Thе 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 оf 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 “сash 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 dеfendant 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,
Colonial Development Corp. v. Bragdon,
Colonial Development Corp. v. Bragdon has been followed in O’Meara v. Smyth,
The case of Granlund v. Saraf,
The case of Florimond Realty Co. Inc. v. Waye,
Five months after the decision in Florimond Realty Co. Inc.
Noack v. Standard Stores, Inc.
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 rеpresentations have been made. Yet the issue of .fraud has been held to be open in these cases. Reinherz v. American Piano Co.
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 receрtion 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,
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,
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.
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.
Notes
Doten v. Chase,
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,
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.
