FRAUD

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 a 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;
5. 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, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech1.

To better understand section-17 of the Indian Contract Act, 1872, we need to take help of an illustration; for example- A proposes to sell a horse to B, B before buying it asks A if the horse is sound, and says that if you do not deny it I shall presume that the horse is completely fine, A did not say anything. Afterwards, when B finds out that the horse is unsound, he sues A for fraud. Here the court would rule that although mere silence doesn’t amount to fraud but even in his silence, A spoke volumes about the soundness of the horse which is to be considered as fraud. Here the court would ensure fairness to B by declaring the contract as voidable, because in this case B was at loss because of fraud committed by A. This section provides fairness to the contracting parties in various ways, but the most debatable is- “Mere Silence is no Fraud”, from the outside this clause might seem unfair, but from legal perspective especially from the point of view of justice this clause is not at all unfair, because for example, if we modulate the previous illustration in such a way that, B didn’t ask anything about the soundness of the horse and A, even though he knew that the horse was unsound stayed silent. Here, A’s silence cannot be considered as fraud because it was B’s duty as a buyer to completely inspect the horse before buying it, and if he did not deem it to be important then A cannot be made liable for something he did not do.

1 S. 17, The Indian Contract Act, 1872 (9 of 1872), Lexis Nexis.

Aishwarya Says:

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