Difference between Fraud and Misrepresentation and discuss the effects of fraud on the validity of the contract and also define essential of fraud
"A false representation of fact made with the knowledge of its falsehood or recklessly without belief in truth with intention that it should be acted upon by the party and actually inducing him to act upon it."
It must have been committed by a party to the contract or by his agent in order to deceive the other party.
Example 1 :- Suppose Mr. Shah purchases the land from Mr. Khan, who has already sold his land to Mr. Rahul. In this example, Mr. Khan had committed fraud because he did not tell to Mr. Shah that i have already sold this land to Mr. Rahul.
Example 2 :- Suppose Mr. Amur tells Miss. Jolly knowing it to be false that his cow is pregnant. On this suggestion Miss. Jolly agrees to buy cow Rs. 45,000. It is a fraud.
Example 3 :- Suppose Miss. Tina borrow Rs. 10,000 from Mr. Nash and promises to return it after one month without any intention of performing it. In this example Miss. Tina has no intention to return the money when she promises to pay. It is also a fraud.
ELEMENTS OF FRAUD or ESSENTIALS OF FRAUD
1. False Representation :-
It is the basic element of fraud. If there is no false representation, fraud may not exist. In few exceptional cases silence itself may amount to fraud.
2. Other Party Must Be Induced :-
It is also necessary that the other party should be also induced to act on such false representation.
3. Before The Conclusion of Contract :-
False representation must be made before the conclusion of contract with the intention of cusing the other party to enter into a contract.
4. Object of Fraud :-
The object of fraud act must be to deceive the other party. It is also necessary that other party must have been actually deceived.
5. Suffering Loss :-
The other party acting on the representation must have suffered a loss. But according to common law only injury is a damage or loss.
6. Knowledge of Falsity :-
It is also important essentials of fraud that representation must have been made with the knowledge of its falsity or without believing it to be true recklessly.
EFFECTS OF FRAUD ON THE VALIDITY OF CONTRACT or REMEDIES :-
In case of fraud the contract is voidable at the option of defrauded party. A party has the following three options :
1. Contract May be Avoided :-
Defrauded party may avoid itself from the contract where his consent was obtained by fraud. In case of fraudulent silence he cannot avoid if he had the means to discover the truth.
2. Act Upon the Contract :-
Second option for the defrauded party is that it may act upon the contract and may ask the other party to fulfill the terms and conditions of the contract.
3. Claims for Damages :-
Third option for the defrauded party is that may claim for damages. Suit for damage can be filled.
Note :- If a defrauded party fails to give notice of the intention to avoid contract after becoming aware of fraud then it will lose his option.
"Misrepresentation means "misstatement" about the facts. In other words, it means to conceal the facts deliberately about something in such a way that other party may be induced and become ready to do the contract."
Example 1 :- Miss. Bina says to Mr. Kohli that her cow gives 20 kg milk per day and induces to purchase her cow. It turns out that cow only gives 4 kg milk. Miss. Bina is guilty of misrepresentation.
Example 2 :- Mr. Sam sends his luggage from London to Manchester by truck saying that its weight is only 80 kg believing it to be true. The actual weight is 120 kg. The truck company charges the lower rate of fare then actual rate. It is a misrepresentation.
CONSEQUENCES or EFFECTS OF MISREPRESENTATION ON THE VALIDITY OF CONTRACT
1. Voidable :-
In case of misrepresentation the contract is voidable at the option of the party whose consent is caused.
2. Acceptable :-
The contract may be accepted by the aggrieved party but it can insist to be placed in that position if the representation made were true.
DIFFERENCE or DISTINCTION BETWEEN FRAUD AND MISREPRESENTATION
1. Basic Condition :-
Fraud : In fraud basic thing is to deceive other.
Misrepresentation : In the misrepresentation basic thing is not to deceive other.
2. Right of Claim :-
Fraud : The injured party may claim the damage in case of fraud.
Misrepresentation : The injured party cannot claim the damages in case of misrepresentation.
3. Avoidness :-
Fraud : In case of fraud injured party can avoid the contract.
Misrepresentation : In case of misrepresentation also party can avoid the contract.
4. Knowledge of Truth :-
Fraud : In case of fraud one party has a knowledge of truth but it does not tell the other party correctly.
Misrepresentation : Misrepresentation is a false statement made in the belief that it is true.