But contracts which restrict the exercise of a trade or profession to a certain locality are valid. The restraint in all cases must be reasonable, and what is reasonable depends in large measure upon the nature of the business to which the contract relates.

A few practical cases will make the principle clearer. Where a defendant covenanted not to teach the French and German languages anywhere within the state of Rhode Island, for one year, the agreement was held to be unreasonable and void, as placing a greater restriction upon the defendant than was required for the protection of the plaintiff. Where the defendant sold out his insurance business and agreed never to engage in that business again, the contract was held void as against public policy and as an undue restriction upon the defendant's rights to pursue his calling. Where a party, who has been dealing in shirts, collars, and cuffs at Des Moines, Iowa, and who had an established trade in these articles, throughout Iowa and Nebraska, entered into an agreement, on the sale of his business, not to re-engage in such business, in Iowa or Nebraska or within one hundred miles of Des Moines for a period of ten years, the contract was held to be valid.

Where a steamship company which operated boats on the waters of California, sold one of their boats to a company operating on the Columbia River and its tributaries; a stipulation, that the boat purchased should not be used on any of the waters of the state of California was held to be valid. A contract not to carry on a publishing business within the state of Michigan was upheld as not being an unlawful restraint of trade. An agreement made by a manufacturer of matches not to sell in any of the United States except two was held to be valid.

75. Agreements which tend to pervert the course of justice. Rule: Agreements to prevent or hinder the course of justice are illegal.

An agreement whereby one bargains with a criminal to suppress criminal proceedings against him is void. But if in addition to subjecting the criminal to public prosecution, the crime also renders him liable for money damages, the injured party may compromise his private cause of action. Care should be taken, however, not to obstruct the criminal proceedings in anyway. Agreements to conceal a crime of which one has knowledge, or to influence a witness's testimony, or to bribe a juror, or not to let his witness testify are all void. A contract

to pay an attorney a contingent fee to procure the settlement of a criminal charge is invalid. A father whose son had been guilty of embezzlement gave a mortgage for the amount embezzled in consideration that the mortgagee would not prosecute his son. Such a mortgage is invalid as against public policy.

76. Agreements for the payment of usury. Usury is interest in excess of the legal rate. Statutes in most of the states limit the rate of interest which may be charged for the use of money. The law establishes a maximum rate, but the parties are free to agree upon any lower rate. The penalty for exceeding the maximum rate varies in the different states. In some of the states all of the interest is forfeited, in others both interest and principal, and sometimes a fine and imprisonment are also imposed.

QUESTIONS

1. What is the meaning of legality of subject-matter?

2. What three classes of contracts are prohibited?

3. What is a gaming contract?

4. Give a general summary of the statutes in the United States which are illegal as wagering contracts.

5. What is the law in regard to contracts made on Sunday?

6. Name some of the important classes of contracts that are void as against public policy.

7. What is a lobbying contract?

8. When is an agreement considered in restraint of trade?

9. Give illustrations showing when the restraint imposed is reasonable. 10. When may an injured party compromise a private cause of action, notwithstanding the criminal is also liable to prosecution for the same offense?

11. What regulations are made in the different states in regard to the rate of interest that may be charged?

CASES

(GIVE REASONS FOR YOUR ANSWERS)

1. A and B exchanged horses on Sunday and A warranted his horse to be sound. The horse proved to be unsound and B sued A on his warranty. Can B recover?

2. A bet B $100.00 that a certain ball team would win the pennant. The team did not win the pennant. Can B recover the $100.00 from A?

3. A contracted to sell B a quantity of liquor to be sold in a state where it was forbidden by statute to sell liquor. A sued B for his failure to accept the goods. Can A secure damages for B's refusal to accept the goods? 4. C offered to give D $50.00 if D would refrain from marrying for one D remained single for one year and sued C for the money. Is he entitled to recover?

year.

5. A was interested in getting some Indian claims through Congress. He hired B, a public official at Washington to look after the matter for him. The claims were allowed and B sued A for his services. Can B collect the money?

6. A distributed literature and did other services in securing the election of B to a public office in consideration that B would appoint A to office after the election. B was elected and refused to appoint A. What remedy has A?

7. A, who was a lawyer, was retained by a manufacturing association to present an argument before a committee of the legislature in favor of a bill which had been introduced at the instance of the association. Can A maintain a suit against the association for his services?

8. Defendant sold his cart and butcher business for $90.00 and agreed that he would not carry on business on the same route for two years. Defendant did not keep his promise. Is the plaintiff entitled to damages?

9. The defendant promised an important witness $50.00 to refrain from testifying against the defendant. The witness refused to testify and subsequently sued the defendant for the $50.00. Can he recover?

10. A sold his grocery to B. A agreed not to run a grocery within the State of Michigan for ten years. A failed to keep his promise. Can B maintain a suit for damages?

11. B broke into a house and stole some jewelry. The owner promised that he would not prosecute B if he would return the goods, which B did. Is the promise not to prosecute valid?

12. A promised B that he would give perjured testimony in B's behalf in a law suit. A gave the testimony and B refused to pay A for his services. Can A recover the amount in an action at law?

13. The legal rate of interest in the state was 6 per cent. A loaned B $500.00 and charged B 8 per cent interest on the money and a cash payment of $50.00 for making the loan. B refused to pay more than 6 per cent. How much is A entitled to recover on the loan?

14. A was failing in business, and among other creditors he owed his brother-in-law $500.00 and entered into an agreement with his brother-inlaw to defraud the other creditors, and as a part of the agreement gave the brother-in-law his note for $500.00. Can the note be collected?

CHAPTER VI

MISTAKE, MISREPRESENTATION AND FRAUD

77. Mistake. Definition. A mistake is a substantial error about some material fact connected with the transaction.

Care should be taken to distinguish a mistake of fact from mistake of judgment. Where A owned two farms, one in North Dakota and one in South Dakota, and B offered him $10,000.00 for his Dakota farm, without specifying whether it was in North Dakota or in South Dakota, and as a matter of fact A was thinking of one farm and B of the other, an acceptance by A of the $10,000.00 offered by B did not constitute a contract. They were mutually mistaken as to the location of the farm. This is a mistake of fact.

Where A offered B $100.00 for his diamond believing it to be genuine, and B had made no representations as to its quality, and A considered himself an expert judge of such articles; A cannot rescind the sale on finding that the diamond is only paste. This was a mistake of judgment.

78. Effect of mistake. It prevents the making of a contract. The minds of the parties never meet, and hence one of the essential elements of a contract is missing.

79. Misrepresentation. Definition. A misrepresentation is a misstatement of a fact without any wrongful intent. It is an innocent misstatement as distinguished from fraud or a willful misstatement. This misrepresentation may be a part of the contract, or it may be concerning a fact which is only collateral to the contract.

Illustration: B agreed with A that his ship which was then in the port at Amsterdam should proceed at once to Newport and take on a load of coal to be taken to Hong Kong. As a matter of fact B's ship was not in the port of Amsterdam at the time and did not reach there until four days later. This was misrepresentation of a material fact and a part of the contract, and A was entitled to rescind it.

80. Statement of opinion. We must distinguish between misrepresentation and a mere statement of opinion. The law allows considerable liberty in the puffing of goods and in the expression of opinions and mere commendatory statements. These are not misrepresentations.

81. Fraud. Rule: Fraud is a false representation of fact, made with knowledge of its falsehood, or in reckless disregard of whether it be true or false, with the intention that it should be acted upon by the complaining party, and actually inducing him to act upon it to his damage.

We shall consider these characteristics in detail.

(a) There must have been a material false representation, and it is material if the contract would not have been made but for the fraud practiced.

Intentional misrepresentation is always fraudulent. But there may be intentional concealment which is not fraudulent. The question, then, is, what kind of knowledge may a contracting party lawfully keep to himself. The Supreme Court of the United States lays down the following rule: "If you have any peculiar or extraordinary information which the other party, exercising ordinary knowledge and diligence, cannot be presumed to have, you are bound to disclose it, and the concealment of it will be fraud." While the law requires a full disclosure of all material facts necessary to enable each party to make up his mind, the rule here has a reasonable construction. The law will not relieve against the common inequalities of knowledge, judgment, skill and experience. It allows one party to obtain the advantage when there is no unfairness. In regard to the quality and value of articles contracted for, the rule is that if a defect, fault or imperfection be open and obvious by an inspection, there can be no ground to complain of fraud. But when the defect cannot be easily perceived, the party knowing it is bound to make a disclosure.

(b) The representation must be made with knowledge of its falsehood.

It is clear that a person who makes a statement although untrue, is not guilty of fraud, unless he knows it is false. Thus,