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Mercantile Laws-I

Notes 4.5 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 fulfillment 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).
(iv) A sold to B by auction a horse which A knew to be unsound. A said nothing to B about the
horse’s unsoundness. This was held not to be a fraud.
Silence may in itself be equivalent to speech. Silence may in itself amount to fraud where the
circumstances are such that “silence is in itself equivalent to speech”.

Example:
(i) Where B says to A, “if you do not deny it I shall assume that the car does not overheat” A
says nothing. Here A’s silence is equivalent to speech.
(ii) A prospectus issued by a company did not refer to the existence of a document disclosing
liabilities. The impression thereby created was that the company was a prosperous one
which actually was not the case. Held, the suppression of truth amounted to fraud [Peek v.
Gurney (1873) 6 H.L.377].
However, a mere expression of opinion, puffery or flourishing description does not amount to

a fraud.

Example:
(i) A, a seller of a vintage car says that the car is a ‘beauty’. It is merely A’s opinion. But in
case he says that the car is worth ` 5 lakhs whereas he paid only ` 2 lakhs for it, then he has
misstated a fact which may amount to fraud or simple misrepresentation.

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