📜 The Indian Contract Act 1872: Sections 17 – 22

⚖️ “Fraud” defined  Section 17

Fraud means any of the following acts committed by a party to contract with intent to deceive another party to induce another party to enter into contract…

Acts of fraud:

• (1) suggestion as a fact of that which is not true by one who does not believe it to be true
• (2) 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) an act or omission specially declared by law to be fraudulent

This definition also includes acts with same intent committed by an agent of a party done to an agent of the other party.

Explanation

Mere silence as to facts likely to affect willingness of a person to enter into contract is not fraud, unless it is duty of the person keeping silence to speak or 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 unsoundness. This is not fraud.
• (b) But where: B is A’s daughter and has just come of age. This relation between the parties makes it A’s duty to tell B about unsoundness of the horse
• (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.
• (d) A and B, being traders enter upon a contract. A has information of a change in prices which would affect B’s willingness to make the contract A is not bound to inform B.

📌 “Misrepresentation” defined  Section 18

Misrepresentation means any of these acts:

• (1) positive assertion of that which is not true in a manner not warranted by information of the person making it though he believes it to be true.
• (2) any breach of duty without an intent to deceive which gains an advantage to the person committing it by misleading another to his prejudice.
• (3) Causing, even if innocently a party to make a mistake as to substance of the subject of agreement.

Difference between Misrepresentation and Fraud

Misrepresentation:

• 1. A false statement of facts believing it to be true, without an intention to deceive the other party.
• 2. Misrepresentation is innocent or unintentional.
• 3. If the aggrieved party had the means to discover the truth with ordinary diligence, contract will not be voidable.
• 4. The other party can rescind the contract but cannot claim damages.

Fraud:

• 1. A misrepresentation of facts with full knowledge that it is not true, with an intention to deceive the other party.
• 2. Fraud is a willful misrepresentation or concealment of facts to defraud the other party.
• 3. The contract will be voidable on account of fraud even if the aggrieved party could discover the truth by ordinary diligence except when it is on account of fraudulent silence.
• 4. The aggrieved party can set aside the contract and can also claim compensation for any loss or damages suffered by it.

⚖️ Voidability of agreements without free consent  Section 19

When consent to an agreement is caused by coercion, fraud or misrepresentation the agreement is a contract voidable at the option of the party whose consent was so caused .

A party whose consent was caused by fraud or misrepresentation may insist that the contract shall be performed and he shall be put in that position in which he would have been had the representations been true.

Illustrations

• (a) A, intending to deceive B, falsely represents that 500 maunds indigo are made at A’s factory and thereby induces B to buy the factory. Contract is voidable at B’s option.
• (b) A, by a misrepresentation leads B erroneously to believe that 500 maunds indigo are made at A’s factory. B examines accounts which show only 400 maunds indigo. After this, B buys the factory. Contract is not voidable on account of A’s misrepresentation.
• (c) A fraudulently informs B that A’s estate is free from encumbrance. B thereupon buys the estate which is actually subject to a mortgage. B may either avoid the contract or may insist on its being carried out and mortgage-debt redeemed.
• (e) A is entitled to succeed to an estate at the death of B. B dies. C, having received intelligence of B’s death prevents the intelligence reaching A and thus induces A to sell him his interest in the estate. The sale is voidable at the option of A.

⚖️ Setting aside of contract induced by undue influence  Section 19A

When consent is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused.

Any such contract may be set aside either absolutely or upon such conditions as Court may find just if the party who was entitled to avoid has received benefit.

Illustrations

(b) A, a money-lender advances Rs. 100 to B, an agriculturist. A, by undue influence induces B to execute a bond for Rs. 200 with interest at 6% per month. Court may set the bond aside ordering B to repay Rs. 100 with just interest

📌 Both parties under mistake of fact  Section 20

Where both parties to an agreement are under a mistake of fact essential to the agreement, the agreement is void

Illustrations

(a) A agrees to sell to B a cargo of goods on its way from England to Bombay. Actually, before the day of bargain the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of these facts, the agreement is void.

📌 Mistake of law  Section 21

A contract is not voidable, if it was caused by a mistake of law in force in India.

A contract caused by a mistake of law not in force in India has the same effect as a mistake of fact.

Illustration

A and B make contract on the erroneous belief that a particular debt is barred by the Indian Law of Limitation. Contract is not voidable.

📌 Mistake of fact by one party  Section 22

A contract is not voidable merely because it was caused by one party being under a mistake of fact.

❓ FAQs: Indian Contract Act 1872 Sections 17-22

1️⃣ What is “Fraud” under Section 17? 🕵️‍♂️

2️⃣ What is “Misrepresentation” under Section 18? 📢

3️⃣ How is Misrepresentation different from Fraud? ⚖️

4️⃣ What happens when consent is caused by fraud, misrepresentation, or coercion? 📝

5️⃣ What is Section 19A: Contract induced by undue influence? 🏦

6️⃣ What is the effect of mistake of fact or law? 📚

📍 Delhi Law Academy – Jaipur Branch
6C, Tower 2, Coaching Hub, Pratap Nagar, Jaipur – 302033

📞 Phone:
+91 9911916552
+91 8447285606

✉️ Email:
contactus@delhilawacademy.com