Page 55 - DCOM103_COMMERCIAL_LAW

Commercial Law

Notes 3. The representation or statement must have been made (a) knowingly or (b) without belief
in its truth or (c) recklessly, carelessly whether it be true or false. In (a) and (b), there seems

to be no difficulty since fraud is proved when it is shown that a false representation has
been made knowingly or without belief in its truth. However, with regard to reckless
misstatement it may appear difficult to say whether it amounts to fraud because the person

making such statement does not himself definitely know that the statement is false. But if

we carefully look into it we find that it does amount to fraud. Though the person making
it is not sure of the truth of the statement yet he represents to the other party as if he is
absolutely certain about its truth.
4. The representation, statement, or assertion must have been made with the intention of
inducing the other party to act upon it. For fraud to exist the intention of misstating the
facts must be to cause the other party to enter into an agreement.
5. The representation must in fact deceive. It has been said that a deceit which does not
deceive is not a fraud. A fraud or misrepresentation, which does not cause the consent to a
contract of the party on whom such fraud is practised or to whom such misrepresentation
was made, does not render a contract voidable.
6. The party subjected to fraud must have suffered some loss. It is a common rule of law that
there is no fraud without damages. As such a fraud without damage does not give rise to
an action of deceit.

Example: A informs B fraudulently that A’s estate is free from encumbrance. B
therefore buys the estate. The estate in fact is subject to a mortgage. B may either avoid the
contract or may insist on its being carried out and the mortgage deed redeemed.

5.1.4 Meaning of Misrepresentation (Ss. 18-19)

Misrepresentation is also known as simple misrepresentation whereas fraud is known as
fraudulent misrepresentation. Like fraud, misrepresentation is an incorrect or false statement
but the falsity or inaccuracy is not due to any desire to deceive or defraud the other party. Such
a statement is made innocently. The party making it believes it to be true. In this way, fraud
is different from misrepresentation. The case of misrepresentation may be classified into the

following three groups: (i) The positive assertion in a manner not warranted by the information
of the person making it, of that which is not true though he believes it to be true. (ii) Any breach
of duty which without an intent to deceive gives an advantage to the person committing it (or
anyone claiming under him) by misleading another to his prejudice or to the prejudice of anyone
claiming under him. (iii) Causing however innocently a party to an agreement to make a mistake
as to the substance of a thing which is the subject of the agreement.

Example: (i) A chartered a ship to B which was described in the ‘Charter Party’ and
was represented to him as being not more than 2,800 tonnage registered. It turned out that
the registered tonnage was 3,045 tons. A refused to accept the ship in fulfi llment of the charter
party. He would be entitled to avoid the charter party by reason of the erroneous statement as to
tonnage.

(ii) A, by a misrepresentation leads B erroneously to believe that 500 kilos of indigo are made
annually at A’s factory. B examines the account of the factory, which show that only 400 kilos of
indigo have been made. After this B buys the factory. The contract is not voidable an account of
A’s misrepresentation.
(iii) H sold W with all faults certain animals which were suffering from some fever, the fact of
which was known to him but he did not disclose to W, it was held that there was no fraud [Ward
v. Hobbs (1878) A C 13].

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