Page 39 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes shall be performed and that he shall be put in the position in which he would have been if the
representation made had been true. In case of fraud he has an additional remedy, i.e., he can sue
for damages.
Exceptions to the principle that the party aggrieved or wronged by misrepresentation cannot
claim damages. The directors of a company are liable in damages under s.62 of the Companies
Act, 1956, even for misstatements, i.e., misrepresentation in the prospectus issued by the company
inviting public for subscription. Also where there exists a confidential relationship between the
parties (such as solicitor and client), and negligent representation is made by one to the other
then the aggrieved party may claim damages.

Task Peter by way of misrepresentation leads Deepak erroneously to believe that 100
quintals of indigo are made annually at Peter’s factory, Deepak examines the accounts of
the factory and finds that only 50 quintals of indigo have been made. Afterwards, Deepak
buys the factory. Now, he wants to avoid the contract on the ground of misrepresentation.
Advise him giving reasons.

Self Assessment

Fill in the blanks:
9. Silence may in itself amount to …………..where the circumstances are such that “silence is
in itself equivalent to speech”.
10. The case of misrepresentation is classified into …………….groups.

2.6 Meaning of ‘Mistake’ [Ss.20-21]

Mistake may be defined as an erroneous belief on the part of the parties to the contract concerning
something pertaining to the contract. For example, A agrees to buy from B a certain house. It
turns out that the house had been destroyed by fire before the time of the bargain though neither
party was aware of the fact. The agreement is void. A cannot insist for possession of the house.
The agreement is void as there is a mistake on the part of both the parties about the existence of
the subject matter.

2.6.1 Different Kinds of Mistake

Broadly there are two kinds of mistake: (i) Mistake of fact and (ii) Mistake of law. Further
mistake of fact may be either: (a) Bilateral or (b) Unilateral. The mistake of law may be
(a) mistake of law of the land and (b) mistake of foreign law.
When both the parties to the agreement are under a mistake of fact essential to the agreement,
the mistake is called a bilateral mistake and the agreement is void. For example, A agrees to sell
to B a specific cargo of goods supposed to be on its way from London to Mumbai. It turns out that
before the day of the bargain the ship conveying the cargo had been cast away and the goods
lost. Neither party was aware of the facts. The agreement is void.
Some typical cases of bilateral mistake invalidating the agreement. There may be is a mistake
concerning subject matter as to its (i) existence, (ii) identity, (iii) title, (iv) quantity, (v) price.

Example: A, who owns two fiat cars, offers to sell his ‘White fiat’ for ` 80,000. B accepts
the offer thinking A is selling his ‘Brown Fiat’. There is a mistake as to the identity of the subject
matter.

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