1.4.3. Fraud [See 17] Fraud is an intentional misrepresentation of a material fact which induces the other party to enter into a contract. This happens when one person makes misrepresentation of material facts known to him to be untrue or made with reckless indifference as to whether it is true or false with the intention of causing other party to enter into a contract relying upon the same. In the words of Lord Herschell in the case of Derry v Peek(1889)14 Ac 337 fraud is a false statement made knowingly or without belief in its truth or recklessly whether it is true or false. As per section 17 of the Contract Act: “Fraud” means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract: (i) The suggestion, as a fact, of that which is not true by one who does not believe it to be true; (ii) The active concealment of a fact by one having knowledge or belief of the fact; (iii) A promise made without any intention of performing it; (iv) Any other act fitted to deceive; (v) Any such act or omission as the law specially declares to be fraudulent. Explanation: Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech. Illustrations (a) A sells, by auction, to B, a horse which A knows to be unsound. A says nothing to B about the horse’s unsoundness. This is not fraud in A. (b) B says to A - “If you do not deny it, I shall assume that the horse is sound”. A says nothing. Here, A’s silence is equivalent to speech.
Posted on: Sun, 18 Aug 2013 16:59:10 +0000
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