Short essay on Misrepresentation

Misrepresentation is a wrong statement of fact made innocently, i.e., without any intention to deceive the other party. A party makes a statement which is not correct but the party making the statement does not know that it is wrong or it honestly believes that it is correct.

Example:

A, while selling his watch, tells B that his watch is made in Switzerland. A honestly believes that the watch is made in Switzerland. B purchased the watch. However, it is found later on that the watch is made in India. A is guilty of misrepresentation.

Definition :

According to Sec. 18, there is misrepresentation:

1. By position statement:

When a person makes a positive representation without any reasonable basis or ground, honestly believing it to be true though it is not true, he is making a misrepresentation.

Example:

A tell B that his scooter goes 40 km. in 2 liters of petrol. A believes the statement to be true although he did not have sufficient grounds for the belief. A has made a misrepresentation.

2. By breach of duty:

When a person commits a breach of duty which gives him an advantage by misleading another to his disadvantage, he is making a misrepresentation.

Example:

A, while taking a life insurance policy, states his age as 23 years. He is 25 years old actually. Believing it to be true L.I.C. charges a lower premium. A is guilty of misrepresentation.

3. When a person induces another person, even innocently to make a mistake regarding the subject- matter of the agreement, he is making a misrepresentation.

Example:

A ship was chartered on the declaration that it was registered for not more than 2,800 tons. Actually, it was found later on that the ship was registered for 3,045 tons. The defendant refused to accept the ship on the ground of misrepresentation. It was held by the Court that the party was entitled to avoid the charter party on the ground of mis-statement as to tonnage. [Oceanic Stam Navigation v. Soonderdas].

Essentials of Misrepresentation:

1. There must be a representation or omission of a material fact.

2. The representation or omission of duty must be made with a view to inducing the other party to enter into contract.

3. The representation or omission of duty must have induced the party to enter into contract.

4. The representation must be wrong but the party making the representation should not know that it is wrong. In other words, the party making the representation should believe honestly that it is true.

Consequences of Misrepresentation

1. Aggrieved party may avoid the contract.

2. Aggrieved party may accept the contract but insist that he shall be placed in the position in which he would have been had the representation been true. In other words, claim the difference.

3. Where the aggrieved party had the means to discover the truth with ordinary diligence, the contract cannot be avoided.

Example:

A, by misrepresentation, leads B erroneously to believe that 500 tons of sugar is made annually at A’s factory. B examines the accounts of the factory, which show that only 400 tons of sugars have been made. After this, B buys A’s factory. The contract is not avoidable on account of As misrepresentation as he (B) could have ascertained the truth.

Fraud :

Fraud is a misrepresentation made with an intention to deceive or cheat. Thus, the distinction between the two is that misrepresentation is made without any intention to cheat, while fraud is made with an intention to cheat.

Definition :

Sec. 17 defines fraud as follows:

“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 intention to deceive another party thereto (or his agent) or to induce him to enter into the contract.”

(i) The suggestion that a fact is true when it is not true, by a person who does not believe it to be true.

Example:

A fully well knows that his watch is made in India. In order to sell his watch, he tells B that it is made in Switzerland, B buys the watch. A is guilty of fraud.

(ii) The active concealment of a fact by a person having knowledge or belief of the fact.

Example:

A, a horse dealer, sold a mare to B. The mare had a cracked hoof. A knew this fact and he filled it up to conceal its defect. Later on, the buyer discovered the defect. In this case it was held that the buyer could avoid the contract on the ground of fraud.

(iii) A promise made without any intention to perform it.

Example:

A has no money in his pocket. In spite of knowing this, he takes dinner at a restaurant with the intention of slipping away. A is guilty of fraud.

(iv) Any other act fitted to deceive. It is impossible to prepare an exhaustive list of acts which can be called fraud. The human mind is very fertile in this respect. Every day, we come across a new way or method of fraud. Hence, law has defined fraud to include any act which is undertaken to deceive.

It is impossible to prepare an exhaustive list of acts which can be called fraud. The human mind is very fertile in this respect. Every day, we come across a new way or method of fraud. Hence, law has defined fraud to include any act which is undertaken to deceive.

Example:

A agrees to double B’s gold by magic and runs away with his gold. It is fraud.

(v) Any such act or omission as the law specifically declares to be fraudulent. This clause is also of general nature. Numbers of acts or omissions have been declared fraudulent.

For example, misuse of railway concession. Thus A travels on B’s Railway Concession Ticket. A is guilty of fraud: