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1. What is the difference between fraud and misinterpretation?

What do you
understand by mistake?
Ans. Fraud is generally defined in the law as an intentional misrepresentation of material
existing fact made by one person to another with knowledge of its falsity and for the
purpose of inducing the other person to act, and upon which the other person relies with
resulting injury or damage. Fraud may also be made by an omission or purposeful failure
to state material facts, which nondisclosure makes other statements misleading.

Misrepresentation means a false statement of fact made by one party to another party,
which has the effect of inducing that party into the contract. For example, under certain
circumstances, false statements or promises made by a seller of goods regarding the
quality or nature of the product that the seller has may constitute misrepresentation. A
finding of misrepresentation allows for a remedy of rescission and sometimes damages
depending on the type of misrepresentation.

Difference between fraud and misinterpretation:-

1. In misrepresentation the person making the false statement believes it to be true.


In fraud the false statement is person who knows that it is false or he does not care
to know whether it is true or false.
2. There is no intention to deceive the other party when there is misrepresentation of
fact. The very purpose of the fraud is to deceive the other party to the contract.
3. Misrepresentation renders the contract voidable at the option of the party whose
consent was obtained by misrepresentation. In the case of fraud the contract is
voidable It also gives rise to an independent action in tort for damages.
4. Misrepresentation is not an offence under Indian penal code and hence not
punishable. Fraud, In certain cases is a punishable offence under Indian penal
code.
5. Generally, silence is not fraud except where there is a duty to speak or the
relations between parties is fiduciary. Under no circumstances can silence be
considered as misrepresentation.
6. The party complaining of misrepresentation can’t avoid the contract if he had the
means to discover the truth with ordinary deligance. But in the case of fraud, The
party making a false statement cannot say that the other party had the means to
discover the truth with ordinary deligance.

MISTAKE

A mistake is an erroneous belief, at contracting, that certain facts are true. It may be
used as grounds to invalidate the agreement. Common law has identified two
different types of mistake in contract: "unilateral mistake" and "mutual mistake,"
sometimes called "common mistake."
A mistake is an error in understanding facts, meaning of words or the law, which causes
one party or both parties to enter into a contract without understanding the
responsibilities or outcomes. Such a mistake can entitle one party or both parties to a
rescission (cancellation) of the contract. A mistaken understanding of the law (as
distinguished from facts) by one party only is usually no basis for rescission since
"ignorance of the law is no excuse."
Mistake covers a broad set of situations, and courts often distinguish between unilateral
mistake and mutual mistake. A unilateral mistake is an incorrect belief of one party that is
not shared by the other party. A mutual mistake is an incorrect belief shared by both
parties. Courts have traditionally held that mutual mistakes are more likely than
unilateral mistakes to make a contract voidable.

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