Fraud| The indian contract act 1872 notes|
The term fraud means a take representation of facts made willfully with a view to deceive the other party.
Sec.17- fraud means any act committed by a party to a contract or with his connivance or by his agent with intent to deceive another party there to or his agent or to induce to enter into contract.
Essentials of fraud
- By a party to the contract
- There must be representation – [an opinion a statement of expression – does not fraud].
- The representation must be false.
- Before conclusion of contract.
- The misrepresentation must be made willfully.
- The misrepresentation must be made with a view to deceive the other party.
- The other party must have actually been deceived.
- The other party have suffered a loss.
Fraud – definition include
- The suggestion, as to fact, of that which is not true by one who does not believe it to be true.
- The active concealment of a fact by one having knowledge or belief of the fact.
Ex. A furniture dealer conceals the crakes in furniture by polish work.
- A promise made without any intention of performing it.
- Any other act fitted to deceive.
- Any such act or omission as the law specially declared to be fraudulent.
Ex:- T bought a cannon from H. It was defective, but H had plugged it. T did not examine the cannon, but it burst when he used it. Held as the plug had not deceived T, he was liable to pay for the cannon.
Ex.: Where the representation was true at the time of when it was made but becomes untrue before the contract is entered into and this fact is known to the party who made the representation. If must be corrected. If it is not so corrected it will amount to be fraud.
When the silence amount to fraud:-General rule
Mere (only) Silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud.
Where the circumstances of the case are such that regarding being had to them. It is duty of the person keeping silence to speak. Such duty arises in the following two cases.
- Duty to speak exists where the parties stand in a fiduciary relationship, e.g. father and son, guardian and ward, trustee and beneficiary etc. or where contract is a contract of ubberima fidei (requiring utmost good faith), e.g. contracts of insurance.
Ex.:- A sells by auction to B a horse which A knows to be unsound. B’ is A’s daughter and has just come of age. Here the relation between the parties would make it A’s duty to tell B is the horse is unsound.
- When silence itself equivalent to speech. B says to A “ if you do not deny it I shall assume that the horse is sound”. A say nothing – A’s silence equivalent to speech. A can held liable to fraud.
[Half Truth is worse than a blatant: – Example – company pay dividend – in class room]
Effect of fraud.
Sec. 19: A contract induced by fraud is voidable at the option of the party defrauded. Till the exercise of such option, the Contract is valid.
- Rescinds of contract
- Right to insist upon performance
- Right to claim damages – if he suffered loss.
Exception : The contract is not voidable in the following cases.
- When the party who consent was caused by silence amount to fraud and be has the means of discovering the truth with ordinary diligence.
- When the party give the consent in ignorance of fraud.
- When the party after become aware of fraud takes a benefit.
- When the parties can’t be restored to their original position.
- Where interests of third parties intervene before the contract is avoided.
Misrepresentation |The Indian Contract Act 1872 Notes|
Misrepresentation is when a party (person) asserts something which is not true though he believes is to be true. In other words misrepresentation is a falls representation made innocently. An agreement is said to be influenced by misrepresentation if all the following conditions are satisfied.
- The party makes a representation of a fact [The representation by a stranger (By anyone with his connivance or by agent) to the contract does not affect the validity of the contract.
- The misrepresentation was made innocently i.e. if was not made with a view to deceive the other party.
- The other party has actually acted believing the misrepresent to be true.
- Unjustified statement of facts – positive assertion – Believe true really not true no basis misrepresentation
- Breach of duty.
- Inducing other to make mistake as to qualify or nature of subject matter.
Effect of Misrepresentation
- Right to Rescind contract:-
- Discovering the truth with ordinary diligence.
- Give consent in ignorance of misrepresentation
- Become aware of misrepresentation takes a benefit
- Where an innocent third party before the contract is rescinds acquires consideration some interest in the property passing under the contract.
- Where the parties can’t be restored to their original position.
- Right to insist upon performance.
Ex.:- Unlike Fraud he cannot sue for damage.
Difference Between Fraud and Misrepresentation
|Fraud (17)||Misrepresentation (18)|