(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 speak2, or unless his
silence, is, in itself, equivalent to speech. Illustrations
(a) A sells, by auction, to B, a horse which A knows to be unsound. A says nothing to B
about the horse’s unsoundness. This is not fraud in A. (a) A sells, by auction, to B, a
horse which A knows to be unsound. A says nothing to B about the horse’s
unsoundness. This is not fraud in A."
(b) B is A’s daughter and has just come of age. Here the relation between the parties
would make it A’s duty to tell B if the horse is unsound. (b) B is A’s daughter and has
just come of age. Here the relation between the parties would make it A’s duty to tell
B if the horse is unsound."
(c) B says to A—‘‘If you do not deny it, I shall assume that the horse is sound”. A says
nothing. Here, A’s silence is equivalent to speech. (c) B says to A—‘‘If you do not deny
it, I shall assume that the horse is sound”. A says nothing. Here, A’s silence is
equivalent to speech."
False Assertion without Belief in its Truth
To prove a case of fraud, it must be proved that representations
made were false to the knowledge of the party making them. The
statement must be false in substance and in fact. Positive
knowledge of falsehood is not a criterion. In order to constitute
fraud, it is necessary that the statement was made by the person
concerned with knowledge of its falsehood, or without belief in its
truth. Even mere ignorance as to the truth or falsehood of material
assertion, which, however, turns out to be untrue, is deemed equivalent to
the knowledge of its untruth, as also where the representor suspected that
his statement might be inaccurate, or that he neglected to inquire into its
accuracy. In Jewson & Sons Ltd v Arcos Ltd, giving a false impression
and inducing a person to act upon it, was considered fraud, even if
each fact taken by itself would be literally true.
Reckless Statements
Proof of absence of actual and honest belief is all that is necessary
to satisfy the existence of fraud, whether the representation is made
recklessly or deliberately; indifference or recklessness on the part of
the representor as to truth or falsity of the representation affords
merely an instance of absence of such belief. Statements made
without belief in the truth would include statements made
recklessly. Misrepresentation as to title made by vendors recklessly or with
gross negligence cannot escape the charge of fraudulent misrepresentation.
Ambiguous Statements
Where the representer makes an ambiguous statement, the person
to whom it is made must prove that he understood that statement in
the sense that it was in fact false. The representor will be guilty of
fraud if he intended the statement to be understood in that sense,
and not if he honestly believes it to be true, but the person relying
on it understands it in a different sense. Once it is held that the
representation was fraudulent under this clause, the exception in s 19 is of no
avail, and the question whether the person alleging fraud had or had not the
means of discovering the truth with ordinary diligence, is immaterial.
Active Concealment
Mere non-disclosure of some immaterial fact s would not per se five
a right to recission unless it is further found that the consent has
been secured by practicing some deception. Where the seller sold
property already sold by him to a third person, his conduct amounted to
active concealment and fraud, and the buyer could recover the price despite
the agreement that the seller could not be responsible for a defect in title.
Promise without Intention of performing it
Making a promise without the intention of performing it is fraud,
though not so under the English law. To bring the case within this
clause, it must be shown that the promisor had no intention of
performing the promise at the time of making it, and any
subsequent conduct or representation is not considered for this
purpose.
Silence as Fraud
Silence about fats is not fraud per se. Unless there is a obligation to
talk or if it is equal to expression, mere silence is not fraud. This rule
has two skills. First, suppressing portion of the known facts may
mislead the assertion of the remainder, although literally true as far
as it goes. In such a case, the declaration is substantially incorrect,
and fraudulent is the willing rejection that makes it so. Secondly,
commercial use may impose a obligation to disclose specific flaws in
products sold or the like. In such a situation, failure to mention such
a defect is equal to an statement that there is no such defect.
Mere silence usually does not support a fraudulent action. However,
when silence is taken together with the circumstances of a
particular case, it may amount to misrepresentation. While courts are
willing to engage with various factual circumstances to ensure that parties’
intentions are upheld, prudence is always key to reducing the commercial
risks and potential litigation in the formulation of contracts.
Mere silence or nondisclosure of facts would not constitute a wrongful act
unless the defendant is under an obligation to talk and conceal the facts of a
particular transaction or trade. Therefore, mere silence amounts to fraud
when the circumstances of the case are such that the individual has a duty to
speak and inform the other party of the facts, but they remain silent or the
party’s silence is equivalent to expression. The other party to the contract is
misled and suffers damages as a consequence.
Section 19 explains the voidability of contracts in the absence of
free consent. The first exception of this section explains that if a
party gave consent to the terms of the contract by silence or by
misrepresentation, the contract would not be voidable if the party
could have discovered the truth by ordinary diligence. Here, the
silence or the misrepresentation must fall under the ambit of fraud
as mentioned under Section 17.
Duty to Speak
There is no general duty to disclose facts that are or might be
equally within the means of knowledge of both parties. In Bell v
Lever Bros, the company agreed to pay large compensation to two
employees, the subsidiary company directors, whose services were
being dispensed with. After paying the money, the company
discovered that the directors had committed breaches of duty, which
would have justified their dismissal without compensation. The
House of Lords held that the directors had not these breaches in
mind, and were under no duty to disclose them.
No Fraud
If the party alleging fraud had the facts before it or had the means
to know them, it could not be said to have been defrauded, even if a
false statement has been made. Further, a contract cannot be
merely on a trivial and inconsequential mis-statement or non-
disclosure. In Janakiamma v Raveendra Menon, where the plaintiff
was aware of the contents of the Will of her father, the partition of
property on the death of the father and mother was not set aside on
the ground of fraud of not disclosing the contents of the Will; and no
fresh partition was ordered.
