Supreme Court of Appeals of
193
Facts: Lucy owned some land and sold it to her brother
Benjamin for a minimal amount of money.
He had told her that the land was more or less worthless, and she
trusted his judgment. It turned out that
the land was worth a lot more than he paid because it had timber that could be
sold. Lucy first offered to rescind the
contract and give back the money Ben paid her with interest, but Ben
refused. Lucy sued to have the contract
rescinded.
Issue: Is the plaintiff entitled to relief under the theory
of constructive fraud?
Rule: Constructive fraud is indicated by a combination of
the following factors:
1.
A confidential
relation between the parties
2.
Reliance of the
plaintiff on the advice of the defendant
3.
Gross inadequacy
of the contract price
4.
An offer by the
plaintiff to return the purchase price and rescind the contract
5.
The rejection of
the defendant of that offer
Analysis: The court says that even though there wasn’t mutual
mistake between the parties or actual fraud on the part of Ben, the plaintiff
states a cause of action for constructive
fraud.
Conclusion: The lower court’s decree is reversed and the
rescission is granted.