FRAUD

False representations being made Knowingly Without belief in its truth. Not caring it to be true

or false. There is a concealment of a material fact/ is a

partial statement of fact. Intention to deceive

Fraud means and includes any of the following acts done with an intent to deceive or to induce a person to enter into a contract: Any false suggestion or statement Active concealment of fact by one having knowledge or

belief of the fact A promise made without any intention of performing it. Any such act or omission as the law specially declares to

be fraudulent.

(e.g playing with financial records)

A sells by auction, to B , a horse which A knows to be unsound. A says nothing to B about horse’s unsoundness. Is it a fraud?

B says to A , “If you do not deny it, I shall assume that the horse is sound.” A says nothing. Is it a fraud now ?

ESSENTIAL ELEMENTS OF FRAUD

There must be a representation and it must be false.The prospectus of a company did not refer

to the existence of a document disclosing liabilities. This gave an impression that the company was prosperous. Held non disclosure amounted to fraud.

The representation must relate to a material fact. A mere opinion is not regarded as

representation of fact.A sells some spoons to B and says that they

are as good as that of X. Is this a misrepresentation?

Must have been made before the conclusion of the contract , with a motive to induce the other party.

Other party must have been induced to act upon the representation asserted.

Other party must have relied upon the representation and must have been deceived.

Other party must have suffered some loss.

CONSEQUENCES OF FRAUD He can rescind the contract He can sue for damages He can insist on the performance of the

contract.

SILENCE AS TO FRAUD

Before letting his house, a landlord failed to tell the tenant that it was in a ruinous condition. held he was not liable in deceit as the tenant should have inspected the house.

H sold to W certain pigs. The pigs were suffering from some fever and H knew it. The pigs were sold “with all faults.” H did not disclose the fever to W. Held : There was no fraud.

MISTAKE Any erroneous belief about something. Mistake of law

Mistake of law of the country Ignorance of law is not an excuse

A and B enter into a contract on the erroneous belief that a particular debt is barred by the Indian law of limitation.

Mistake of law of a foreign country Mistake of fact

Bilateralunilateral

BILATERAL MISTAKE Mistake must be mutual

A agreed to purchase B’s motor which was lying in B’s garage. unknowingly either party,the car and garage were completely destroyed by fire a day earlier.

Mistake must relate to matter of fact essential to the agreement.A ,man and a woman entered into a

separation agreement under which the man agreed to pay a weekly allowance to the woman, mistakenly believing themselves lawfully married. Held the agreement was void.

UNILATERAL MISTAKE Where only 1 party is mistaken

regarding the subject matter or in expressing or understanding the terms or the legal effect of the agreement.

A offers to sell his house to B for an intended sum of Rs.44000. By mistake he makes an offer in writing of Rs.40000. He cannot plead the mistake as defence.

A buys an article thinking that it is worth Rs. 1000 when it is worth only Rs. 50. A cannot subsequently avoid the contract.