LAW The set of the rules and regulations

Rules enforced by the state to control the conducts of people“According to Salmon”

“Law is the body of principle recognized and applied by the state for providing the justice”

PURPOSE OF LAW To maintain the peace and order in the Society.

Provide Liberty (freedom)

To assist people against Common Enemy.

Not for Punishment of sins but to Prevent from sins.

Prevent People and their Property.

What is law

FREE CONSENT Consent (Willingness) of the parties should be free. A consent is said to be free, if not caused by Coercion (To Threat)

Fraud (To Deceive)

Undue Influence (To Dominate the Will)

Misrepresentation. (To Hide Reality Mistakenly)

CONSENT

A false representation willfully made by a party to contract in order to mislead the other party and inducing him to enter into contract is known as fraud.

Example: A purchased goods of Rs. 5000 from a shopkeeper B, with the intent of not paying the money to B, this type of act amounts to Fraud.

Definition of Fraud

A representation of a material fact made by a party to contract who believes it to be true, the other party relied on the statement, entered into the contract and acted upon it which later on turned out to be incorrect is known as misrepresentation.

Example:  A says to B to purchase his car which is in a good

condition, B purchased it in good faith but after a few days, the car did not function properly and B has to suffer loss to repair the car. So the act amounts to misrepresentation as A believes that the car works properly but this is not so.

Definition of Misrepresentation

Innocent Misrepresentation- A statement made by a party who didn’t

know it was untrueEx: a seller is unaware that a car has gotten a new

odometer and states it has 700mi when in fact it has 90,000mi.

Fraudulent Misrepresentation- A statement made by one party who

knew it was untrue Ex: a seller is aware of the fact that the cars engine is

bad but tells consumers that it is fine. Both result in void contract

Types of Misrepresentation

A) Untrue Statements

• The fact must be a past or existing fact, as distinguished from:

1. an opinion orFor example, the statements “In my opinion this apple is

very tasty” and “These apples are the best in the county” are not facts; they are not expected to be taken as true. Reliance on opinion is generally not considered justifiable.

2. a promise or prediction about some future happening. •

What is Misrepresentation?? (cont’d)

The concealment of a fact through some active conduct intended to prevent the other party from discovering the fact is considered the equivalent of an assertion.

Forexample, if Summers is offering his house for sale and paints the ceilings to conceal

the fact that the roof leaks, his active concealment constitutes an assertion of fact.

Nondisclosure can also be the equivalent of an assertion of fact.

Nondisclosure is the failure to volunteer information. Disclosure of a fact is required when: 1. the person has already offered some information but further

information is needed to give the other party an accurate picture or

2. there is a relationship of trust and confidence between the parties or

What is Misrepresentation?? (cont’d)

B) Materiality◦ A statement is material if it causes a reasonable

person to want to contract.◦ A statement can be material if defendant a knew

the plaintiff would rely on it.◦ A statement is material when the defendant

knows that the statement is false.C) Reasonable Reliance

◦ Misrepresentation can only take place when the victim is reasonably reliable.

What is Misrepresentation?? (cont’d)

Fraud and Remedies for Fraud

Fraud- is a crime based on misrepresentation

A) Misrepresentation- Intentional or Reckless??◦ When a person lies and they know they are lying. It

is intentional◦ When a person says something without knowing its

true or false. It is reckless.

Farud

B) Misrepresentation or Concealment??

◦ Injury-something that is proven to establish fraud. ◦ There can still be misrepresentation but without

injury there’s no fraud.

Fraud and Remedies for Fraud (cont’d)

C) Remedies for Fraud◦ Rescission

Contracts resulting of misrepresentation or fraud can be voidable by the injured party and can be rescinded

◦ Damages Are only available if fraud is proven. Then the party

defrauded may choose to ratify the agreement instead of rescind.

◦ Punitive Damages- A form of punishment Are also available if fraud is proven.

Fraud and Remedies for Fraud (cont’d)

misrepresentation Fraud

1. Untrue assertion of fact (or equivalent)

2. Assertion relates to material fact

3. Actual reliance

4. Justifiable reliance

1.Untrue assertion of fact (or equivalent)

2. Assertion made with knowledge of falsity and intent to deceive

3. Actual reliance

4. Justifiable reliance

5. Economic loss (in a tort action for damages

Misrepresentation and Fraud

Actual Reliance Reliance means that a

person pursues some course of action because of his faith in the assertion made to him.

• There must have been a causal connection between the assertion and the complaining party’s decision to enter the contract.

• If the complaining party (1) knew that the assertion was false

(2) was not aware that an assertion had been made, there is no reliance.

reliance

Justifiable Reliance • Courts also scrutinize the reasonableness

of the behavior of the complaining party by requiring that his reliance be justifiable.

• A person does not act justifiably if he relies on an assertion that is:

1. obviously false 2. not to be taken seriously.

Justifiable Reliance

. In Tort actions in which the plaintiff is seeking to recover damages for fraud, the plaintiff would have to establish a fifth element: injury.

He would have to prove that he had suffered actual economic injury because of his reliance on the fraudulent assertion.

In cases in which the injured person seeks only rescission of the contract, however, proof of economic injury usually is not required.

Economic loss

Basis for comparison

Farud MISREPRESENTATION

Meaning A deceptive act done intentionally by one party in order to influence the other party to enter into the contract is known as Fraud.

The representation of a misstatement, made innocently, which persuades other party to enter into the contract, is known as misrepresentation.

Defined in Section 2 (17) of the Indian Contract Act, 1872

Section 2 (18) of the Indian Contract Act, 1872

Purpose to deceive the other party

Yes No

Variation in extent of truth In a fraud, the party making the representation knows that the statement is not true.

In misrepresentation, the party making the representation believes the statement made by him is true, which subsequently turned out as false.

Fraud Vs Misrepresentation

Voidable The contract is voidable even if the truth can be discovered in normal diligence.

The contract is not voidable if the truth can be discovered in normal diligence.

Fraud Vs Misrepresentation

The acts done fraudulently are civil wrong and hence the party doing it can be sued in court by the aggrieved party even if the aggrieved party has a means of discovering the truth in normal course of action.

Misrepresentation is not a civil wrong as the party making the wrong representation honestly have no idea about the actual truth and so the aggrieved party cannot sue the other party in court but it has the option to rescind the contract.

Hence, there is an absence of free consent in both the conditions whether it is fraud or misrepresentation that is why the contract is voidable at the option of the party whose consent was so caused.

Conclusion