Name -Satendra Kumar Maurya, Dr.

Ram Manohar Lohiya National Law

University, Lucknow.

Topic – Explain the Concept of Mere Silence is not Fraud with the Help
of Case Laws and Examples.
INTRODUCTION: -
Fraud is one of the most important topic of Indian contract act, 1872. If consent
of any party is induced by false statement then contract will be voidable.
Because to make a binding contract there should be all essentials of contract.
The essentials of the contract are free consent of the parties competent to the
contact, lawful consideration, lawful object, consensus ad idem and not declared
by any law as void or voidable. Fraud define under section 17 of Indian contract
Act. According to this section, fraud is intentionally misrepresentation of fact
and speaking broadly is called fraud. Contractual fraud is a type of fraud where
the intentional misrepresentation of a fact is made in the formation of the
contract. If any person with intention to deceive any person, convince that
person by the following fact- the suggestion of a fact which is not true and he
believe that it is not true, Active concealment of a fact by one having
knowledge or belief of the fact, he made a promise without any intention of
performing it or any other act fitted to deceive and any act which the law
specially declared to be fraudulent.
For example- 1. X says to Y that if you do not deny it I shall assume that the
horse is sound mind. Y says nothing. Here Y silence is equivalent to fraud.
2. A sells by auction to B, a horse which A knows is of unsound mind. A says
nothing of the unsoundness of the horse. A has not committed fraud as mere
silence does not amount to fraud.
3. A and B, being trader enter into a contract. A has private information of a
change in price which would affect B’s willingness to proceed with a contract.
Here, A is not bound to inform B.
In the case Derry vs peek, it was held that to prove a fraud it is mandatory that a
person should intentionally make a false representation to deceive other party
and thereby convince him to enter into a contract. If the intention to deceive the
party is not present there is no fraud.
Silence is very doubtful term in the law of contract. Sometimes it is fraud and
sometimes it is not. Here we will study the cases in which mere silence is not
fraud.
MERE SILENCE IS NO FRAUD: -
Mere silence which is affect the willingness of a person to enter into a contract
is not fraud, unless the circumstances of the are such that mere silence of that
person equivalent to speech.

Illustration –
A sell by auction to B a dog which A knows to be unsound mind. A says
nothing to B about the dog’s unsoundness. This is not fraud in A because here B
never ask anything about dog and A say nothing to B which is capable to active
concealment. So that it is a example of mere silence is not fraud.
Any contracting party is not bound to disclose all truth to the other party or give
him all the information in his possession affecting the subject matter of the
contract. It is under this principle that a trader may keep silent about the change
in prices of contracting things. A seller who put forth an unsound mind’s horse
for sell but he says nothing about its quality commits no fraud.
In the case Shri Kishan Vs. Kurukshetra University, a candidate of Kurukshetra
University who had full knowledge of short of attendance did not mention that
fact himself in the form. Neither the head of the examination department nor the
university authorities made proper scrutiny to discover the truth. The Supreme
Court held that there was no fraud by the candidate as he merely kept silent as
to his attendance which the authorities could have discovered had proper
scrutiny been made the university having fail to do so. The university had no
power to cancel the examination of the candidate on that ground.
Keats v Earl of Cadogan, in this case owner of a house was let out for three year
without disclosing to the tenant that the state of the house is in such as ruinous
and dangerous state to live. When tenant discover this, he applied to break the
contract and started arguing that owner should have disclose the real state of the
house. The court rejected the relief and said that there was no warranty that the
house was fit for occupation. No misrepresentation was made because he can
make investigation before he began to resides in it. There was no obligation on
the landlord to say anything about the state of the house.
EXCEPTION OF MERE SILENCE IS NOT FRAUD: -
1. DUTY TO SPEAK: - if anyone keeping silence where there is duty of
that person to speak then it will be fraud. Duty of the person to speak
arises where one party reposes trust and confident on the other party.

2. WHERE SILENCE IS DECEPTIVE: - where silence is itself equivalent

to speech. A person who knows that his silence is going to be deceptive
then he will be guilty of fraud.

3. CHANGE OF CIRCUMSTANCES: - sometimes a representation is true

when it was made but after change in circumstances it become false. In
such circumstances, it is duty of that person to communicate the change
of circumstances.

4. HALF TRUTH: - even a person under no duty to disclose a fact, he may

become a guilty of fraud if he voluntarily disclosed something and then
stops half the way. So that mere silence is not fraud but if he speak
anything about quality of the contracting goods then he will be become
guilty of fraud.

CONCLUSION: -
Fraud is very serious problem this time because there is lots of fraud happening
day by day and poor investor or low educated citizen got trap by this and last
there lots of money and wealth. Fraudster always comes with new ideas and
traps unaware people of the society. All people should aware and they are
asking all thing about the contracting goods for that they are trying to enter into
contract. Because if person do not ask about anything and not investigate
properly then they can be trap by the fraudster.