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Unit 1: Laws of Contract

Extra Precautions to be taken while entering into Contract with a Pardanashin Notes
Woman

A pardanashin woman is one, who according to the custom of her community, observes complete
seclusion. The courts in India regard such women as being especially open to undue infl uence.

Money Lending Transactions

In money lending transactions the rate of interest being high, or that the borrower is in urgent
need of money is not an evidence of undue infl uence.

Example: A, being in debt to B, the money lender, contracts for a fresh loan at compound
interest of 25 per cent the transaction may be held to be unconscionable and a reduced rate of
simple interest may be awarded.

1.4.3 Meaning of Fraud

Fraud means and includes any of the following acts committed by a party to a contract with
intent to deceive the other party thereto or to induce him to enter into a contract:
(i) The suggestion as a fact of that which is not true by one who does not believe it to be true;
(ii) Active concealment of a fact by one having knowledge or belief of the fact;
(iii) Promise made without any intention of performing it;

(iv) Any other act fitted to deceive;
(v) Any such act or omission as the law specifically declares to be fraudulent.

Essential Elements or Conditions for an Fraud to Exist

For a fraud to exist the following are the essential elements:
1. There must be a representation or assertion and it must be false. To constitute fraud there
must be an assertion of something false within the knowledge of the party asserting it.

2. The representation or assertion alleged to be false must be of a fact. A mere expression of

opinion, puffery or flourishing description does not constitute fraud.
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.
4. The representation, statement, or assertion must have been made with the intention of
inducing the other party to act upon it.

5. The representation must in fact deceive. It has been said that a deceit which does not
deceive is not a fraud.
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.

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.

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