Horsfall v Thomas
Court of Exchequer
Citations: (1862) 1 Hurlstone and Coltman 90; 158 ER 813.
The defendant contracted with the claimant to make him a steel gun. The claimant made and delivered the gun, but it had a defect in it. This defect would have justified the defendant rejecting the goods. However, the defendant accepted the gun and paid for it in bills of exchange without examining it. The gun later broke because of the defect.
The claimant sued on the bills of exchange. The defendant refused to honour them, arguing that he had been induced to accept the bills by fraud and misrepresentation. He argued that either the claimant had failed to disclose the defect, or they had done something to the gun to actively conceal it.
- Was the defendant induced to accept the gun by fraudulent misrepresentation?
The court held in favour of the claimant. If the claimant merely failed to point out the defect, this did not amount to fraud or misrepresentation. If the claimant had done something to the gun to deliberately conceal the defect, this was irrelevant since the defendant never inspected the gun. Any fraud or misrepresentation could not have operated upon his mind, because he was not aware of it.
This Case is Authority For…
Unless the parties have a fiduciary relationship or some special duty to disclose, a seller does not commit fraud or misrepresentation by failing to disclose material information. A misrepresentation or deceit is not actionable unless it operates on the buyer’s mind. As Bramwell B explained:
‘To constitute fraud, there must be an assertion of something false within the knowledge of the party asserting it, or the suppression of that which is true and which it was his duty to communicate.’