Laidlaw v. Organ

Supreme Court of the United States · 1817 · Contracts

Contractsnondisclosurefraudmisrepresentationimpositionextrinsic circumstancesmarket informationbuyer silence

Facts

Organ purchased 111 hogsheads of tobacco from Laidlaw & Co. After learning news that peace had been signed at Ghent, Organ went to complete the purchase before the seller had heard the news. The evidence showed Girault, a member of Laidlaw & Co., asked whether there was any news calculated to enhance the value of the tobacco, and there was no evidence that Organ made any affirmative statement calculated to impose on Girault. The trial court instructed the jury to find for Organ, even though the news had caused the value of the tobacco to rise substantially.

Issue

Must a buyer who has exclusive knowledge of extrinsic circumstances affecting market price disclose that information to the seller before contracting? Also, should the question whether the buyer practiced any imposition on the seller have been submitted to the jury rather than decided by absolute instruction?

Rule

A vendee is not bound to communicate intelligence of extrinsic circumstances that may influence the price of the commodity when the means of intelligence are equally accessible to both parties. However, each party must take care not to say or do anything tending to impose upon the other, and whether such imposition occurred is for the jury when the evidence permits it.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In New Orleans, Maya Benton agreed on Monday morning to buy 5,000 bushels of rice from Gulf Crescent Trading, a grain dealer. An hour earlier, she had read a publicly posted port circular announcing that a major export embargo had just been lifted, a development likely to raise rice prices sharply, but she said nothing about it during negotiations.

If Gulf Crescent later seeks to avoid the sale solely because Maya did not reveal the circular before contracting, what is the best answer?

Explanation. The controlling rule is that a vendee is not bound to communicate intelligence of extrinsic circumstances that may influence price when the means of intelligence are equally accessible to both parties. Mere superior knowledge of market-moving news does not itself create a duty to speak. The result would differ only if the buyer said or did something tending to impose on the seller.