Fraud

Fraud means cheating. It is intentionally stating something untrue as true. Section 17 defines Fraud as “Fraud means and  included any of the following acts committed by a party to a contract or with his connivance, or his agent, which intent to decided another party thereto or his agent, or to induce him to enter into a contract.”

The essentials conditions of Fraud :

1.  The fraudulent act must be committed by a party to the contract – The act of fraud must be committed  by  the  party  to  the  contract  or  with  his  connivance  or  by  his  authorised  agent.  Fraud committed by third party will not affect the validity of the contract.

2.  False representation – There must be a false representation. This false representation must be made intentionally. A  person making a false statement is not guilty of fraud if he honesty believes in its truthfulness.

3.  Representation as to fact – The false representation must be of fact. Mere opinion, expression of intention will not amount to fraud. For eg. A says to B that the house is lucky and worth Rs. 10 Lacs. B buys the house but later on comes to know that the house is worth only Rs. 9 LAcs. B wants to bring an action against A. Held, it was expression of opinion and not a fact and therefore not a fraud.

4.  Actually deceived –  In order to constitute fraud, the innocent party must have been actually deceived. If not deceived than the act would not amount to fraud.

5.  Suffered Losses – The party who has been deceived must suffer a loss. If there is no loss, it will not give rise to an action for fraud.

Mere silence as to facts, likely to affect the willingness of a party to enter into a contract is not fraud, as no party is  under obligation to disclose the whole truth to the other party. However there are some exceptions to the rule ‘mere silence is not fraud’. They are

a)  If there are such circumstances which requires full disclosure then it is the duty of the person to speak and not remain silent. This duty exist in case fiduciary relationship.

b)  Where silence is equivalent to speech.