Laidlaw v. Organ

Brief Fact Summary. Organ entered into a contract to purchase tobacco from Laidlaw at an agreed upon price. Prior to completion of the sale, Plaintiff learned of the end of the War of 1812, but did not disclose that information to Defendant, when asked if Plaintiff knew any information that would affect the terms of their agreement, at the close of the sale. Plaintiff brought suit to recover the tobacco, at the agreed-upon price, and Defendant countered that Plaintiff dealt in bad faith.

Synopsis of Rule of Law. This case is among the beginning of a line of cases that explores the duties of good faith and disclosure in contractual negotiations.

Facts. The Plaintiff/vendee, Organ (Plaintiff) and the Defendant, Laidlaw/vendor (Defendant), entered into an agreement whereby Plaintiff would buy tobacco from Defendant at an agreed upon price. Prior to completion of the sale, Plaintiff learned the War of 1812 was ending and that the value of the product would substantially increase. Defendant, at close of the sale, asked Plaintiff if he knew of any information that would affect the value of the product and Plaintiff answered in the negative, and took possession of the tobacco. The next morning, Defendant recovered the tobacco, upon learning of the change in circumstances, and Plaintiff brought suit to enforce the contract.
At the trial of this matter, the Court found that Plaintiff was silent when asked directly whether the value of the goods to be purchased would change. Silence, in this case, amounted to bad faith circumvention, which caused harm to the vendor, Defendant. Plaintiff appealed.

Issue. This case explores whether fraud necessarily voids a contract and whether it must be proven by positive communication or whether suppression of information could also amount to fraud.

Held. Venire de novo awarded. (Remanded for a new trial.)
Chief Justice Marshall (J. Marshall), on behalf of the Court noted there may be an affirmative duty to disclose, but that it must be determined on a case-by-case basis and the question of whether Plaintiff intentionally circumvented necessary information is one of fact, for a jury to make a determination upon.
Because Defendant directly asked Plaintiff whether it knew of any information that could affect the price of its product, the Court found Plaintiff may have been under a duty to disclose that information.

Discussion. This case begins to consider the duty of disclosure. When a promisee asks a direct question of a promisor, it could amount to bad faith if the promisor withholds information that could change the promisee’s position.