Supreme Court of Appeals of
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the contract and give back the money Ben paid her with interest, but Ben refused.† Lucy sued to have the contract rescinded.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 wasnít 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 courtís decree is reversed and the rescission is granted.