FRAUD VS MISREPRESENTATION

FRAUD VS MISREPRESENTATION

FRAUD

Fraud means dishonestly making a false, untrue or misleading representation with a view to gain or with intention to cause loss. If the fraud results in injury to the deceived party, he/ she may claim damages for the tort of deceit. A contract obtained by fraud is voidable on the grounds of fraudulent misrepresentation.  

ACCORDING TO SECTION 17 OF THE INDIAN CONTRACT ACT, 1872 

“FRAUD” means and includes any of the following acts committed by a party to a contract, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract:

  • The suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
  • The active concealment of a fact by one having knowledge or belief of the fact;
  • A promise made without any intention of performing it;
  • Any other act fitted to deceive;
  • Any such act or omission as the law specially declares to be fraudulent.

MISREPRESENTATION

A misrepresentation is an untrue statement of a material fact made by one party which affects the other party’s decision in corresponding to a contract. If the misrepresentation is identified, the contract can be declared void.

ACCORDING TO SECTION 18 OF INDIAN CONTRACT ACT, 1872

“Misrepresentation is a form of a statement made preceding to the contract being completed. There are two varieties of statement that can be performed before a contract is formed, these will either:

  1. Form part of the contract.
  2. Not form part of the contract, therefore it becomes a representation.”

FRAUD VS MISREPRESENTATION

BASIS OF DIFFERENCE FRAUD MISREPRESENTATION
MEANING A deceptive act done intentionally by one party in order to influence the other party to enter into the contract is known as Fraud. The representation of a misstatement, made innocently, which persuades other party to enter into the contract, is known as misrepresentation.
DEFINED IN Fraud is defined under Section 2 (17) of the Indian Contract Act, 1872. Misrepresentation is defined under Section 2 (18) of the Indian Contract Act, 1872.
PURPOSE TO DECEIVE THE OTHER PARTY The purpose of fraud is to deceive the party. The purpose of misrepresentation is not to deceive the party.
VARIATION IN EXTENT OF TRUTH In a fraud, the party making the representation knows that the statement is not true. In misrepresentation, the party making the representation believes the statement made by him is true, which subsequently turned out as false.
CLAIM The aggrieved party has the right to claim for damages. The aggrieved party has no right to sue the other party for damages.
VOIDABLE The contract is voidable even if the truth can be discovered in normal diligence. The contract is not voidable if the truth can be discovered in normal diligence.
CONSENT The consent of the party is obtained by committing a fraud by the other party. The consent of the party is gained because of the misrepresentation of information by the other party.

CONCLUSION

The acts done fraudulently are civil wrong and hence the party doing it can be sued in court by the aggrieved party even if the aggrieved party has a means of discovering the truth in the normal course of action. Misrepresentation is not a civil wrong as the party making the wrong representation honestly have no idea about the actual truth and so the aggrieved party cannot sue the other party in court but it has the option to rescind the contract.

Hence, there is an absence of free consent in both the conditions whether it is fraud or misrepresentation that is why the contract is voidable at the option of the party whose consent was so caused.

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