Write a short note on Misrepresentation in a contract.

Question: Write a short note on Misrepresentation in a contract. [BJS 2017]

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Answer

Misrepresentation as defined under Section 18 of the Indian Contract Act, 1872 means presenting the False representation of facts without the wrong intentions or to deceive the other party. In misrepresentation, the party is innocent and has done the act without knowing it.

Section 18 of the act defines misrepresentation. It states misrepresentation means and includes:

(1.) The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true although the person making the statement believes it to be true;

The first clause refers to a positive assertion, which apparently means an absolute and explicit statement of fact, not merely such language as to lead the hearer to infer it.

Negligent Misrepresentation: Negligent Misrepresentation is one made carelessly or without reasonable grounds for believing it to be true. But it cannot be regarded unless the representer owed a duty to the representee to be careful. The same above statement was given in the case Derry v. Peek [(1889) 14 A.C. 337].

Innocent Misrepresentation: The term innocent misrepresentation is used for the misrepresentation in which no element of fraud or negligence is found or one for which the representee has good grounds of belief.

(2.) Any breach of duty done without an intent to deceive which gives an advantage to the person making it or to persons claiming under him, by misleading another person to his prejudice or to the prejudice of any people claiming under him;

In Oriental Bank Corporation v. John Fleming [(1879) ILR 3 Bom 242], Sargent J. observed: “The second clause of Section 18 is probably intended to meet all those cases which are called in the courts of inquiry, perhaps unfortunately so, cases of ‘constructed fraud’, in which there is no intention to deceive, but where the circumstances are such as to make the party who derives a benefit from the transaction equally answerable in effect as if he had been actuated by motives of fraud or deceit.”

(3.) Causing, however innocently, a party to an agreement to make a mistake as to the substance of the subject matter of the agreement. A misrepresentation that does not cause a party to the contract to consent to it does not render the contract voidable.

Misrepresentation differs from fraud, although in both the cases it is a misstatement of fact that misleads the promisee; while in the former the person making the statement believes it to be true, in the latter he does not.

Positive assertion, i.e. an explicit statement of fact by a person of that which is not true, though he believes it to be true amounts to misrepresentation. There should be a false statement made innocently, without any intention to deceive.

Noorudeen v. Umairathu Beevi [A.I.R. 1998 Ker. 171] is an illustration where the transaction was set aside on the ground of fraud and misrepresentation. The defendant, who was the plaintiff’s son got a document executed from the plaintiff describing it as a hypothecation deed of the plaintiff’s property. In fact, by fraud and misrepresentation, the document executed was a sale deed of the plaintiff’s property. The plaintiff was a blind man and the sale was for inadequate consideration. It was held that such a deed which was got executed by fraud and misrepresentation, was rightly set aside.

Effect of Misrepresentation: The contract is voidable at the option of the party who was induced by misrepresentation to enter into a contract. He can elect to rescind the contract, or to seek enforcement of representation, and insist upon being placed in the same position as if the contract were performed.

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Law of Contract Mains Questions Series: Important Questions for Judiciary, APO & University Exams

1. Law of Contract Mains Questions Series Part-I
2. Law of Contract Mains Questions Series Part-II
3. Law of Contract Mains Questions Series Part-III
4. Law of Contract Mains Questions Series Part-IV
5. Law of Contract Mains Questions Series Part-V
6. Law of Contract Mains Questions Series Part-VI
7. Law of Contract Mains Questions Series Part-VII
8. Law of Contract Mains Questions Series Part-VIII
9. Law of Contract Mains Questions Series Part-IX
10. Law of Contract Mains Questions Series Part-X