FRAUD

SECTION 17: “FRAUD”

DEFINED
“Fraud” means and includes 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 thereto of his agent, or to induce him
to enter into the contract:—
(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
Explanation.—Mere silence as to facts likely to affect the willingness of a person to enter into a
contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is
the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech.
SECTION 17 (1): THE SUGGESTION, AS A FACT, OF THAT WHICH
IS NOT TRUE, BY ONE WHO DOES NOT BELIEVE IT TO BE TRUE;

There should be a suggestion as to a fact.

The fact suggested should not be true.
The person making such suggestion does not believe the fact to be true
The suggestion should be made with intent either to deceive or induce the other party
to enter into the contract.
Example - A 65 year old person enters into an agreement with an insurance company,
falsely stating that he was 50 years old at the time of entering into the agreement to
get a better deal.
 SECTION17(2) THE ACTIVE CONCEALMENT
OF A FACT BY ONE HAVING KNOWLEDGE
OR BELIEF OF THE FACT

Example: B, having discovered on vein of ore on the estate of A, adopts means to

conceal, and does conceal, the existence of the ore from A. through A’s ignorance, B is
enabled to buy the estate on an undervalue. The contract is voidable at the option of A.
SECTION 17(3) A PROMISE
MADE WITHOUT ANY
INTENTION OF PERFORMING
IT
Example- If a man takes loan without any intention to repay.
SECTION 17(4): ANY OTHER
ACT FITTED TO DECEIVE
Example- A husband persuaded his illiterate wife to sign certain documents. He told
her that he was going to mortgage her two lands to secure his indebtedness. But
actually he mortgaged four lands belonging to her.
SECTION 17(5):ANY SUCH ACT OR OMISSION AS THE
LAW SPECIALLY DECLARES TO BE FRAUDULENT.

For example- under section 55 of the Transfer of Property Act, 1882, the seller of
immovable property is bound to
(a) to disclose to the buyer any material defect in the property or in the seller’s title
thereto of which the seller is, and the buyer is not, aware, and which the buyer could
not with ordinary care discover;
 MERE SILENCE
Mere silence as to facts likely to affect the willingness of a person to enter into a
contract is not fraud, unless the circumstances of the case are such that, it is the duty
of the person keeping silence to speak, or unless his silence is, in itself, equivalent to
speech.
Example- if A sells a horse to B. A knows that the horse is of unsound mind, but he
remains silent regarding the unsoundness of the horse. This is not a fraud committed
by A.
 EXCEPTIONS
(i) when there is a duty to speak, keeping silence is fraud.
(ii) When silence is, in itself, equivalent to speech, such silence is fraud.
DUTY TO SPEAK (UBER RIMA
FIDES, MEANING UTMOST
GOOD FAITH)
Uberrima Fides
For example- A father selling a horse to his son does not disclose the fact that the
horse is of unsound mind. Because the son would rely on his father.
For example- A, the insured, had heart disease. He took a life insurance policy and
did not disclose about his heart condition. He died within couple of months. Here, A
had committed fraud.
Example- X got married to Y. The husband suppressed the fact that he was a
divorcee. He did not disclose about his previous marriage. Here, the consent to the
marriage had been obtained under fraud and was liable to be annulled under section
12(1) (c) of the Hindu Marriage Act.
SILENCE BEING EQUIVALENT
TO SPEECH
For example- A tells B that if you do not deny it I would assume that this ring is
made of gold. A remains silent. In this case, A’s silence is equivalent to speech. Here,
it is the A’s duty to tell B that the ring is made of ordinary metal and not gold.
 VOKES V. ARTHUR MURRAY, 212 SO. 2D
1906 (1968)
Facts  
Plaintiff Mrs. Audrey E. Vokes, a 51 years old widow, desired to become an accomplished dancer.
She was assured by the defendant that she had "grace and poise"; that she was "rapidly improving
and developing in her dancing skill"; that the additional lessons would "make her a beautiful
dancer, capable of dancing with the most accomplished dancers“.
On the basis of such assurance, the plaintiff purchased many courses from the defendant.
The truth was that she did not develop in her dancing ability, she had no "dance aptitude", and in
fact had difficulty in "hearing the musical beat". The complaint alleged that such representations
to her "were in fact false and known by the defendant to be false and contrary to the plaintiff's
true ability, the truth of plaintiff's ability being fully known to the defendants, but withheld from
the plaintiff for the sole and specific intent to deceive and defraud the plaintiff and to induce her
in the purchasing of additional hours of dance lessons".
 VOKES V. ARTHUR MURRAY, 212 SO. 2D
1906
The complaint prayed that the Court decree the dance contracts to be null and void
and to be cancelled, that an accounting be had, and judgment entered against the
defendants "for that portion of the $ 31,090.45 not charged against specific hours of
instruction given to the plaintiff".
Issue
Whether a contract can be rescinded for fraud on the basis of false assurance given on
dancing ability?
 VOKES V. ARTHUR MURRAY, 212 SO. 2D
1906
Held
“It is true that "generally a misrepresentation, to be actionable, must be one of fact
rather than of opinion". It does not apply where there is a fiduciary relationship
between the parties, or where there has been some artifice or trick employed by the
representor, or where the parties do not in general deal at "arm's length" as we
understand the phrase, or where the representee does not have equal opportunity to
become of the truth or falsity of the fact represented. A statement of a party having
superior knowledge may be regarded as a statement of fact although it would be
considered as opinion if the parties were dealing on equal terms."
 VOKES V. ARTHUR MURRAY, 212 SO. 2D
1906
“It could be reasonably supposed here that defendants had "superior knowledge" as
to whether plaintiff had "dance potential" and as to whether she was noticeably
improving in the art of terpsichore. And it would be a reasonable inference from the
undenied averments of the complaint that the flowery eulogiums heaped upon her by
defendants as a prelude to her contracting for 1944 additional hours of instruction in
order to attain the rank of the Bronze Standard, thence to the bracket of the Silver
Standard, thence to the class of the Gold Bar Standard, and finally to the crowning
plateau of a Life Member of the Studio, proceeded as much or more from the urge to
"ring the cash register" as from any honest or realistic appraisal of her dancing
prowess or a factual representation of her progress.”
The plaintiff was entitled to her day in Court.