308 Mass. 170 | Mass. | 1941
The plaintiff did business as an “investment broker” in Salem. The defendants as partners carried on a brokerage business in Boston under the name of South-gate and Company. In this action of contract the plaintiff seeks to recover the purchase price paid by him to the defendants for five hundred shares of stock in Victoria Gypsum Company which he bought from them and later
At the beginning the question arises and has been argued whether the “confirmation slip” ever became part of the contract of purchase and sale of the stock. The evidence on this point came from the testimony of the plaintiff himself. He testified to a series of telephone talks on May 6, 1937, between himself and a member of the firm of Southgate and Company wherein the parties came to terms upon the sale and purchase of five hundred shares of the gypsum stock at $12 a share. On the following day the plaintiff received the "confirmation slip” from the defendants. The plaintiff testified that he used confirmation slips in his own business; that he could have refused to pay for the stock, if he did not want to take it on the terms stated in the slip; that there "wasn’t the slightest question” but that he could have cancelled the order on May 6 before he received the “confirmation slip”; that he was content to pay for the stock and to take delivery on the terms set forth in the slip, and that he did so; that he expected his own customers to go through with their deals on the terms of his confirmation slips or "call the deal off”; that he did not expect to do anything different as a customer of Southgate and Company than he would expect of his own customers; that on May 19, after he had received the confirmation slip but, as the jury could find, before he knew that the representation was false, he
Upon this evidence the jury could find, if they were not bound to find, that at the time of the telephone conversations both parties expected a confirmation slip to be delivered later as the embodiment of the bargain and regarded the slip, after its delivery and acceptance, as expressing the final terms of the contract between them. The slip stated the names of seller and buyer, the subject matter of the sale, the price, and the terms of payment as “cash transaction.” It contained all the essential elements of a contract. Even though previous oral conversations would be enough in themselves to establish an oral contract the parties may, nevertheless, by mutual understanding postpone the culmination of their negotiations into a contract to the later preparation and delivery of a written instrument.
On the question of fraud there was evidence that before the plaintiff bought the stock one of the defendant partners stated to the plaintiff, as an inducement to buy, that the gypsum company had received an order for forty, thousand tons of gypsum to be delivered in New York at $2.66 a ton, upon which the company would derive a profit of about $1 a ton, and that the plaintiff relied upon this statement in agreeing to buy, in accepting the “confirmation slip,” and in paying for the stock. There was no
The defendants point to the “confirmation slip” and urge that therein the parties have contractéd that no representation, and so of course no fraudulent representation, has been made; that the plaintiff is bound by the contract and has in effect agreed to take the stock at all events, whether he has been defrauded or not. The plaintiff may urge in reply that the jury could find that in real fact there was a fraudulent representation; that he was induced by it to purchase the stock; that even if the "confirmation slip” became the embodiment of the contract or a part of the contract, he was induced to accept the slip by the same fraud by which he was induced to purchase; and that if it is the policy of the law to refuse to honor a contract procured by fraud, that policy extends to all contracts and to all parts of contracts, as much to provisions inserted by the opposite party for the purpose of escaping the consequences of his own wrong as to any other part.
In Cannon v. Burrell, 193 Mass. 534, 536, this court
Colonial Development Corp. v. Bragdon, 219 Mass. 170, was an action of contract to recover the purchase price of land sold, with a cross action for deceit. The contract contained this clause: “No agent of this company has authority ... to make any reference, representation or agreement not contained in this contract and none not contained herein shall be binding upon the seller, or in any wise effect [sic] the validity of this contract or form any part hereof, but all statements made have been merged and set forth herein” (page 173). It was held that because of this provision previous false and fraudulent representations by the plaintiff’s authorized agents as to the condition of the land, inducing the defendant to sign the contract, were neither a defence nor the basis of a cross action. The court said: “It is a fundamental principle of law that contracts in writing voluntarily executed with full knowledge of their contents by rational beings acting on their own judgment must be enforced”; and also: “The defendant relies on the proposition that fraud vitiates every' contract. But there is a distinction between a fraud which
Colonial Development Corp. v. Bragdon has been followed in O’Meara v. Smyth, 243 Mass. 188, and in Sullivan v. Roche, 257 Mass. 166, 171 (this being the last case in which the supposed distinction has been made the precise ground of the decision). It has been cited with apparent approval in International Textbook Co. v. Martin, 221 Mass. 1, 7, Eastern Advertising Co. v. E. L. Patch Co. 235 Mass. 580, Boss v. Greater Boston Mortgage Corp. 251 Mass. 455, and Eastern Advertising Co. v. Shapiro, 263 Mass. 228, 232, although it would seem that the actual decisions in these cases could well have been rested, in so far as in truth they were not, upon the so called paroi evidence rule. See Glackin v. Bennett, 226 Mass. 316, 319, 320. The Colonial Development Corp. case was accepted but distinguished in Brown v. Grow, 249 Mass. 495, 500, and, (without citing) in Reinherz v. American Piano Co. 254 Mass. 411, 421, 422 (where it is said that the words barring proof of fraudulent representations “must be explicit, have no folds, and be understood and intended by the parties unequivocally to effect such result”), and in Hashem v. Massachusetts Security Corp. 255 Mass. 29, 31.
The case of Granlund v. Saraf, 263 Mass. 76, was a suit in equity by the buyer for rescission of his purchase of a retail business induced by fraudulent representations as to the amount of the gross receipts. By a document forming part of the transaction the defendants had attempted to provide that if after six months from the date of sale the plaintiffs should find that one of the defendants had made any misrepresentation, that defendant would take the store back and refund the money, but only on certain specified conditions. The court said, “It is a fundamental principle of law, as it is of morals, public policy and fair dealing, that a party cannot contract against liability for his own fraud. Fraud which enters into the making of the contract cannot be excluded from the reach of the law by any form of phrase inserted in the contract itself. Parties cannot by written words prevent the law from inquiring into and granting relief for fraud in the substance of the contract. Butler v. Prussian, 252 Mass. 265, 268. Many contracts have been refused enforcement whereby a party has striven to shield himself from the results of his fraudulent practices upon the other party. Such contracts, if given validity, would overcome the salutary maxim which pervades the common law, that fraud vitiates every transaction at the election of the injured party” (page 79). And again: “Attempts under the form of contract to secure total or partial immunity from liability for fraud are all under the ban of the law. The extent of the relief granted to the injured party, in order to be adequate and complete, cannot be constricted by act of the parties. The nature of fraud and the grounds upon which the law denounces it are such that it cannot be made the subject of preliminary or contemporaneous alleviating contract” (page 80). Relief was granted to the plaintiffs without observance of the conditions upon which rescission was to be limited by the terms of the contract. Nevertheless the court distinguished
The case of Florimond Realty Co. Inc. v. Waye, 268 Mass. 475, - was a suit for specific performance of a contract to purchase land. The salesman employed by the plaintiff had made false representations as to the character of the land. The contract contained a provision that all terms and representations'were “embraced” in the contract and that “No representations, promises or agreements except as herein contained shall be binding on the parties hereto” (page 478). In holding that a court of equity would not grant specific performance of a contract thus tainted, the court said that the terms of the contract could not be invoked to prevent the court from examining all the circumstances in order to ascertain whether it would be conformable to good conscience to grant that relief. “No one can escape the equitable consequences of his fraudulent statements inducing a contract by inserting therein a clause of this nature. The principle on which Colonial Development Corp. v. Bragdon, 219 Mass. 170, and similar cases (see Sullivan v. Roche, 257 Mass. 166, 171, for collection of them,) rest, to the effect that a written contract freely and intelligently made, without misrepresentation as to its contents or execution, untainted by fraud as to its substance, providing that all' inducing representations are therein set forth, is binding upon the parties, is confined within narrow limits, is not to be enlarged, and does not extend to specific performance on facts like those here disclosed” (pages 479-480). The court then calls attention to a number of cases to which reference is hereinafter made, which either in their tendency or by express statement are opposed to the doctrine of Colonial Development Corp. v. Bragdon.
Five months after the decision in Florimond Realty Co. Inc.
Noack v. Standard Stores, Inc. 281 Mass. 53, was also an action of tort for deceit. The plaintiff had been induced to buy stock from the defendant by fraudulent representations that the stock would be just like money in a bank or lent on a mortgage and that she could get her money back from the company any time she wanted it, and by other
There is, closely related to the cases .we have here discussed, another class of cases wherein the parties have contracted that goods are bought “as is,” thus purporting to cast upon the buyer by agreement all risk as to the condition of the goods. It would seem that if parties could bind themselves by contract against the effect of “antecedent” fraud an agreement of the kind described ought to be as effective to that end as an agreement that no representations have been made. Yet the issue of .fraud has been held to be open in these cases. Reinherz v. American Piano Co. 254 Mass. 411, 421, 422, 423. Connelly v. Fellsway Motor Mart, Inc. 270 Mass. 386, 390, 391. New England Foundation Co. Inc. v. Elliott & Watrous, Inc. 306 Mass. 177, 182.
We have reviewed the decisions of this court at unusual length because, although it cannot be said that Colonial Development Corp. v. Bragdon has been expressly overruled, it is impossible to avoid the impression that the later decisions, several of them written by the same eminent chief justice who wrote the opinion in that case, have disclosed
The distinction announced in Colonial Development Corp. v. Bragdon has met with a generally unfavorable reception in the courts of other jurisdictions and by commentators.
As a matter of principle it is necessary to weigh the advantages of certainty in contractual relations against the harm and injustice that result from fraud. In obedience to the demands of a larger public policy the law long ago abandoned the position that a contract must be held sacred regardless of the fraud of one of the parties in procuring it. No one advocates a return to outworn conceptions. The same public policy that in general sanctions the avoidance of a promise obtained by deceit strikes down all attempts to circumvent that policy by means of contractual devices. In the realm of fact it is entirely possible for a party knowingly to agree that no representations have been made to him, while at the same time believing and relying upon representations which in fact have been made and in fact are false but for which he would not have made the agreement. To deny this possibility is to ignore the frequent instances in everyday experience where parties accept, often without critical examination, and act upon agreements containing somewhere within their four corners exculpatory clauses in one form or another, but where they do so, nevertheless, in reliance upon the honesty of supposed friends, the plausible and disarming statements of salesmen, or the. customary course of business. To refuse relief would result in opening the door to a multitude of frauds and in thwarting the general policy of the law.
For the reasons set forth we conclude that the distinction stated in Colonial Development Corp. v. Bragdon, 219 Mass. 170, 174, and repeated in the later cases hereinbefore mentioned, between “fraud which is antecedent to a contract” and “fraud which enters into the making of the contract” cannot be maintained, and that contracts or clauses attempting to protect a party against the consequences of his own fraud are against public policy and void where fraud inducing the contract is shown, whether that fraud was “antecedent” to the contract or “entered into the making” .of it. In the words of Granlund v. Saraf,
This decision deals with fraud and its consequences. Nothing we have said limits or alters the effect of the paroi evidence rule. That rule does not stand in the way of rescission for fraud. Weeks v. Currier, 172 Mass. 53, 55. Busiere v. Reilly, 189 Mass. 518, 520. Harris v. Delco Products, Inc. 305 Mass. 362, 364.
In the case before us the parties dealt directly with each other. No representations were made through an agent. Frequently a principal provides his agents with a form of contract containing clauses designed to limit the authority of his agents to make alterations in the form furnished or to make agreements or representations not contained in the form itself. Such a clause appears in Colonial Development Corp. v. Bragdon and in some of the other cases hereinbefore discussed. This decision does not touch upon the effect of such clauses as notice to a person dealing with the agent of limitations upon the agent’s authority, or in the absence of fraud in procuring assent to such clauses, as limiting by contract the authority of the agent. But whatever effect such clauses may normally have as a protection to the principal it would seem that they should not enable him to enforce for his own benefit a contract procured through the actual fraudulent misrepresentation of his agent, whether that fraud is “antecedent” to the contract or “enters into the making” of it. If the principal insists upon the contract he must take it with the defect which his agent has implanted in it. Rackemann v. Riverbank Improvement Co. 167 Mass. 1, 3, 4. Tremont Trust Co. v. Noyes, 246 Mass. 197, 207, 208. Quincy Trust,Co. v. Woodbury, 299 Mass. 565, 568. Williston on Contracts (Rev. Ed.) § 811A (page 2283). Am. Law Inst. Restatement: Agency, §§ 260 (2), 298, 308.
Nothing herein said affects any evidential value of exculpatory clauses or agreements as tending to show that no extraneous representations were in fact made, or if made that they were not relied upon.
Exceptions overruled.
Doten v. Chase, 237 Mass. 218, 220. Kilroy v. Schimmel, 243 Mass. 262, 267. Gould v. Converse, 246 Mass. 185, 188. Long v. Agricultural Ins. Co. 257 Mass. 240, 243. Geo. W. Wilcox, Inc. v. Shell Eastern Petroleum Products, Inc. 283 Mass. 383, 387. See Ehrlich v. United Smelting & Aluminum Co-252 Mass. 12, 15; Bresky v. Rosenberg, 256 Mass. 66, 74-75; Peerless Petticoat Co. v. Colyak-Van Costume Co. 273 Mass. 289, 292; McNulty v. Whitney, 273 Mass. 494, 501; Duggan v. Matthew Cummings Co. 277 Mass. 445; Rosenfield v. United States Trust Co. 290 Mass. 210, 217. Compare Bodell v. Sawyer, 294 Mass. 534, 540.
8 B. U. Law Rev. 57. 10 Id. 446. 6 Brooklyn Law Rev. 450, 451. 32 111. Law Rev. 944. 75 Univ. of Pa. Law Rev. 281. See 25 Col. Law Rev. 231; 20 Cornell Law Quarterly, 91; 32 Mich. Law Rev. 1004. Compare, however, 22 Cornell Law Quarterly, 103.
Advance-Rumely Thresher Co. Inc. v. Jacobs, 51 Idaho, 160, 167-169. Angerosa v. White Go. 248 App. Div. (N. Y.) 425, affirmed, 275 N. Y. 524. Sharkey v. Burlingame Co. 131 Ore. 185, 203-207. Land Finance Corp. v. Sherwin Electric Co. 102 Vt. 73, 79-80. Baylies v. Vanden Boom, 40 Wyo. 411, 429-433. Jones v. Bankers’ Trust Co. 235 Fed. 649; S. C. 239 Fed. 770, (at first approved, but upon rehearing disapproved). Arnold v. National Aniline & Chemical Co. Inc. 20 Fed. (2d) 364, 369-370 (an instructive discussion). Barnébey v. Barron G. Collier, Inc. 65 Fed. (2d) 864, 867 (approved).
See cases collected in 10 Am. L. R. 1472; 56 Am. L. R. 56 et seq.; 75 Am. L. R. 1032; and 127 Am. L. R. 132. In addition to cases previously cited, the following are illustrative: Abercrombie v. Martin & Hoyt Co. 227 Ala. 510, 512; Speck v. Wylie, 1 Cal. (2d) 625; Callahan v. Jursek, 100 Conn. 490, 496; Plate v. Detroit Fidelity & Surety Co. 229 Mich. 482, 487; Ganley Brothers, Inc. v. Butler Brothers Building Co. 170 Minn. 373, 375; Nash Mississippi Valley Motor Co. v. Childress, 156 Miss. 157, 162; Stroman v. Atlas Refining Corp. 112 Neb. 187, 189, 190; Guilder v. Boonton-Pine Brook-New York Bus Co. 110 N. J. L. 103, 105-106; Bridger v. Goldsmith, 143 N. Y. 424; White Sewing Machine Co. v. Bullock, 161 N. C. 1; Dieterich v. Rice, 115 Wash. 365; Shepard v. Pabst, 149 Wis. 35, 47; Strand v. Griffith, 97 Fed. 854, 857, 858; S. Pearson (fe Son, Ltd. v. Dublin Corp. £19073 A. C. 351.