Masson vs. Bovet

New York Court for the Correction of Errors1845-05

1 Denio 69

Summary · law.co

Holding. The court affirmed the judgment, holding that a person defrauded into parting with property may rescind the fraudulent contract and recover what was paid, provided he acts promptly upon discovering the fraud and returns or offers to return everything he received, even if the fraudster cannot be fully restored to his original position.

The plaintiff purchased land from the defendant based on false representations and fraudulent assurances. Upon discovering the fraud, the plaintiff sought to rescind the contract and recover what he had paid. The court held that a defrauded party may void a fraudulent contract and recover consideration paid, provided the party acts promptly after discovering the deception and returns or offers to return everything received under the contract.

The court rejected the defendant's argument that rescission requires the defrauded party to fully restore the fraudster to his original position. Instead, the law requires only that the injured party return what he personally received and undo what he can of the contract's execution. The court reasoned that if the fraudster becomes entangled in the consequences of his own scheme beyond what the victim can unwind, that hardship is the wrongdoer's responsibility alone, not the victim's. Here, the plaintiff acted appropriately by seeking prompt rescission and demanding return of his note when the defendant refused to restore it.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether a defrauded party may rescind a fraudulent contract and recover consideration paid
Timing and promptness requirements for disaffirming a fraudulent contract
What restitution obligations the defrauded party must fulfill to rescind
Whether the defrauded party must fully restore the fraudster to his pre-contract position

Procedural posture

The plaintiff brought an action to rescind a land purchase contract induced by the defendant's fraudulent representations and to recover his note after the defendant refused to return it.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

By the Court, Beardsley, J.

Upon the evidence as detailed in the bill of exceptions, there is little room to doubt that the plaintiff was imposed upon and defrauded. The charge of the recorder placed the cause before the jury on its true ground in point of morality. They have found that the plaintiff was induced to purchase the land, by the defendant’s representations and assurances; that these were false and fraudulent; that the purchase was made without knowledge of their falsity; and thus the plaintiff was deprived of his property.

It would be a scandal to the law of any country, if it failed to furnish redress for such an injury. Our system is not yet subject to that reproach, and I am glad to find that the remedy resorted to in this case is appropriate to its object.

A person who is induced to part with his property on a fraudulent contract may, on discovering the fraud, avoid the contract and claim a return of what has been advanced upon it. Fraud destroys the contract ah initio, and the fraudulent purchaser has no title. (Chit. on Cont. 406, 678 to 681, Am. ed. of 1842.) But if the party defrauded would disaffirm the contract, he must do so at the earliest practicable moment after discovery of the- cheat. That is the time to make his election, and it must be done promptly and unreservedly. He must not hesitate ; nor can he be allowed to deal with the subject matter of the contract and afterwards rescind it. (Id. 408, 409, 680.) The election is with him ; he may affirm or disaffirm the contract, but he cannot do both; and if he concludes to abide by it, as upon the whole advantageous, he shall not afterwards be permitted to question its validity.

The party who would disaffirm a fraudulent contract must return whatever he has received upon it. This is on a plain and just principle. He cannot hold oh to such part of the contract as may be desirable on his part, and avoid the residue, but must rescind in Mo, if at all.

It was urged on the argument that a contract cannot be rescinded by one of the parties alone, so as to authorize a recovery by him of what had been paid upon it, unless the other party is thereby fully restored to the condition in which he stood before the contract was made. This is certainly the general rule; but in cases of fraud, such as this was, it can only mean that the party defrauded, if he would rescind the contract, must return or offer to return every thing he received in execution of it. To retain the whole, or a part only of what was received upon the contract, is incompatible with its rescisión; and hence the necessity of restoring, what had been received upon it. »

This is not exacted on account of any feeling of partiality or regard for the fraudulent party. The law cares very little what his loss may be, and exacts nothing for his sake. If, therefore, he has so entangled himself in the meshes of his own knavish plot, that the party defrauded cannot unloose him, - the fault is his own; and the law only requires the injured party to restore what he has received, and, as far as he- can, undo what had been done in the execution of the contract. This is all that the party defrauded can do, and all that honesty and fair dealing require of him. If these fail to extricate the wrongdoer front the position he has assumed in the execution of the contract, it is in no sense the fault of his intended victim, and upon the principles of eternal justice, whatever consequences may follow, they should rest on the head of the offender alone.

Here the plaintiff did all he could to rescind the contract in toto. As he had been grievously taken in, he was entitled to a return of his note, and that having been refused, this action was well brought.

Judgment affirmed.