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Q. What is fraud? What is the suggestion of a fact not fraud but a misrepresentation? Explain it by giving
examples. (199! (199"!
1. #ntroduction$
Fraud is intentional misrepresentation. %he parties of the contract should not conceal anything and not ma&e
false colour to the dealing. %he term fraud includes all acts committed by a party to induce the other to enter
into a contract 'ith an intention to deceive other.
(. )efinition of fraud$
*ccording to contract act sec 1
Fraud means and includes any of the follo'ing acts committed by a party to a contract or 'ith his connivance or
by his agent.
(i! %he suggestion+ as a fact+ of that 'hich is not true+ by one 'ho does not believe it to be true+
(ii! %he active concealment of a fact by one having &no'ledge or belief of the fact+
(iii! * promise made 'ithout any intention of performing it.
(iv! *ny other act fitted to deceive and.
(v! *ny such act or omission as he the la' specially declared to be fraudulent.
,. -ases of fraud$
Follo'ing are cases of fraud in accordance 'ith sec 1
(#! .uggestion regarding fact$
When a party to the contract ma&es a false statement intentionally he 'ould be liable for fraud.
#f a person honestly believe his statement is to be true he can not be held liable for fraud.
/*0 &no's that his mobile is made 1a&istan. #n order to sell his mobile phone he tells that it is made of
England /20 buys it. /*0 is guilty of fraud.
(##! *ctive concealment of fact$
When the party to the contract material fact essential to the contract. 3e is guilty of fraud.
* sells a car to 2 the engine of the car is defective but * conceals it. * is guilty of fraud.
(###! 1romise 'ithout intention of performing$
* promise 'ithout intention of performing amounts of fraud.
* purchases certain items from /20 'ithout intention to pay him. /*0 is guilty of fraud.
(#4! *ny act 'ith intention to deceive$
*ll the unfair 'ays 'hich a man can adopt to deceive the other party 'ill be considered fraud.
5*6 tells 526 that his co' is pregnant on this suggestion 526 purchases co'. * is guilty of fraud.
(4! *ny act or omission$
*ny act or omission as the la' specially declares to be fraudulent.
7. Essentials of fraud$
Follo'ing are the important essentials of fraud.
(#! False representation$
%here must be false representation 'ithout representation there can be no fraud.
(##! 8epresentation of a fact$
%he representation must relate to a fact.
(###! 8epresentation must be made before conclusion of contract$
%he representation must be mad before conclusion of contract 'ith the intention of causing the other party
to enter into a contract.
(#4! 9no'ledge of falsity$
%he representation must have been made 'ith the &no'ledge of its falsity.
(4! .uffering of loss$
%he other party acting on the representation must have suffered a loss.
(4#! %he other party must have been deceived$
%he other party must have been deceived.
(4##! %he other party must have relied upon the representation$
%he other party must have relied upon the representation 'hich is made by fraudulent means.
:. -onse;uences of fraud$
* contract made by fraud is voidable at the option of the party defraud.
-ase la'
1. <. ) 19=9 .- 1=
#t 'as held that burden of proof lies on the party alleging fraud.
=. burden of proof$
%he burden of proof that fraud 'as used lies on the party 'ho 'ants to set aside the contract on plea of
. 8emedies$
Follo'ing remedies in case of fraud are available.
(#! %o avoid the contract$
1arty can avoid the contract but it must be done 'ithin reasonable time.
(##! .uit for damages$
.uit for damages can be instituted defrauded by party.
(###! .uit for specific performance$
.uit for specific performance can be filed.
". -an silence be fraudulent$
*ccording to sec 1 />ere silence as to facts li&ely to effect the 'illingness of a person to enter into a
contract is not fraud. ?nless the circumstances of the case are such that regard being had to them. #t is the
duty of the person &eeping silence to spea&+ or unless his silence is in itself e;uivalent to speech.
9. conclusion$
%o conclusion it can be said that+ fraud is 'illful and intentional misrepresentation. %he contract is voidable
at the option of aggrieved party. Fraud is committed 'herever one man causes another to act on a false
belief by representation 'hich he does not himself believe to be true. Fraud can not be directly proved+ it
has to be inferred from surrounding circumstances and the conduct of the parties.