It may be asked whether these
contracts are not void also.
There might conceivably be cases in which, taking into account
the nature of the contract, the words used could be said to
embody the representation as a term by construction. For
instance, it might be said that the true and well-understood
purport of a contract of insurance is not, as the words seem to
say, to take the risk of any loss by fire or perils of the sea,
however great the risk may be, but to take a risk of a certain
magnitude, and no other, which risk has been calculated
mathematically from the statements of the party insured. The
extent of the risk taken is not specified in the policy, because
the old forms and established usage are otherwise, but the
meaning is perfectly understood.
If this reasoning were adopted, there would be an equal
repugnancy in the terms of the contract, whether the nature of
the risk were written in the policy or fixed by previous
description. But, subject to possible exceptions of this kind, it
would seem that a contract would be made, and that the most that
could be claimed would be a right to rescind. Where parties
having power to bind themselves do acts and use words which are
fit to create an obligation, I take it that an obligation arises.
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