It is essential to the creation of a contract that both parties should agree to the same thing in the same sense. Mutual consent, which should also be a free consent, is the sine qua non of a valid agreement and one of its essential elements is that a thing is understood in the same sense by a party as is understood by the other. Not only consent, but free consent is provided in Section 10 of the Indian Contract Act, 1872 to be necessary to the complete validity of a contract. Consent is free when it works without obstacles to impede its exercise. Where there is no consent or no real and certain object of consent, there can be no contract at all. Where there is consent, but not free consent, there is generally a contract voidable at the option of the party whose consent was not free. A general averment that consent was not freely obtained is not enough, and it is necessary to set up one of the vitiating elements such as fraud which includes, false assertion, active concealment, promise without intention of performing it, any other deceptive act, or any act declared as fraudulent. In order to constitute fraud, the act should have been done by the party to the contract, or by any other person with his connivance, or by his agent and with intent to deceive the other party thereto or his agent, or to induce him to enter into the contract. There is no duty upon parties to speak about facts likely to affect the other party’s consent to the contract and mere silence does not amount to fraud, unless the circumstances of the case show that there is duty to speak, or silence is, in itself equivalent to speech. On the other hand, misrepresentation falls into three categories: (i) a statement of fact, which if false, would be misrepresentation if the maker believes it to be true, but which is not justified by the information he possesses; (ii) any breach of duty which gains an advantage to the person committing it by misleading another to his prejudice, there being no intention to deceive; and (iii) causing a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement, even though done innocently.
Consider the statements given below and answer which one correctly describes a fraudulent act.
(I) The expression fraud means an intention to deceive, whether it is from any expectation of advantage to the party himself or from ill will towards the other is immaterial.
(II) A fraud is an act of deliberate deception with the design of securing something by taking an unfair advantage of another. It is a deception to gain from another’s loss.
(III) Fraud arises out of deliberate active role of representator about a fact.
Correct Answer :
(I), (II), (III) are correct.
Solution :
The correct answer is (I), (II), (III) are correct.
Step-by-Step Explanation:
Let's analyze each statement based on the legal principles of fraud under the Indian Contract Act, 1872 as described in the passage:
1. Statement (I): "The expression fraud means an intention to deceive, whether it is from any expectation of advantage to the party himself or from ill will towards the other is immaterial."
According to the passage, fraud requires an act done "with intent to deceive the other party thereto or his agent, or to induce him to enter into the contract." The core element is the intention to deceive. Whether the deceiver gains an advantage or acts out of ill will does not change the fact that an intention to deceive was present. Therefore, Statement (I) is correct.
2. Statement (II): "A fraud is an act of deliberate deception with the design of securing something by taking an unfair advantage of another. It is a deception to gain from another’s loss."
The passage mentions that fraud includes false assertion, active concealment, a promise made without intention of performing it, or any deceptive act intended to induce another party into a contract. This inherently defines fraud as deliberate deception meant to gain an unfair advantage or induce an agreement under false pretenses. Therefore, Statement (II) is correct.
3. Statement (III): "Fraud arises out of deliberate active role of representator about a fact."
The passage highlights that fraud involves active vitiating elements such as "false assertion, active concealment, promise without intention of performing it, any other deceptive act, or any act declared as fraudulent." Unlike innocent misrepresentation (where a false statement may be made innocently), fraud requires a deliberate, active role in deceiving the other party. Therefore, Statement (III) is also correct.
Since statements (I), (II), and (III) accurately describe fraudulent acts under contract law, the correct option is (I), (II), (III) are correct.
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