no statement, representation, or agreement of warranty made to the subscriber by the person taking the contract should operate to cancel or annul it, unless the same were reduced to writing and inserted in the contract. The court, after reviewing the decisions on the subject, continued as follows: "The weight of the authority is thus to the effect that such conditions, when embodied in a contract such as this, are binding upon the subscriber. The cases proceed upon the ground, first, that the absent principal, the company, is entitled to protect itself against the improper acts of its representatives by requiring any acts relied upon against such representatives to be narrated in the contract. This provision is not unreasonable, for it protects the company, upon the one hand, and, being known to the subscriber on the other, puts the latter upon notice of the limitations of the authority of the agent. The cases further proceed upon the ground that such an agreement fairly made by a

made in this regard between the

subscriber is as binding upon him as any other provision of the contract. Having read it and understood it, the time for him to speak is then, and not afterwards."

By way of illustration, attention is called also to Pease v. Fitzgerald (1916) 31 Cal. App. 727, 161 Pac. 506, in which it was held that a subscriber to corporate stock who was sued on a note given for the purchase price, and who alleged as a defense that the contract was procured by false and fraudulent representations of the seller's agent as to the assets and solvency of the corporation, was not entitled to rely on the oral statements of the agent, in the face of the express written agreement that the subscription was based upon the printed statement of the corporation, and that no representations made by its agent not in accordance therewith should be binding on the corporation. But the specific question as to the applicability of the parol-evidence rule, in view of the alleged fraud, is not discussed.

And in Canon City Industrial Stores Co. v. McInerney (1922) 71 Colo. 492, 208 Pac. 457, it was held, in an action on a note given for subscriptions to stock in the plaintiff company, that it was not a defense that the defendant had been induced to execute the note and contract by misrepresentations made by the agent of the plaintiff, whom the defendant had known for many years and in whom he had great confidence, where the contract stated that the subscriber acted solely upon the conditions stated in the contract and in the company's printed literature, and that he fully understood that no agent or representative of the company had authority in any manner to change, add to, or detract from the same. The court said: "Where a principal includes in the contract offered for signature, a statement like that contained in this contract, a person who accepts the agent's statement as a basis of the transaction cannot avoid the effect of his trusting to the agent, by alleging long acquaintance and a belief in the agent's integrity. If the statements made are not in accord with the contract, and the party has acted upon them to his injury, he must abide the result of his negligence in not observing the warning contained in the contract itself."

agent's misrepresentations respecting

In J. B. Colt Co. v. Odom (1924) 136 Miss. 651, 101 So. 854, where the written order for the purchase of certain personal property contained a warranty, and stated that the order should become a contract upon acceptance by the seller, and that the writing, on acceptance, covered all agreements between the purchaser and the seller, and that no agent of the latter had made any statements or agreements modifying or adding to the terms set forth, the court, in holding that the purchaser, when sued for the purchase price, could not show that the agreement was procured by fraudulent representations of the agent in taking the order, respecting the subject-matter of the sale, said: "The contract showed on its face that it was to come into force only upon being approved by an officer of the company or its credit manager, and that it was not to take effect until such approval was had. It contained a representation by the signer of the contract that no representations had been made to him by the agent that were not embraced in the contract. It also contained a stipulation that the contract embraced all the agreements between the parties. Ordinarily, where an agent has authority to execute a complete contract for its principal, and does so, it may be avoided if the agent made fraudulent representations to induce the signature or execution of the contract. But where the contract shows on its face that it is not to be executed by the agent for the company, but is to be sent to the company to be approved by some officer or manager of the company, and the purchaser represents in his contract that no representations have been made to him other than that contained in the contract, the company has a right to rely upon such stipulations by the purchaser. Every person has a constitutional right to limit the powers of his or its agents, and if it reserves a right to pass upon the contract as sent to it, and the purchaser represents in such contract that no outside representations have been made, and the contract contains all the agreements of the parties, such purchaser will not thereafter be permitted to show statements made by the agent to him not embraced in the contract, where such person is able to read and write. and to note the terms of the

the subject-matter and his representations as to what will be done in the future. 48

contract in writing before he signs it, and his failure to read it will not exonerate him from the consequences resulting from such failure to read. He cannot represent to the company that no representations have been made by the agent to procure the execution of the contract, and thereafter repudiate it on the ground that the agent misled him." It will be observed that the conclusions reached in this case are based on the views taken in a number of cases involving misrepresentations through agents which are set out in the annotation in 10 A.L.R. 1472. The Odom Case was followed in J. B. Colt Co. v. McCullogh (1925) 141 Miss. 328, 105 So. 744, which involved a similar contract.

43 The view has been taken in Nebraska that, while proof of fraudulent representations made by a sales agent regarding the subject-matter of the contract, inducing the execution of the same, is admissible to avoid the contract, notwithstanding it contains a provision to the effect that the agent cannot bind the principal, a corporation, by any representations, statements, or agreements, since the agent has ostensible authority to make representations as to the subject-matter of the sale, and his fraud, committed within the limits of such authority, will fix responsibility upon his principal, yet this is not true as to the agent's promises of what the company will do in the future, even though he misrepresents the company's present attitude, and does not intend or expect that the promise will be carried out, and may therefore, be personally liable for fraud,-since in making this representation he is acting outside of the scope of his ostensible authority, in view of the provisions of the written contract. Schuster v. North American Hotel Co. (1921) 106 Neb. 679, 186 N. W. 87 (denying rehearing of (1921) 106 Neb. 672, 184 N. W. 136). The case was one of a sale of corporate stock, in which the subscription contract, which was complete on its face, contained a provision that "no conditions, agreements, or representations, other than those printed above, shall bind the company." The court said: "The rule that evidence of a parol promise cannot be shown for the purpose of

Some of the decisions turn more on the question of the construction and effect of the particular provisions in enlarging or changing the written contract, where the action is one to enforce the contract, is, however, not applicable where the action is in fraud to rescind the contract and to prove the oral promise as the fraudulent representation which acted as the inducement to the sale. The question then, if this action is to be considered an action in fraud, is whether such oral promise, being shown, even though made in violation of the limitation of the agent's authority, as expressed in the written contract, will constitute a fraud for which the company is responsible, and which will afford the purchaser the basis for an action against the company in rescission or for damages. It is quite generally held that a provision in a contract, to the effect that the agent cannot bind the company by any representations, statements, or agreements, will not relieve the principal from responsibility for the fraudulent representations as to the subject-matter of the contract, made by the agent, since such representations are within the scope of the agent's actual or ostensible authority. It is a self-evident fact that, in order that an agent sell corporate stock for a company, he must make representations to the buyer as to the character of the business of the company, the amount of its earnings, its financial condition and assets, and many other representations of fact which materially affect the value or desirability of the stock. An agent, even though the contract which he presents contains a clause declaring that the company will not be bound by the representations that he may make, is known to be an agent sent out for the express purpose of making representations as an inducement to the sale of stock; and the provision in the contract, therefore, is not considered as limiting the scope of his ostensible authority. Where he makes false representations concerning the subject-matter of the contract, as distinguished at least from the agreements and promises which are to be undertaken, the company is responsible, and the buyer, when injured, may rescind the contract on the ground of fraud. . The agent, of course, had ostensible authority to de

the contract, than on the general question whether in any event stipulations in the contract may be effective to prescribe the goods that he was to sell, and, when he made representations as to their quality and character, he was acting within the scope of his authority. We do not mean to say that the principal will never be liable for promissory representations made by his agent, when those promises are fraudulent, and when the agent misrepresents the present attitude of the company, and does not, at the time, expect or intend that his promises shall be carried out; for when the agent, in making such promissory representations, acts within its actual or ostensible authority, such fraudulent representations, even though of a promissory character, would be binding upon the company as any other. Though a representation, promissory in its nature, when made with the present intention of not carrying it out, may be fraudulent and actionable, it must be remembered that this case is not brought against the agents, who actually made the representations, but against the company, and when the company had no knowledge that such representations were being made."

See also in this connection, Ruddy v. Gunby (Mo.) note 119, infra.

The Schuster Case (Neb.) supra, was approved and followed in Stroman v. Atlas Ref. Corp. (1924) 112 Neb. 187, 199 N. W. 26, an action to recover damages sustained by false and fraudulent representations inducing the purchase of shares of stock, where the subscription contract contained a provision that "no conditions or agreements, either verbal or written, or other than those printed herein, shall be binding upon the corporation. This contract is signed with full knowledge of the plans of organization of the corporation." It was held that, notwithstanding this stipulation, the purchaser might show fraudulent misrepresentations of the salesman regarding the assets and business of the corporation.

So, in Johnson v. Nebraska Bldg. & Invest. Co. (1922) 109 Neb. 235, 190 N. W. 590, an action to rescind a contract for the purchase of stock in the defendant corporation, on the ground of false representations inducing the purchase, it was held that the parolevidence rule did not preclude a show

clude admission of parol or extrinsic evidence to show that the contract was obtained by fraud. 4 And in this coning of false representations by the company's agent regarding the nature of its business, its assets, and profits, notwithstanding the contract of subscription contained a provision that "no conditions, agreements, or representations, other than those, shall bind said company." The contention was overruled that this provision constituted notice of the limits of the agent's authority, and that the corporation was not bound by any other representations.

44 In the reported case (ARNHOLD V. NATIONAL ANILINE & CHEMICAL CO. ante, 4) the court, while apparently approving the view that antecedent fraud will vitiate a written contract, notwithstanding the fact that it contains a provision to the effect that every representation relied on is embodied in the agreement, holds that, in any event, the provision in the contract of sale in question, that the contracts of the seller with third parties were assigned "without guaranty" and "without prejudice," and that the contract of sale contained "all the terms of the sale," and there was no "warranty, express or implied, incident to the sale, or other conditions not herein specifically stipulated," was not the equivalent of a statement that the prior representations were not an inducement to the making of the contract, and that fraud in such representations might be shown.

The rule admitting parol or extrinsic evidence to prove fraud in the execution of a written contract applies to an action for deceit brought by a vendor against the vendee for false representations by the latter that no real estate broker was connected with the transaction, notwithstanding the fact that the contract contains a provision that it is understood that no broker's commission is to be paid by the vendor, since such a stipulation is not coextensive in terms with the fraud alleged, and does not necessarily relate to that subject, and the fraud is not merged in the written contract. Cheraska v. Ohanasian (1927) — Mass. —, 52 A.L.R. 1149, 156 N. E. 715.

It has been held that the rule that one who claims to have been fraudulently induced to enter into a written contract may allege and prove the

While calling attention to the above questions, it is not the purpose of the

fraud relied upon, not for the purpose of contradicting the terms of the contract, but to show that no valid contract was in fact executed, is applicable to a contract for the sale of iron ore, to show fraudulent representations as to the per cent of iron or other minerals which the ore would run, notwithstanding the contract recited that the parties, in entering into it, "expected" the ore to average a certain per cent of iron substance, and to meet and fill all expectations in that respect, and fixed a sliding scale of compensation for the ore removed, depending upon the per cent of iron as tained by a final survey by third parties. Remington v. Savage (1921) 148 Minn. 405, 182 N. W. 524.

ascer

It has been held that, while parties to a contract may agree that the terms of their contract shall be construed to embody every material element, and that no false representation of facts, other than a false representation of the nature of the instrument to be executed, shall be deemed to be a warranty in the face of a sale, or lay the foundation for an action of deceit, yet that to accomplish such a contractual result the words to this end must be explicit, and be understood and intended by the parties unequivocally to effect such result; and that the fact that a written contract for the sale of personal property provides that the property is sold "as is" does not preclude a showing of fraudulent misrep. resentations by the seller, inducing the execution of the contract, respecting the condition and value of the property, which is not open for the buyer's examination. Reinherz v. American Piano Co. (1926) 254 Mass. 411, 150 N. E. 216 (sale of phonographs and talking machine accessories).

And in Hanson v. Fletcher Auto Sales Co. (1927) 239 Mich. 118, 214 N. W. 187, an action for deceit in exchange of automobiles, consisting of false representations as to the year model of the car received by the plain

annotation to include at this point generally cases which do not discuss the effect of the parol-evidence rule, but which turn on other principles not distinctive to the annotation. It is sometimes difficult, however, to draw a precise line between the cases in which the court obviously had in mind the question of the effect of the principle tiff, it was contended that, as the automobile was sold "as is" under the provisions of a written contract, the terms of that contract could not be varied by parol. The contract contained a provision that "it is understood that all details pertaining to the execution of this contract are embodied herein, and that there are no verbal agreements pertaining thereto." But the court, in holding that the above contention had been improperly sustained, observed: "It is said that the words 'as is' have a well-understood meaning in the sale or exchange of used automobiles, and that the language of the contract we have quoted precludes the introduction of parol proof. The rule is well recognized that parol testimony may not be received to vary the terms of a written instrument. But, likewise, the rule is well recognized that, where fraud is claimed to have been practised in a transaction, evidence of fraudulent representation does not change the terms of a written contract, but, if established and they are material, they nullify the contract, and evidence of them is admissible for that purpose."

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In Eisler v. Canadian Fairbanks Co. (1912) - Sask., 8 D. L. R. 390, 22 West. L. R. 888, it was held that the purchaser of an engine was not precluded from asserting a right to rescind the contract on the ground of false representations of the seller inducing its execution, and consisting of material misrepresentations as to the capacity or power of the engine, by provisions in the contract that the machinery was purchased upon and subject to certain specified mutual and independent conditions, and none other, followed by a warranty as to quality and workmanship, and provisions relating to shipments and passing of title. The case was not, however, deemed necessarily to involve actual fraud, and turns upon the construction of the particular stipulations of the contract. 45 See annotation in 10 A.L.R. 1472.