Posted February 1, 2014 by advocateguru in Learning Centre
 
 

Fraud

The term fraud includes all intentional or willful misrepresentation of facts which are material for the formation of a contract. The most important thing in fraud is the intention to fraud the other party which distinguishes it from misrepresentation.

 

“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, 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.

 

In the case of Deny v Peek in England, it was held that “Fraud is proved when it is shown that a false representation has been made (i) with knowledge or (2) without belief in its truth or (3) recklessly carelessly whether it is true or false.” Example: – A purchases good from B, he has no intention of paying for it. The contract is caused by fraud and is voidable at the option of B. Example: A comes to B’s house in the financial experts and asks him to deposit with him `10,000 which will be doubled in next two months. He runs away with the amount. This amounts to fraud.


advocateguru