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Acts which constitute misrepresentation

As per Sec. 18, any act amounts to misrepresentation if it falls in any of the following three categories:
  • Positive unwarranted statement: A statement made without any reasonable basis, is an unwarranted statement. When a person makes a positive statement of a fact without any trustworthy source of information and believes that statement to be true, the act amounts to misrepresentation.

    Example: A believed his horse to be sound although he had no sufficient ground for his belief. A, while selling his horse to B, stated the horse to be sound. On the basis of this statement, B bought the horse. Later on, B found the horse to be unsound. In this case, the positive statement made by A is a misrepresentation.

  • 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. This clause covers all those cases where the person making the statement has a duty to disclose all material facts which he knows, but he fails to disclose it, innocently. Such cases of non disclosure of material facts though innocently are termed as instances of “constructive fraud”.

    Example: In case of Bonnerman vs. White there was contract of sale of wheat grown on 200 acres of land. The seller made an innocent representation that no sulphur had been used in the cultivation of wheat. But sulphur had been actually used in 5 out of 200 acres of land on which the wheat was cultivated. The buyer would not have purchased the wheat, if he had known that sulphur had been used in the cultivation of wheat. It was held that there was misrepresentation.

  • Inducement of mistake about the subject matter: When a person induces the other person, however innocently, to make a mistake regarding the subject matter of the agreement, he has committed a misrepresentation. When such misrepresentation goes to the substance of the subject matter then the contract is voidable at the option of the other party.

    Example: Sonu says to Monu, an intending purchaser of his building, that his building is in perfect condition. He did not know that the foundation of his building is very weak. Monu believing the statement of Sonu purchased the building. In this case Sonu is guilty of misrepresentation.

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