Vulcan Metals Co. v. Simmons Manufacturing Co.
F. 853 (1918) (1918)
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Rule of Law:
General commendations or "puffing" by a seller are not actionable as deceit, but a specific, material misrepresentation of fact is. A recital in a contract that contradicts a prior misrepresentation does not, as a matter of law, absolve the seller of liability; the adequacy of such a retraction is a question of fact for a jury.
Facts:
- Simmons Manufacturing Company ('Simmons Co.') developed a type of vacuum cleaner.
- Simmons Co. entered into negotiations to sell the entire business, including patents and machinery, to a buyer, Freeman.
- During negotiations, agents for Simmons Co. made general statements about the quality and performance of the vacuum cleaners.
- Agents for Simmons Co. also specifically represented to Freeman that the cleaners had never been put on the market or offered for sale.
- Freeman was given a full opportunity to examine and test the cleaners before the purchase.
- In reality, a small number of the cleaners, approximately 60, had been sold in various states prior to the negotiations.
- Freeman and Simmons Co. executed a purchase contract containing a recital that stated Simmons Co. had been manufacturing the cleaners and Freeman's company had been 'engaged in the sale thereof.'
Procedural Posture:
- Simmons Manufacturing Company sued Vulcan Metals Company, Incorporated, in the District Court to recover payment on promissory notes from the sale of the business.
- Vulcan Metals Company filed a counterclaim in that action, alleging it was induced to enter the contract by deceit.
- A separate action for deceit was also filed against Simmons Manufacturing Company.
- In the deceit action, the District Court directed a verdict in favor of the defendant, Simmons Manufacturing Company.
- In the action on the notes, the District Court entered a judgment for Simmons Manufacturing Company and dismissed the counterclaim.
- The buyer (the plaintiff in the deceit action and defendant/counterclaimant in the notes action) appealed both judgments to the Circuit Court of Appeals.
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Issue:
Does a recital in a signed contract, which contradicts a prior material misrepresentation made by the seller, automatically constitute an adequate retraction that bars a buyer's claim for deceit as a matter of law?
Opinions:
Majority - Learned Hand, District Judge
No. A recital in a contract does not automatically serve as an adequate retraction of a prior fraudulent misrepresentation. The court distinguished between two types of statements. General commendations or "puffing" about the cleaner's quality are not actionable because a buyer with an opportunity to inspect cannot reasonably rely on such "dealers' talk." However, the specific statement that the cleaners had never been sold was a misrepresentation of a material fact that a buyer could rely on. The court reasoned that a recital contradicting this fact, buried within a formal contract, was not necessarily an adequate retraction. It is a question of fact for the jury to decide whether the recital was sufficient to discharge the defendant's duty to retract or whether Freeman actually saw and understood its significance, as reasonable people could differ on the matter.
Dissent - Hough, Circuit Judge
Yes. A statement contained in a contract signed by the buyer should be held, as a matter of law, sufficient to conclude the buyer. Judge Hough argued that a person who signs a contract is presumed to know and understand its contents. To allow a jury to speculate on whether the buyer actually saw or comprehended a specific clause, despite signing the document, undermines the legal principle that a signed contract is binding. In his view, the recital served as a complete legal defense to the claim of deceit.
Dissent - Learned Hand, District Judge
This opinion does not address the main issue but dissents on a procedural matter. Judge Hand argued that the judgment on the promissory notes should also be reversed and sent back for a new trial along with the counterclaim, rather than being affirmed.
Analysis:
This case clarifies the distinction between non-actionable puffery and actionable fraud, reinforcing that specific factual claims are treated more seriously than general opinions. Its primary significance lies in establishing that a retraction of a misrepresentation must be effective, not merely formal. By ruling that a contract recital's adequacy is a jury question, the decision prevents parties from using boilerplate language to automatically shield themselves from liability for prior, deliberate falsehoods. This precedent places a greater burden on the party who misrepresented a fact to ensure their correction is clearly communicated and understood, rather than just documented.
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