{"id":3954,"date":"2020-03-15T14:26:09","date_gmt":"2020-03-15T14:26:09","guid":{"rendered":"https:\/\/commerceiets.com\/?p=3954"},"modified":"2020-03-15T14:26:09","modified_gmt":"2020-03-15T14:26:09","slug":"fraud","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/fraud\/","title":{"rendered":"FRAUD"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_69_1 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/commerceiets.com\/fraud\/#FRAUD\" title=\"FRAUD\">FRAUD<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/commerceiets.com\/fraud\/#ESSENTIALS_OF_FRAUD\" title=\"ESSENTIALS OF FRAUD\">ESSENTIALS OF FRAUD<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/commerceiets.com\/fraud\/#CONSEQUENCES_OF_FRAUD\" title=\"CONSEQUENCES\nOF FRAUD\">CONSEQUENCES\nOF FRAUD<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/commerceiets.com\/fraud\/#MERE_SILENCE_IS_NOT_FRAUD\" title=\"MERE\nSILENCE IS NOT FRAUD\">MERE\nSILENCE IS NOT FRAUD<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/commerceiets.com\/fraud\/#EXCEPTIONS\" title=\"EXCEPTIONS\">EXCEPTIONS<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/commerceiets.com\/fraud\/#CONCLUSION\" title=\"CONCLUSION\">CONCLUSION<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"has-text-align-center wp-block-heading\" id=\"fraud\"><span class=\"ez-toc-section\" id=\"FRAUD\"><\/span><strong>FRAUD<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>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 <a href=\"https:\/\/commerceiets.com\/indian-contract-act-1872\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"contract (opens in a new tab)\">contract<\/a> obtained by fraud is voidable on the grounds of fraudulent misrepresentation. &nbsp;<\/p>\n\n\n\n<p><strong>ACCORDING TO&nbsp;SECTION\n17&nbsp;OF THE INDIAN CONTRACT ACT, 1872&nbsp;<\/strong><\/p>\n\n\n\n<p>\u201cFRAUD\u201d&nbsp;means and includes any of the following acts\ncommitted by a party to a contract, or by his agent, with intent to deceive\nanother party thereto or his agent, or to induce him to enter into the\ncontract:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>The\nsuggestion, as a fact, of that which is not true, by one who does not believe\nit to be true;<\/li><li>The active\nconcealment of a fact by one having knowledge or belief of the fact;<\/li><li>A promise\nmade without any intention of performing it;<\/li><li>Any other act\nfitted to deceive;<\/li><li>Any such act\nor omission as the law specially declares to be fraudulent.<\/li><\/ul>\n\n\n\n<h2 class=\"has-text-align-center wp-block-heading\" id=\"essentials-of-fraud\"><span class=\"ez-toc-section\" id=\"ESSENTIALS_OF_FRAUD\"><\/span><strong>ESSENTIALS OF FRAUD<\/strong><strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The\nessentials of fraud are as follows:<\/p>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>FALSE\nSTATEMENT OF FACT: SECTION17 (1)<\/strong><strong><\/strong><\/p>\n\n\n\n<p>In order to\nconstitute fraud, it is necessary that there should be a statement of fact\nwhich is not true. Mere expression of opinion is not enough to constitute\nfraud.<\/p>\n\n\n\n<p><strong>For example<\/strong>: A person, who is aged over 60 years and\nthus beyond insurable age, deliberately makes a false statement that his age is\n48 years in order to take out an insurance policy, it amounts to fraud, and the\ninsurer is entitled to avoid the policy.<\/p>\n\n\n\n<p><strong>CASE: EDINGTON\nVS. FITZMAURICE<\/strong><\/p>\n\n\n\n<p>In a company\nwas in great financial difficulties and needed funds to pay some pressing\nliabilities. The company raised the amount by the issue of debentures. While\nraising the loan, the directors stated that the amount was needed by the\ncompany for its development, purchasing assets and completing buildings. It was\nheld that the directors had committed a fraud.<\/p>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>ACTIVE\nCONCEALMENT: SECTION 17(2)<\/strong><strong><\/strong><\/p>\n\n\n\n<p>When there is an active concealment of a fact\nby one having knowledge or belief of the fact, that can also be considered to\nbe equivalent to a statement of fact, and amount to fraud. By active\nconcealment of certain facts, there is an effort to see that the other party is\nnot able to know the truth and he is made to believe as true which is in fact\nnot so.<\/p>\n\n\n\n<p><strong>Example<\/strong><strong>: <\/strong>A is entitled to succeed to an estate at the death of B.\n\u2018B\u2019 dies. C having received intelligence of B\u2019s death, prevents the\nintelligence reaching \u2018A\u2019 and thus induces A to sell him his interest in the\nestate. The sale is voidable at the option of A.<\/p>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>PROMISE\nMADE WITHOUT ANY INTENTION TO PERFORM IT: SECTION 17(3)<\/strong><strong><\/strong><\/p>\n\n\n\n<p>When a person makes a promise, there is\ndeemed to be an undertaking by him to perform it. If there is no such intention\nwhen the contract is being made, it amounts to fraud. Thus, if a man takes a\nloan without any intention to repay, or when he is insolvent, or purchases\ngoods on credit without any intention to pay for them, there is fraud. If,\nthere is no such bad intention at the time of making contract, but the promise\ndoesn\u2019t perform the contract, it doesn\u2019t amount to fraud.<\/p>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>ANY OTHER ACT FITTED OR DESIGNED TO DECEIVE: SECTION\n17(4)<\/strong><strong><\/strong><\/p>\n\n\n\n<p>This provision is general in nature and is\nintended to include other means of trick and unfair means intended to deceive\nany one other than by means of a promise made without the intention to perform\nit. Under this Section, any such acts will amount to fraud.<\/p>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>ANY SUCH ACTS OF OMISSION AS THE LAW SPECIALLY\nDECLARES TO BE FRAUDULENT: SECTION 17(5)<\/strong><strong><\/strong><\/p>\n\n\n\n<p>According to Section 17(5) fraud includes any\nsuch acts of omission which specially declares it to be fraudulent. For\ninstance under the Transfer of Property Act 1882, under Section 55 , the seller\nof immovable property is bound to disclose to the buyer all material latent\ndefects in the property. Not doing so will amount to fraud.<\/p>\n\n\n\n<p><strong>CASE: AKHTAR\nJAHAN BEGAM vs. HAZARILAL<\/strong><\/p>\n\n\n\n<p>A sold some\nproperty to B stating in the sale deed that he won\u2019t be liable to B if he\nsuffered any loss owing to A\u2019s defective title. A had, earlier to this\ntransaction, sold this property to somebody else, but didn\u2019t inform B about it.\nIt was held that A had committed fraud and the contract was voidable at the\noption of B.<\/p>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>PARTY TO THE CONTRACT <\/strong><strong><\/strong><\/p>\n\n\n\n<p>The Act of fraud must be done \u2013<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>By the party to the contract himself<\/li><li>With his connivance<\/li><li>Or by his agent<\/li><\/ul>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>STATEMENT\nSHOULD BE MEANT FOR THE PARTY MISLED<\/strong><strong><\/strong><\/p>\n\n\n\n<p>It is necessary that the misleading statement\nshould be meant for the party who is misled. If a person is purchasing the\nshares of the company on the basis of any prospectus then he can\u2019t sue the\ncompany later on because the prospectus is meant for an original allottee of\nthe shares by the company, not for the person like the present appellant who\nbuys the shares from the original allottee and therefore, the promoters were\nnot liable for fraud.<\/p>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>THE OTHER PARTY MUST SUFFER LOSS<\/strong><strong><\/strong><\/p>\n\n\n\n<p>To constitute a fraud, under the Indian Contract\nAct, it is necessary that the other party must have suffered some material loss\nas a consequence of the deceit. Hence, there is no fraud without damage.<\/p>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"consequences-of-fraud\"><span class=\"ez-toc-section\" id=\"CONSEQUENCES_OF_FRAUD\"><\/span><strong>CONSEQUENCES\nOF FRAUD<\/strong><strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>According to&nbsp;Section 19&nbsp;where consent to an agreement is caused by fraud,\nthe agreement to a contract is voidable at the option of the party whose\nconsent was so caused by fraud. Until such time it is avoided, the contract is\nvalid.<\/p>\n\n\n\n<p>The party defrauded has the following\nspecific remedies:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>To rescind the contract<\/li><li>To affirm it<\/li><li>Rescind and claim for damages<\/li><li>Enforce principle of restitution<\/li><li>Sue for specific performance<\/li><\/ul>\n\n\n\n<p>If he chooses to&nbsp;rescind the contract&nbsp;he must do so within reasonable time.\nWhen the contract is rescinded it becomes void and unenforceable.<\/p>\n\n\n\n<p>However, if the party chooses, he&nbsp;may affirm it&nbsp;, then the question of rescinding the contract does not arise and the&nbsp;principle of estoppel&nbsp;will be revoked against him.<\/p>\n\n\n\n<h2 class=\"has-text-align-center wp-block-heading\" id=\"mere-silence-is-not-fraud\"><span class=\"ez-toc-section\" id=\"MERE_SILENCE_IS_NOT_FRAUD\"><\/span><strong>MERE\nSILENCE IS NOT FRAUD<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Every\nsilence is not a fraud. According to Sec. 17, Mere silence as to the facts does\nnot amount to fraud. A party to the contract does owe no gratitude to disclose\nthe whole truth to the other party.<\/p>\n\n\n\n<p>The\nRule of Caveat Emptor is applicable here that is Buyer Beware principle. This\nprinciple means that the buyer should be aware of things while making the\ncontract. In these cases there is no duty to speak and silence does not result\nto fraud. When both the parties are aware of the contract, there is no duty to\ndisclose the facts.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"exceptions\"><span class=\"ez-toc-section\" id=\"EXCEPTIONS\"><\/span><strong>EXCEPTIONS<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The\nsilence amounts to fraud in the following cases, namely:<\/p>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>DUTY TO SPEAK<\/strong><\/p>\n\n\n\n<p>Mere silence amounts to fraud when the person keeping silent, is\nunder a duty to speak. The duty to speak arises, where one party reposes trust\nand confidence in the other.<\/p>\n\n\n\n<p><strong>Circumstances where it is the\nduty of the person keeping silence to speak are<\/strong><strong>:-<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Uberrimae Fedei<\/strong><\/li><\/ul>\n\n\n\n<p>There\nare certain contracts which are&nbsp;contracts\nof uberrimae fedei meaning contracts of utmost good faith. In such a\ntype of contract it is supposed that the party in whom good faith is reposed,\nwould make full disclosure of it and not keep silent.<\/p>\n\n\n\n<p>One instance of contract of uberrimae fedei is\ncontract of insurance&nbsp;. In such a\ncontract, there may be certain facts which are in full knowledge of the insured\nor policy holder. He must make full disclosure of such facts to the insurer or\ninsurance company.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Fiduciary  relationship<\/strong><\/li><\/ul>\n\n\n\n<p>Another\ninstance where a duty to disclose facts arises is where the parties to the contract\nrepose \u201ctrust and confidence\u201d in the each other giving rise to a fiduciary\nrelationship.<\/p>\n\n\n\n<p><strong>Example:\n<\/strong>A sells a horse to B, his daughter by\nauction, who has just come of age. Here the relationship between the parties\nwould make it the duty of A to disclose that the horse is unsound. If he does\nnot disclose so, it would amount to fraud.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Speaking half\ntruth<\/strong><\/li><\/ul>\n\n\n\n<p>Subject\nto statutory exceptions under&nbsp;Explanation\nto Section 17&nbsp;a person keeping silence but if he decides to speak,\na duty arises to disclose the whole truth.&nbsp;Withholding a part of the information amounts to fraud.<\/p>\n\n\n\n<p>Thus,\nspeaking half truths may also amount to willful misrepresentation as regards to\nthe facts which have not been disclosed. When there is a duty to disclose all\nfacts, then non disclosure or half-disclosure of facts amounts to fraud.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Statutory\ndisclosure<\/strong><\/li><\/ul>\n\n\n\n<p>In\nsome cases the disclosure is required by a&nbsp;statute. In such a case also there arises a duty to speak.<\/p>\n\n\n\n<p>For\ninstance,&nbsp;under the Transfer of Property\nAct 1882, under Section 55&nbsp;, the seller of immovable property is\nbound to disclose to the buyer all material latent defects in the property. Not\ndoing so will amount to fraud.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Custom of trade<\/strong><\/li><\/ul>\n\n\n\n<p>If\nthe&nbsp;usage or custom of trade\nrequires disclosure&nbsp;of certain things or&nbsp;known defects&nbsp;then non disclosure\nwould amount to fraud. For example, tobacco\/liquor is injurious to health.<\/p>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>WHERE SILENCE IS EQUIVALENT TO SPEECH<\/strong><\/p>\n\n\n\n<p>Sometimes, the silence is equivalent to speech. In such cases, the\nsilence of a person amounts to fraud e.g., where a person keeps silent, knowing\nthat his silence is going to be deceptive, he is guilty of fraud.<\/p>\n\n\n\n<p><strong>Example: <\/strong>A says to B \u201cIf you do not deny it I shall\naccrue that the horse is sound .\u201d B says nothing. Here B\u2019s silence is equal to\nspeech that the horse is sound. Later if the horse turns out to be unsound, B\nwill be guilty of fraud.<\/p>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"conclusion\"><span class=\"ez-toc-section\" id=\"CONCLUSION\"><\/span><strong>CONCLUSION<\/strong><strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Fraud is essentially a question of fact and the person who alleges that has to prove the same. If the plaintiff seeks the compensation the ground of fraud or misrepresentation, he has to specifically plead the same and mention the circumstances which can lead to the conclusion of the existence of fraud. Merely making a mention of fraud or misrepresentation in the pleadings is not enough.<\/p>\n\n\n\n<p><strong>JOIN THE CHANNEL ON TELEGRAM<\/strong><\/p>\n\n\n\n<p><a href=\"https:\/\/t.me\/commerceiets\" target=\"_blank\">https:\/\/t.me\/commerceiets<\/a><\/p>\n\n\n\n<p><strong>CONNECT ON LINKEDIN<\/strong><\/p>\n\n\n\n<p><a href=\"https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/\" target=\"_blank\" rel=\"noopener\">https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>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&#8230;.<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/fraud\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;FRAUD&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":3956,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-3954","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-commercial-law"],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/3954"}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=3954"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/3954\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/3956"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=3954"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=3954"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=3954"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}