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Fraud means a false representation or concealment of material fact with a view to deceive the other party to the contract or to induce him to enter into a contract. According to section 17, ‘fraud’ means and include any of the following acts committed by a party to a contract, or with his connivance, or by his agent with intent to deceive another party therto or his agent, or to induce him to enter into a contract:


  • The suggestion that a fact is true when it is not true and the person making the suggestion does not believe it to be true.
  • The active concealment of a fact by a person having knowledge or belief of the fact.
  • A promise made without any intention of performing it.
  • Any other act fitted to deceive.
  • Any such act or omission as the law specially declares to be fraudulent.

False representation

There must be a false representation or concealment of material facts. If a represented is true when it is made but becomes untrue before the contract is entered into and this fact is known to the party making it, it must be corrected. If not so corrected, it will amount to fraud.



Representation must relate to a material fact: The representation must relate to a fact. A mere opinion, commendatory or puffing expression or hearsay or flourishing description, is not regarded as representation of fact.

Representation must have been made before the conclusion of the contract with the intention of inducing the other party to act upon it.

Representation must have been made with knowledge of its falsity or without belief in its truth or recklessly, not caring whether it is true or false.

Other party must have been induced to act upon the representation: A mere false representation is not enough, it must have induced the other party to act upon it.

Other party must have relied upon the representation and must have been deceived: A mere attempt to deceive by one party is not fraud unless the other party is actually deceived.

Other party acting on the representation must have suffered some loss: As a common law “there is no fraud without damage”. Thus, a ‘fraud without damage’ or ‘damage without fraud’ does not give rise to an action on deceit.

It must be made directly to plaintiff.

Effects Of Fraud

A contract induced by fraud is voidable at the option of the party defrauded. The party defrauded has the following remedies:

Right to rescind the contract: The party defrauded has a right to rescind the contract provided he must act within a reasonable time. If in the interval, an innocent third party has acquired some interest for consideration in the property passing under the contract, then the case for rescinding the contract can not be filed.


Right to insist upon performance: The party defrauded can insist upon the performance of the contract on the condition that he shall be put in the position in which he would have been if the representation made had been true.

Right to claim damages: The party defrauded can sue the other party and claim damages if he suffers some loss.


Does silence amount to fraud: According to explanation to section 17, “a mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud”.


There are two statutory exceptions to the above rule:

  • Where the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak.
  • Where silence in itself equivalent to speech.


Other Exception: 

If a seller fails to inform the buyers as to a latent defect, i.e. defect know to the seller and not apparent on an ordinary inspection, his silence amounts to fraud.

If a trustee does not make full disclosure of the facts to the beneficiary while entering into a contract with him as to the property of which he is a trustee, his silence as to any material facts amounts to fraud.

If a party has disclosed only half truth which deceives the other party as to the correct situation.

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