tract is, however, voidable, that is, the person deceived has the right to elect whether the contract shall be void or not; but the fraudulent party has no choice in the matter. When, after having acquired full knowledge of the fraud, the person misled does any act clearly treating the contract as still binding, he cannot afterwards repudiate the contract; but he continues to be entitled to compensation for loss incurred by the fraud. If he repudiate the contract on discovering the fraud, or after discovering it does not do any act recognizing the contract as still binding, then the fact that he was induced to contract by fraud will be a good defence to any action brought against him for breach of contract.

To constitute fraud a representation must as a rule be a false statement as to a matter of existing fact. Therefore a statement as to future intention will not usually be fraud; for the existence of intention is difficult to prove, and a change of intention at a time subsequent to the representation does not make the representation false. But the existence of intention may be a matter of fact; therefore if a person induce another to make a contract by a statement of future intention, and it can be shown that in fact the intention was a different one, the statement is fraudulent. Thus, the directors of a company issued a prospectus inviting the public to buy debentures in the company, and representing that it was intended to use the money for the purpose of enlarging the business. premises and buying additional plant; in fact, they had determined to use the money which should be subscribed in paying off debts of the company. It was held that this false representation of intention was fraud.

Fraud may be committed in an infinite number of ways -as by writing, by spoken words, or merely by conduct— in fact, by any means by which a false impression can be

1.109.

see p 106.

see p 12.

4194.

conveyed. But, although a party to a contract must not in making the agreement make any false statement, or tell anything but the truth, he is in general not bound to disclose all the material facts which he knows, or to tell the whole truth. In other words, mere silence or non-disclosure of material facts does not in most cases amount to fraud. There are, however, certain contracts the parties to which are presumed to deal with one another on terms of mutual confidence, and in such contracts the mere non-disclosure of material facts may amount to fraud. Thus, in the contract of suretyship, where the creditor and the debtor conceal from the surety any fact which would show that the surety was undertaking a greater risk than he knew of, the surety is not bound by his contract. Again, in the contract of insurance the person insured is bound to reveal everything within his knowledge and which he has reason to believe is not within the knowledge of the other party, which goes to increase the risk. Concealment of any material fact makes any contract of insurance (life, fire, marine, accident, or other,) voidable at the option of the insurer.

Again, where a party to a contract has made a statement which at the time of making it he believed to be true, but afterwards he discovers that the statement was false, he is bound to disclose to the other party the fact that the statement was false. If he fail to make such disclosure and allow the other party to act upon the truth of the statements, he is guilty of fraud.

An untrue statement made carelessly, in such circumstances that if reasonable care had been taken the person making it must have known it to be untrue, is prima facie evidence of fraud. But it does not necessarily amount to fraud; for if the person making the statement honestly

believed it to be true, however unfounded his belief was, he is not guilty of fraud. He who alleges fraud must as a rule prove the fraud. In the case, however, of the directors, promoters, or officers of a company there are exceptions to these rules. Any such person who is a party to the issuing of a prospectus inviting the public to subscribe for shares in the company is liable to pay compensation to any person who takes shares on the strength of any untrue statement in the prospectus, and in consequence suffers loss; unless he can prove that he had reasonable ground to believe, and did in fact believe, the statement to be true; or unless the untrue statement was made on the authority of the report of an engineer, valuer, accountant, or other expert believed on reasonable ground to be competent to make such report.

In trade a great deal of puffing and exaggeration is used by persons wishing to sell their goods or to make other contracts. It is often extremely difficult to draw the line between such puffing and actual fraud. Each case must depend on its own facts; but a business man should not readily be deceived by the common tricks of the market, and has no ground for alleging fraud unless he really believed false statements made to him, and acted upon those statements to his loss.

§

༣).

false statement was made.

That the maku know that it was

falk.

(3). That the maker intended the other party to act on it.

(4). That the statement was belcord by the passon to whom it was made. (5). That the person to whom it was made acted on

(6)

it.

That the passon to whom it was made meurred loss by acting

the

on it

fust for exist the contract in vordable but damage surth can be pround.

Cannot be clannad unless the

A shans holda must prove the first & the Past three in which ease the promotor ate must disprove the second.

32.

h. 33.

PART III

PROOF AND INTERPRETATION
OF CONTRACTS

A CONTRACT not made in writing is often difficult of proof. The difficulty is to prove what was the real intention of the parties. This can, as a rule, only be proved by verbal evidence, and obviously there is much room for difference between parties as to the terms of the contract. One cause of this is the uncertainty of memory; another is the possibility of dishonesty; and a third is the different senses in which parties may understand the effect of words or of a conversation. Much light is often thrown on the question by the conduct of the parties in regard to the matter of the contract; and their real intention can in many cases only be ascertained from their conduct.

Contracts in Writing.-Where the contract is in writing, however, such difficulties disappear. The contents of the writing are proved simply by production, and it is for the court to say what the writing means. No evidence may be given that the intention of the parties was anything. different from what is expressed in the writing. No evidence may be given as to anything which was said or done before or at the time the writing was made for the purpose of altering or contradicting any of its terms. Thus, when there was a contract in writing by which A

agreed to sell to B a certain quantity of corn at so much a quarter, to be delivered within three months, A was not allowed in an action by B for not delivering the corn to make a statement to the effect that when the writing was signed it was agreed between them that the corn should only be delivered in case a certain ship arrived with corn on board. If he had been allowed to give such evidence, he would have been allowed to entirely alter the effect of the contract, and at once to turn an unconditional into a conditional contract.

But when two persons have made a contract, they may afterwards agree to vary or alter some of the terms of the contract. This is really making a new contract. If, therefore, the contract is one which is not binding unless it is in writing, it is clear that such variation and alteration can only be made in writing. But if the contract, although not obliged by law to be in writing, was in fact in writing, the parties may after the writing is signed agree verbally to vary or alter it.

Although no verbal evidence may be given to alter or contradict the terms of a written contract, such evidence may sometimes be given to explain it. The judge alone decides the meaning of ordinary English words and sentences. Sometimes, however, words are used in a contract not in the ordinary sense, but in the sense peculiar to some business or locality. In such a case evidence may be given as to the peculiar meaning attached by the parties to such words. For example,

evidence is admissible that in a certain business a dozen" is understood to mean thirteen; that in the corn trade "fine" barley has a peculiar meaning, and is not the same as good" barley, etc. On the same principle, where a contract is in a foreign language, or where foreign words are used in a contract in English,

p. 32.