Misrepresentation in Contract Law
📘 Misrepresentation in Contract Law (Indian Contract Act, 1872)
⚖️ Definition:
Under Section 18 of the Indian Contract Act, misrepresentation refers to a false statement of fact made innocently (i.e., without intent to deceive) which induces the other party to enter into a contract.
🔍 Key Elements of Misrepresentation:
| Element | Description |
|---|---|
| 1️⃣ False Representation | A statement of fact that is not true. |
| 2️⃣ Made Innocently | The person believes it to be true; no intention to deceive (unlike fraud). |
| 3️⃣ Relied Upon by the Other Party | The other party must have relied on this false statement while entering the contract. |
| 4️⃣ Induces the Contract | The false statement influences the decision of the other party to contract. |
📚 Types of Misrepresentation (Section 18):
| Type | Meaning |
|---|---|
| 🔹 Positive Assertion Without Justification | Saying something is true without verifying its truth. |
| 🔹 Breach of Duty Without Intent to Deceive | Where one has a duty to speak truthfully but fails to do so innocently. |
| 🔹 Innocent Causing of Mistake | When the act causes the other party to make a mistake on the subject matter without intent. |
📌 Effect of Misrepresentation (Section 19):
The contract is voidable at the option of the party misled.
The affected party may:
Rescind (cancel) the contract, or
Accept the contract and claim damages (if any loss suffered).
However, if the truth could have been discovered with reasonable diligence, the party cannot rescind.
⚖️ Important Case Laws:
| Case | Principle |
|---|---|
| 🔹 Derry v. Peek | Distinguished between fraud and misrepresentation. |
| 🔹 Redgrave v. Hurd | Even if the party could have discovered the truth, if they relied on the misrepresentation, they can rescind. |
| 🔹 With v. O’Flanagan | A change in circumstances must be disclosed to avoid misrepresentation. |
🆚 Misrepresentation vs Fraud:
| Basis | Misrepresentation | Fraud |
|---|---|---|
| Intention | No intent to deceive | Intentional deception |
| Damages | May not always be claimed | Can claim damages |
| Nature | Innocent | Willful/wrongful |
✅ Conclusion:
Misrepresentation involves innocent falsehood that leads to a contract. It invalidates free consent and allows the misled party to void the agreement.
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