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fraud

English · Contract and commercial

Meaning. Deliberate deception by a party to a contract to induce the other to enter into it.

Section 17 of the Indian Contract Act lists acts done by a party, or with his connivance or by his agent, with intent to deceive or induce another to contract: a false suggestion of fact by one who does not believe it true, active concealment, a promise made with no intention of performing it, any other act fitted to deceive, and anything the law declares fraudulent. Mere silence is not fraud unless there is a duty to speak or the silence is itself equivalent to speech.

Consent obtained by fraud is not free (s.14), and the contract is voidable at the option of the deceived party, who may also claim damages (s.19). Fraud differs from misrepresentation (s.18) in intent: misrepresentation is innocent. Courts treat fraud as vitiating every solemn act; in S.P. Chengalvaraya Naidu the Supreme Court held that a decree obtained by fraud is a nullity.

Example

A seller who paints over cracks in a wall to hide them commits fraud by active concealment, so the buyer may rescind under s.19.

In Indian law

See also

misrepresentation · free consent · voidable contract · deceit

Read more in the study notes

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