(COMPARATIVE STUDY OF FRAUD AND MISREPRESENTATION UNDER INDIAN

CONTRACT ACT 1872)

A PROJECT REPORT
Submitted in partial fulfilment of the requirement for the award of the degree.
of
BALLB (Hons.)

by

(CHAHAK JAIN)
(23FL10IBL00006)

(LAW Department)
MANIPAL UNIVERSITY JAIPUR JAIPUR-303007
RAJASTHAN, INDIA

2023-2024
 DEPARTMENT OF LAW
MANIPAL UNIVERSITY JAIPUR, JAIPUR – 303 007 (RAJASTHAN), INDIA

15 NOVEMBER 2023

CERTIFICATE

This is to certify that the project titled COMPARATIVE STUDY OF FRAUD AND
MISREPRESENTATION UNDER INDIAN CONTRACT ACT 1872 is a record of the bonafide
work done by CHAHAK JAIN (23FL10IBL00006) submitted in partial fulfilment of the
requirements for the award of the BALLB(Hons.) in School Of Law of Manipal University
Jaipur, during the academic year 2022-23.

Dr. Arti Sharma

Project Guide, Dept of LAW
Manipal University Jaipur

Dr. Sonu Agarwal

HOD, Dept of (C&M.)
Manipal University Jaipur
 15th November 2023

CERTIFICATE

This is to certify that the project entitled COMPARATIVE STUDY OF FRAUD AND
MISREPRESENTATION UNDER INDIAN CONTRACT ACT 1872 was carried out by
CHAHAK JAIN (23FL10IBL00006) at M A N I P A L U N I V E R S I T Y J A I P U R
under my
guidance during 1st semester.

DR ARTI SHARMA
Assistant Professor
Manipal University Jaipur
 ACKNOWLEDGEMENT

I EXPRESS MY GRATITUDE & INDDEBTNESS TO OUR DEAN FOL DR. JAYARAM E

R , HOD DR. SONU AGARWAL ANDF TEACHERS UNDER WHOSE GUIDANCE ,
VALUABLE SUGGESTIONS , CONSTANT ENCOURAGEMENTS , AND KIND
SUPERVISION THE PRESENT REASEACH WORK WAS CARRIED OUT. . I AM ALSO
GRATEFUL FOR THE COLLEGE FACULTY OF LAW FOR THEIR FEEDBACK AND
FOR KEEPING US ON SCHEDULE . I WOULD LIKE TO CONVEY MY HEARTFELT
THANKS TO MY FRIOENDS WHO HELPED DIRECTLY OR INDIRECTLY BY
GIVING THEIR VALUABLE SUGGESTIONS.
 ABSTRACT

This research paper deals with the comparative analysis of fraud and misrepresentation and
their various components. The paper starts with the question of what is misrepresentation and
its various essentials. Then different types of misrepresentation are also explained. This
includes unwarranted statements, breach of duty and inducing mistake about subject matter.
Suppression of vital facts and of material facts is discussed. Then the case of inducement and
means of discovering the truth are also discussed and explained in brief. Then the paper
moves forward with the question of what is fraud and its various components are also
discussed. Then it deals with the case of active concealment. Moving on forward, then the
paper deals with the other cases which shows when mere silence amounts to fraud. This
includes the case when the person has duty to speak, when silence is deceptive, change of
circumstances and the case of half-truths. Then we move on to promises made without the
intention of performing and the acts or missions specially declared to be fraudulent. Then we
move on to the differences between fraud and misrepresentation. The differences includes the
definition of fraud and misrepresentation, the enactment, the consent obtained, the
consequences, the action and the legal action which will happen on the person doing any of
these acts. Then two case laws have been discussed, one from fraud and one from
misrepresentation. The fraud case discussed is of Shri Krishnan vs Kurukshetra University
and the misrepresentation case taken is an English case of Fraser-Reid v. Droumtsekas.
Lastly, I have ended the paper with my own conclusion and given the source of various
references from which I have written my research paper
 CONTENTS

1. INTRODUCTION 7-8
2. SUPPRESSION OF VITAL FACTS 9-10
3. TYPES OF 11
MISINTERPRETATION
4. WHAT IF FRAUD? 12-13
5. ACTIVE CONCEALMENT 14-16
6. KEY DIFFERENCES B/W 17-20
FRAUD & MISINTERPETATION
7. KEY PRONOUNCEMENT 21-22
8. CONCLUSION 23
9. BIBLIOGRAPHY 24
 INTRODUCTION

MISREPRESENTATON-

What is Misrepresentation?

A contract the consent to that is brought on through misrepresentation is voidable at the

choice of the deceived birthday celebration. Misrepresentation method misstatement of a
truth fabric to the settlement.

Misrepresentation is defined in section 18:

S.18.”Misrepresentation” defined- “misrepresentation” means and induces-

he advantageous assertion, in a way now not warranted by using the information of the
character making it, of that which is not genuine, even though he believes it to be real.

2. Any breach of responsibility which, without an purpose to deceive, gains an advantage to

the character committing it, or any one claiming beneath him, via misleading every other to
his prejudice, or to the bias of anyone claiming underneath him.

3. Causing but innocently a celebration to an agreement, to make a screw up as to the

substance of the issue that's the situation of the settlement.

The section includes the following types of misrepresentation-

Unwarranted statements-
When a person undoubtedly asserts that a reality is real while his records does now
not warrant it to be so, though he believes it to be true, that is misrepresentation.
An announcement is stated to be warranted by way of the information of the man or
woman making it when he gets the statistics from a trustworthy source.
Where a representation acquires the status of being a term of the settlement, and it
turns out to be untrue, the downside party might also, no longer best keep away from
the agreement however additionally sue for damages for breach.

Breach of duty-

Any breach of responsibility which brings a bonus to the person committing it by

deceptive the alternative to his prejudice is a misrepresentation. “This clause is
probably intended to meet all the ones instances which might be known as within the
court of fairness-cases of ‘optimistic fraud’, in which there is no goal to misinform,
but where the situations are inclusive of to make the birthday celebration who derives
a benefit from the transaction similarly answerable in effect as if he had been actuated
by using reasons of fraud or deceit.”
Persons of full age and knowledge who subscribe their signature to a report can't be
heard to say that they had affixed the signatures on financial institution papers or that
they signed without appraising themselves about the recitals. Person as imprudent as
that need to face the result of such imprudence.

Inducing mistake about subject matter-

Causing, but innocently, a party to a settlement to make a screw up as to the substance.

of the element which is the subject of the settlement is likewise misrepresentation.
S.18 (3).

The subject count number of every agreement is supposed to by using the parties to possess
certain fee or best. If one of the parties leads the alternative, however innocently, to screw up
as to the character or best of the subject rely, there is misrepresentation.
Suppression of vital facts

Misrepresentation can also arise from suppression of essential data. Cases of concealment or
suppression will fall both underneath sub-phase (2), while it quantities to a breach of
obligation or under sub-section (three), while it leads the opposite celebration to make a
screw up about the subject-depend of the agreement.

Of material facts

Misrepresentation should be of statistics material to the contract. Mere “commendatory

expression” along with men of business will habitually make about their items aren't enough
to avoid the contract.

A fact is said to be fabric if it would have an effect on the judgment of an inexpensive

character in deciding whether or not to enter into the settlement and, if so, on what phrases.
Misrepresentation of the age of a vehicle, displaying it 5 years younger, became held to be
fabric because it affected the charge which a willing purchaser would have preferred to pay
for it. But putting forth exaggerated measurement of land by means of 2.Three% turned into
held to be not material.

Inducement

It is in addition important that misrepresentation ought to be the motive of the consent, in the
sense that however for the misrepresentation the consent would now not have been given.
The rationalization to phase 19 presents:

A fraud or misrepresentation which did no longer cause the consent to a contract of the
birthday party of whom such fraud was practiced, or to whom such misrepresentation turned
into made, dos now not render an agreement voidable.

If the plaintiff might have consented anyways, he can infrequently complain. Again the
illustration need to be made with the purpose that it will be acted upon by way of the other
birthday party. The plaintiff should have been stricken by the fake misrepresentation. There
could be no misrepresentation, even supposing advertisement turned into fake, if the
consumer had inspected the goods before buying them until he was the victim of a few
concealed disorder which couldn't be known by means of outside exam. If someone to whom
the statement turned into no longer addressed voluntarily chooses to behave upon it, he isn't
entitled to rescission.

Means of discovering the truth-

A party cannot complain of misrepresentation if “he had the means of discovering the fact
with ordinary diligence.” This is recognized by means of way of an exception said at the side
of phase 19. The statement is as follows-

If such consent became because of misrepresentation or by using mere silence, fraudulent

inside them which means of phase 17, the agreement, nonetheless, isn't always voidable, if
the birthday party whose consent turned into so brought about had the manner of coming
across the fact with regular diligence.
Types of misrepresentation

Misrepresentation can be of the following types:

Fraudulent misrepresentation-

When a false representation is made and the person making it, let’s say A, knew it was untrue or
was reckless as to whether it was true or not true, it will be considered a fraudulent
misrepresentation because there was no accurate confidence in its honesty. A statement cannot be
a fraudulent misrepresentation if A genuinely believes it to be true; ignorance in making a false
statement will not constitute fraud.

In the case of Bimla Bai v. Shankarlal (1958), a person represents another person as his son, then
holds him as his legitimate natural or adopted son and makes him marry a girl. The Court held that
this representation is a fraudulent misrepresentation and marriage is void.

Negligent misrepresentation

A statement made by one contracting party to another negligently or with limited reasons for
believing it to be true is known as negligent misrepresentation. A party that is trying to induce
another party to enter into a contract has a duty to ensure that reasonable care is taken as regards
the accuracy of any representations of fact that may lead to the other party entering the contract.
Negligent misrepresentation can also occur in some cases when a party makes a careless statement
of fact or does not have sufficient reason for believing in that statement should it may be in the
form of unwarranted positive reservation which in reality is not true but the party making it
believes it to be true.

Innocent misrepresentation

A misrepresentation made completely without fault can be described as an innocent

misrepresentation. In innocent misrepresentation, a misrepresentation that has induced a party into
a contract is good, but the person making the misrepresentation had reasonable grounds for
believing it was true at the time the representation was made.
In the case of Ram Chandra Singh v. Savitri Devi (2003), the Supreme Court observed that it is
also well-established that misrepresentation itself amounts to fraud. Indeed, innocent
misrepresentation may also give reason to claim relief from fraud.
What is fraud?

Intentional misrepresentation of facts, speaking broadly is called “fraud”. According to

section 17-

Sec 17. “Fraud” defined- Fraud method and consists of any of the following acts committed
with the aid of a party to an agreement, or together with his connivance, or with the aid of his
agent, with intent to mislead any other party thereto or his agents, or to result in him to enter
into the settlement-

1. The proposal as a truth, of what which isn't always proper, via one who does
not accept as true with it to be real,

2. The energetic concealment of a reality with the aid of one having know-how
or belief of the statistics,

3. A promise made with none goal of acting it,

4. Any other act fitted to misinform,

5. Any such act or omission as the regulation in particular publicizes to be

fraudulent.

Mere silence as to statistics likely to have an effect on the willingness of someone to enter
into a contract isn't fraud, until the condition of the case are such that, regard being had to
them, it's miles the responsibility of the individual keeping silence to speak, or until his
silence is, in itself, equal to speech.

Pretending that a false fact is true (Suggestio falsi)

Section 17(1) says that fraud requires the statement to be made with knowledge of its dishonesty or
without belief in its veracity by the individual concerned. However, when a material assertion
turns out to be untrue, even a representor’s willful ignorance of its truth or falsity is considered
equivalent to knowing it to be false. This rule also applies in cases where the representor had
reason to believe his statement might be inaccurate but chose not to confirm it.

In the case of The Division Controller v Kashinath Jairam Rahate (1997), an employee of
Maharashtra State Road Transport Corporation while joining the service declares that his date of
birth is 22-5-1929 and he did not give any proof to prove this fact.The Corporation on its own
found from his school leaving certificate that his date of birth is 15-2-1923 and after that
Corporation superannuated him from service.The employee claimed before the Labour Court that
he was entitled to gratuity in the superannuated period.The Court held that he was not entitled to
claim gratuity for the said period on account of his dishonest act of suggestio falsi.
Active concealment

“Active concealment” is something exceptional from mere “passive concealment”. Passive

concealment means mere silence as to material statistics. A lively concealment of material
fact is a fraud; mere silence; besides the few cases referred to underneath, does not quantity
to fraud.

The expression “any other act fitted to deceive” evidently means any act which is finished
with the apparent aim of committing fraud.

When silence is fraud?

When the person has duty to speak

The first such case is whilst the person preserving silence is below responsibility
to speak. Duty to talk arises while one contracting celebration reposes accept as
genuine with and self-belief in the other. A father, as an example, promoting a
horse to his son have to inform him if the horse is unsound, as the son is likely to
depend on his father. But the principle is not so confined. The responsibility to
expose reality will arise in all times wherein one celebration reposes, and the
alternative accepts, confidence. Duty to speak additionally arises wherein one of
the parties is completely without any technique of coming across the fact and has
to rely upon the good feel of the other party.

Where silence is deceptive-

Silence is from time to time itself equal to speech. A man or woman who
continues silent, understanding that his silence is going to be deceptive, is no less
guilty of fraud. Where, as an example, the customer is aware of greater about the fee of the assets,
that is the problem of sale, however prefers to keep the data from the vendor, the latter may also
void the sale. Sec.17

Change of circumstances

Sometimes a representation is proper when made, but, it may, as a consequence of

a trade of circumstances, will become fake when it is clearly ac upon by means of the alternative
birthday party. In such instances, it's far the obligation of the person that made the illustration to
talk the exchange of circumstances.

Truth not fully disclosed

Even when a person is below no responsibility to reveal a reality, he may also turn
out to be guilty of fraud by means of non-disclosure if he voluntarily discloses
something and then stops 1/2 the manner. A person may additionally maintain
silent, however if he speaks, an obligation arises to reveal the whole truth.
”Everybody is aware of that sometimes half a fact isn't any higher than a
downright falsehood.”

Promises made without intention of performing

To tie up someone to a promise without an aim of performing from one’s side and with the
purpose of only stopping the other from coping with others, is an example of a promise made
without the aim of acting it. This is the third type of fraud covered inside the definition in
phase 17. A customer of products without any goal of paying the rate is a fraud of this
species.

Any other acts fitted to deceive

Section 17(4) of the Act talks about it. Since there are numerous varieties of fraud, it is nearly
impossible to attempt to give a precise and exhaustive definition of fraud to cater to all the
contingencies because it is highly likely that many loopholes may become available to escape
liability. This clause was written as a tool to help the judiciary administer effective and true justice
because human innovation and creativity know no limitations. This provision may cover all
behaviours that could be utilised to deceive or defraud someone unjustly, resulting in a wrongful
loss for the victim or wrongful gain for the cheater.The intent of the person cheating must be to
deceive the other person.

In the case of Ramesh Kumar v. Furu Ram (2011), the Supreme Court held that fraud can be of
different forms and hues. It is difficult to define it with precision, as the shape of each fraud
depends upon the fertile imagination and cleverness of those who conceive and perpetrates the
fraud. Its ingredients are an intention to deceive, use of unfair means, deliberate concealment of
material facts, or abuse of a position of confidence.

Further, in the case of Santosh v. Jagat Ram (2010), the Supreme Court observed that whether any
particular act or omission constitutes fraud or not will depend on the facts of each case and that
there cannot be any straight jacket formula for the same.

Any act or omission specially declared to be fraudulent

The remaining category includes cases wherein the law in particular publicizes an act or
omission to be fraudulent. For example, the insolvency acts and corporations act pronounces
certain sorts of switch to be “fraudulent choice”.

The fifth and the closing class of frauds covered in the definition of phase 17 is meant to
cover all such acts which under another department of regulation are seemed as fraudulent. In
insolvency regulation there, is for example, the concept of fraudulent desire and within the
transfer of assets act, there may be the idea of fraudulent switch.
Key differences between fraud and misrepresentation
Illustrations

Fraud

1. ‘A’ sells his horse to ‘B’ by auction, which ‘A’ knows to be unsound, ‘A’ tells ‘B’ nothing
about the horse’s unsoundness. This is a fraud on the part of ‘A’
2. A purchased goods of Rs. 5000 from shopkeeper B, with the intent of not paying the money
to B, this type of action amounts to fraud.

Misrepresentation

X asks Z to purchase his car which is in a good condition, B purchased the car believing in good
faith that the car is in a good condition but after a few days, the car did not function properly and B
had to suffer a loss to repair the car. So the act amounts to misrepresentation as A believes that the
car works properly but this is not so.

Essentials

Fraud

Essentials of fraud are-

A false representation of the facts must exist.

In the case of Derry v Peek (1889), it is observed that fraud is proven when it is shown that a false
representation has been made

 Knowingly
 Without belief in its truth
 Careless whether it is true or false.

1. A person is not guilty of fraud if they think what they are saying is truthful. In the case of
Sukh Sagar Medical College & Hospital v State of Madhya Pradesh (2020), it was held that
actual fraud is concealment or false representation through an intentional or reckless
statement or conduct that injures another who relies on it in acting.

2. The false statement must have been made by the contracting party, with his knowledge, or
through his agent. The contract is unaffected if a stranger makes a statement. Only when a
 party to a contract or his agent commits fraud is a contract voidable.

3. It must have been the intention of the representation to trick the other party. In the case of
the State of A.P v T.Suryachand Rao (2005), the Court observed that the element of deceit
and injury or false representation and suppression of material fact or document amounts to
fraud.

4. The other party must have been persuaded to act on the representation. Fraud is not an
attempt to deceive that is unsuccessful.

5. The other party’s desire to engage in a contract must have been seriously impacted by the
fraud.

6. The misinformed party must have experienced some sort of loss. The general rule of law is
that there cannot be fraud without harm. As a result, the party that was duped must lose. The
harm could consist of a monetary loss or loss in value. Fraud does not give rise to a
deception action in the absence of any loss.

Misrepresentation

Essentials of misrepresentation are:

The misrepresentation must be of material facts. The requirement that the false statement is based
on actual, material facts is a crucial and necessary component of misrepresentation. A simple
opinion remark is not a statement of fact.

1. The misrepresentation must be untrue, but the person making it must honestly believe that it
is true. The factual statement that amounts to the misrepresentation must also be false.
However, the statement should be made from a perspective of truth.

2. The false statements must persuade the other party to enter into a contract. The belief that
the representation is accurate should be there.

3. One party had to make the false statement in order for the person being deceived into
receiving it. The party that is being misled by the false statement or misrepresentation must
have been made by the person making it. It is not a misrepresentation and the contract
cannot be voided at the misled party’s discretion if it is not addressed to that party.

A change in circumstances could constitute misrepresentation. Sometimes a factual statement is

made, and before the contract is finished, the situation changes. In these situations, the opposite
party must be informed of any changes in circumstances that have an impact on the facts that have
already been stated. The contract can be void on the grounds of misrepresentation if the change is
not disclosed to the other party.
Representation

Fraud

A representation is a past or present declaration of the fact that is different from an opinion
statement, yet in some cases, an opinion statement may be regarded as a statement of fact. In order
for the representative to be able to prevent the agreement, the fraudulent misrepresentation must be
substantial, meaning that it must have had a significant impact on a reasonable person’s decision
about whether to enter into the agreement or not. In the case of Central National Bank Ltd. v
United Industrial Bank (1953), the Supreme Court observed that consent induced by false
representation may not be free, but it can nevertheless be real and ordinarily the effect of fraud is
to render a transaction voidable only and not void.

In the case of A.C. Ananthaswamy v. Boraiah (2004), the Supreme Court held that it must be
proved that the representation was made to the knowledge of the party making such representation
or that the party could have no reasonable belief that it was true. The level of proof required in
such a case is extremely high. An ambiguous statement cannot per se make the representative
guilty of fraud.

Misrepresentation

A contract is initiated and induced by representation. It is the material on which a contracting party
bases its decision to carry out the contract. A “representation” is a statement made to the other
party to the contract, either explicitly or implicitly, before or during the contracting process. It is
entered in light of an earlier or current fact. A seller of certain goods, for instance, can claim that
no notice of patent infringement has been received.

A representation cannot be a term of a contract at the outset, and a claim for damages resulting
from misrepresentation is typically barred. Instead, a claim that a false statement induced a
contract could be made in a fraud case, either to void the agreement or to recover damages.

In the case of Meera Sahni v. Lt.Governor of Delhi (2008), the Supreme Court held that the
transfer of land for which acquisition proceedings have been initiated and a false representation
had been made will be invalid because the transfer is based on the false representation of material
facts and, in fact, is a misrepresentation.

Remedies

In case of fraud, the person has the following remedies:

He can cancel or revoke the agreement and file a claim for damages against the defendant and get
compensation.
In the case of Dambarudhar Behera vs State Of Orissa(1980) due to the opposing party’s
misrepresentation of the facts, the plaintiff revoked the contract. The plaintiff sought damages for
the costs incurred in the contract’s drafting as well as for lost wages up until the point at which the
plaintiff discovered the misrepresentation. The Court granted him damages and ruled that the
damages given for the fraudulent misrepresentation should not surpass the losses which would
have occurred had the facts not been misrepresented.

He can sue the defendant and bring an action against the defendant for fraud for the damages
(where the value of the asset has decreased). The punishment for fraud is a non-compoundable
offence as it includes both fines and imprisonment. Section 447 of the Companies Act, 2013 also
provides the punishment for fraud.

Section 19 of the Indian Contract Act mentions that consent obtained by the fraud is voidable at
the option of the deceived person. Further exception of the Section says that if the consent of the
party involved in the contract is obtained by fraud or misrepresentation, then such contract is not
voidable if the party whose consent is obtained can find out about the truth with ordinary
diligence.

Misrepresentation

Rescind: To rescind is to revoke. The party who feels wronged has the right to claim contract
termination and/or monetary damages at any time. Rescission is the legal term for the dissolution
of a contract between two parties. The process of rescinding a transaction. This is intended to put
the parties back in the same situation they were in before entering into a contract (the status quo
ante).

In the case of Ganga Retreats and Towers v. State of Rajasthan (2003), the Supreme Court held
that in the case of misrepresentation, the party can rescind the contract, seek restitution, or affirm
the contract without prejudice to their right to seek damages by way of restitution.

Demand the performance: The party who has been wronged may claim against the first party to
obtain the object in a way that was not expressly provided for in the contract. Section 19 of the Act
makes the contract voidable at the option of the party whose consent was not free.
Key judicial pronouncements
Fraud

S.P Chengalvaraya Naidu v. Jagannath (1993)

In the case of S.P. Chengalvaraya Naidu v. Jagannath (1993) the Apex Court held that fraud is an
act of deliberate deception with the design of securing something by taking unfair advantage of
another. It is a deception to gain from others’ losses.

Gopal Bagda Brahmin v. M/S Omega Infrastructure Limited (2018)

In the case of Gopal Bagda Brahmin v M/S Omega Infrastructure Limited (2018), a cheque in
exchange for the price being paid was issued to the plaintiff got dishonoured, and the defendant
had reason to believe that the account did not have sufficient funds, which would eventually make
the cheque dishonoured, still, they did not disclose this fact to the plaintiff. The Court held that the
defendant issued the cheque with the intention of not performing it and deceived the other party.

Vidya Drolia v. Durga Trading Corporation (2021)

In the case of Vidya Drolia v. Durga Trading Corporation (2021), the Supreme Court held that
Section 17 of the Contract Act would apply if the contract itself was obtained by fraud or cheating.
Thereby, a distinction is made between a contract obtained by fraud and post-contract fraud and
cheating. The leather would fall outside Section 17 of the Contract Act, and therefore the remedy
for damages would be available, not the remedy for treating the contract itself as void.

Misrepresentation

Vaughn v. Menlove (1837)

In the case of Vaughn v. Menlove (1837), the defendant was informed that there was a significant
chance that his haystacks could catch fire and damage the plaintiff’s dwelling. He ignored them
and continued to position the hay. Plaintiff filed a lawsuit accusing the defendant of being
negligent after the hay caught fire and damaged his cottages.

The concept that a defendant’s exacting sensibility or shortcomings should be taken into
consideration when assessing negligence claims are rejected in this case. Instead, one should
simply consider if they have performed as a prudently cautious person would in a similar
circumstance.

Raj Kumar Soni v. State of U.P (2007)

In the case of Raj Kumar Soni v. State of U.P. (2007) suppression of important facts was ruled to
be an assault on due process, and it was decided that the party responsible for failing to present the
truth should not receive any benefits because they would not be required to approach the court
with clean hands.

Sh. Ranbir Singh v Sh.Narain Sharma (2014)

In the case of Sh. Ranbir Singh v. Sh. Narain Sharma (2014), the Court held that while entering
into the contract, free consent must be there, and if consent is obtained under misinterpretation, the
contract will be voidable at the option of the party whose consent was taken under the
misrepresentation.

National Insurance Co. Ltd. Thr Asstt Manager v. Guddi Bai (2022)

In the case of National Insurance Co. Ltd., Thr Asstt Manager v. Guddi Bai (2022), the Court
observed that the party to a contract whose consent is obtained by misrepresentation can demand
that the contract be carried out and that he or she be placed in the same situation as if the
representations made had been accurate.
 CONCLUSIONS-:
The concept of “fraud” as defined in Section 17 of the Contract Act, is very broad. It includes any
suggestion, as a fact, of that which is not true, by a person who does or does not believe it to be
true. It may be contrasted with Section 18(1) of the Contract Act, which, inter alia, defines
“misrepresentation.” Section 18 provides that it is misrepresentation if a person makes a positive
assertion that is not true in a manner that is not warranted by the information that he has. This is
despite the fact that he may believe it to be true. In other words, in fraud, the person who makes an
untrue suggestion does not believe it to be true. He knows it to be false, yet he makes a suggestion
of the fact as if it were true. In a misrepresentation, on the other hand, the person making the
misrepresentation believes it to be true. But the law declares it to be misrepresentation on the basis
of the information he had and what he believed to be true, which was not true. Therefore, the
representation made by him becomes a misrepresentation as it is a statement that is found to be
untrue. Fraud is committed if a person actively conceals a fact, whether they know about the fact
or believe in its existence. The concealment must be active. It is here that mere silence has been
explained in the Exception, which would affect the decision of a person who enters into a contract
as not being fraud unless the circumstances are such that it becomes his duty to speak. His silence
itself may amount to speech. A person may make a promise without having any intention to keep
it. It is fraud. The law further declares that any other act fit to deceive is fraud. So also, any act or
omission that the law declares to be fraudulent, amounts to fraud. However, running as a golden
trend and as a requirement of law through the various limbs of Section 17 of the Contract Act is
the element of deceit. A person who stands accused of fraud, be it in a civil or criminal action,
must entertain an intention to commit deception. Deception can take various forms, and it is a
matter to be judged on the facts of each case.
 BIBLOGRAPHY

 LAW OF CONTRACT BY AVTAR SINGH

 ANSTONS LAW of CONTRACT
 INDIAN CONTRACT ACT , 1872
 SPECEFIC RELEOF ACT, 1963

 https://www.mondaq.com/uk/contracts-and-commercial-law/686848/the-basics-negotiating-
a-contract-misrepresentation-or-just-exaggeration
 https://legislative.gov.in/sites/default/files/A1872-09.pdf
 https://www.csun.edu/sites/default/files/blawfraud.pdf