The Indian Contract Act's Section 17 states that "Fraud denotes and includes any of the following acts performed by a party to a contract, or with his knowledge, or by his agent, with purpose to deceive another party thereto or his agent, or to convince him to enter into the contract:
1. The assertion of something false as fact by someone who does not hold it to be true;
2. The deliberate hiding of a fact by someone who knows or suspects it;
3. A pledge made with no intention of following through;
4. Any other deceptive behaviour; for guntar
5. Any action or inaction that is expressly deemed fraudulent by law.
Therefore, any action or inaction intended to deceive the other party and persuade him to enter into a contract qualifies as fraud.
Important Components of Fraud
1. There must be a false representation - To begin with, there must be some phoney representation. The claim should have been made with the goal to mislead the other party. Even if the remark was foolish and ill-advised, the representative is not liable for fraud if he believes that what he said was accurate.
Therefore, in a nutshell, a representation is only fraudulent if it is false and made on purpose. Even silence in times of effective fact hiding may, in some circumstances, be considered fraud.
2. The representation must be supported by a material fact - The representation must be supported by a material fact. A representation of fact goes beyond simple expressions of opinion or descriptions.
Eg: A tells B which shoes on the market are the best value for the money.
A's assertion is unrelated to any fact. It is merely an expression of opinion.
3. The representation should not have been made prior to the contract's conclusion. Fraud can refer to any false statement made with the intent to deceive the other party before the contract is finalised. This representation may be made by the party to the contract or his representative.
4. The other party must have relied on the representation and taken action as a result of it; one cannot bring a claim solely on the basis of a deceptive representation.
The other party must have relied on the statement and taken action as a result. A party cannot be deemed to have been misled by a representation if they are unaware of it. Similarly, if there was any visible flaw or defect that could have been adequately checked by examination, the other party cannot be expected to close his eyes.
Fraud consequences include the opportunity for the victimised party to declare the fraudulently induced contract void. If it is not avoided, it is valid. A party who was duped into entering into a contract may be entitled to the following relief:
1. He has the right to cancel the contract, which means he can avoid carrying it out. Providing it is finished in a timely manner. If a third person who is unaware of the information acquires a stake in the property for a price in the future, the contract cannot be terminated.
2. He may request that the contract be carried out, and he should be placed in the same position as he would have been in if the representation had been accurate.
3. The party who was wronged may file a lawsuit to recover any damages. If there is any harm to the party, compensation may be required.
Particular details that require attention include:
(1) If the fraud is committed by a third party not party to the deal, the contract is unaffected. If a contract is the subject of duress or undue influence by a third party, it is impacted.
A false statement deceives the other person, according to 1.
2. Another party signs a contract after being persuaded by the false statement.
Exception
The agreement is voidable at the option of the party whose consent was fraudulently obtained or obtained through misrepresentation. However, the following situations do not render the contract voidable:
1.When the party whose permission was gained in this way by fraud or misrepresentation might have found the truth with reasonable diligence.
2. When the misrepresentation or fraud was not known to the party when the contract was signed.
3. When a third party enters into the agreement before it is voided.
