Condition under froud consent shall not be callee to be free
Fraud means and includes making of a false statement knowingly it to be untrue or concealing a material fact knowingly with an intention to defraud the other party and to induce him to give his consent to the offer and enter into a contract.
According to Sec. 17 of the Indian 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:
1.the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
2.the active concealment of a fact by one having knowledge or belief of the fact;
3.a promise made without any intention of performing it;
4.any other act fitted to deceive; for gintar
5.any such act or omission as the law specifically declares to be fraudulent.
Thus, fraud includes any act or omission which is
intended to deceive the other party and to induce him to enter into a contract.
Essential Elements of Fraud
1. There must be a false representation – First of all, some representation must be there and it must be phony. The representation should have been made intentionally to deceive other party. If it is believed by the representative that he made a true statement then he cannot be held liable for fraud however ill-advised and stupid the statement might be.
Therefore, in short, only when a representation is false and intentionally made can it be considered to be fraudulent. In case of effective concealment of a fact even silence, in certain cases, may itself amount to fraud.
2. There must be a material fact related to the representation – There must be a material fact related to the representation. Representation of fact is not mere an opinion, expression or description.
Ex:: B is told by A about shoes which are best available in the market for the price.
There is no fact related with A’s statement. It is mere opinion and expression.
3. The contract should not have concluded before
making the representation – The category of fraud may include any false representation made with the intention to deceive the other party before the contract comes to a conclusion. The party can make this representation either to the contract or his agent.
4. The representation must have been relied upon
and acted upon by the other party – one does not get a right of action only on the basis of a mere false representation.
The statement must have been relied upon and acted upon by the other party. If a party does not notice the representation it cannot said to have been mislead by it. Similarly, the other party cannot be expected to shut his eyes if there was any obvious defect or flaw which could have been reasonably investigated by inspection.
Consequences of fraud- The party defrauded has the option of treating the contract induced by fraud as voidable. It is valid if it is not avoided. The following remedies are available with a party who has been induced to enter into a contract by fraud-
1. The contract can be rescinded by him i.e. the performance of the contract can be avoided by him. Provided it is done within a reasonable time. The contract cannot be rescinded if in interval, an interest in the property for value is acquired by a third party who does not know about the fact.
2. That the contract shall be performed can be asked by him and he should be put in the position in which he would have been if the representation had been true.
3. Damages, if any, can be sued for by the aggrieved party. Compensation can be demanded if the party suffers from any injury.
Special points that must be paid attention :
(1) The contract does not get affected if the fraud is by a stranger to the contract. The contract is affected in case of coercion and undue influence by a stranger related to a contract.
1.Fraudulent statement deceives the other party.
2.Other party enters into contract induced by the
When misrepresentation or fraud causes consent of a party to a contract, the agreement is voidable at the option of the party whose consent was so caused. But the contract is not voidable in the following cases –
1.Where the truth could be discovered by ordinary diligence by the party whose consent was so obtained by mis- representation or fraud.
2.Where the contract is entered into by the party in ignorance of the mis-representation or fraud.
3.Where, before the contract rescinds the third party enters into it.