In the Indian Contract Act, ‘Fraud’ means purposely tricking someone into a contract through intentional deceit. Conversely, ‘Misrepresentation’ occurs when false statements are made innocently, without any intention to deceive. Both terms impact a contract’s validity, so it’s crucial to differentiate between them. Fraud involves intentional wrongdoing, while Misrepresentation results from innocent mistakes. This understanding is vital for individuals dealing with contractual agreements governed by the Indian Contract Act, 1872.

What is Fraud?

Fraud is a deceitful act to mislead someone to gain an unfair advantage. In the context of the Indian Contract Act, Fraud occurs when one party intentionally provides false information or conceals facts to induce another party into entering a contract. This intentional deception is characterized by a willful intent to mislead, leading the deceived party to rely on false information. Fraud undermines the trust essential for fair dealings, and it renders the affected contract voidable. The party committing fraud may intentionally manipulate facts, make false promises, or conceal material information, all to gain an unjust benefit. Recognizing fraud is crucial as it empowers the deceived party to either void the contract or seek legal remedies for any losses suffered due to the deceitful actions of the other party.

As per Section 17 of the Indian Contract Act, 1872 “Fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereof or his agent, or to induce him to enter into a contract.”

• The suggestion, as a fact, of that which is not true, by one who does not believe it to be true.
• The active concealment of a fact by one having knowledge or belief of the fact.
• A promise made without any intention of performing it.
• Any other act fitted to deceive.
• Any such act or omission as the law specially declares to be fraudulent.

What is Misrepresentation?

Misrepresentation happens when someone says something untrue without trying to deceive. In the Indian Contract Act, it means giving false information unintentionally, without any plan to mislead. Unlike Fraud, Misrepresentation lacks the intentional deceit element, it often comes from an honest mistake, carelessness, or a misunderstanding. However, this false information leads the other party to enter a contract based on incorrect details. Misrepresentation can involve making false statements or not sharing important information. Recognizing misrepresentation is crucial because, like fraud, it allows the innocent party to cancel the contract. The party affected by misrepresentation can choose to end the contract or ask for compensation for any harm caused by the wrong information given.

According to Section 18 of the Indian Contract Act, 1872, ‘Misrepresentation’ means and includes:

• The positive assertion in a manner not warranted by the information of the person making it, of that which is not true but believes it is true.
• Any breach of duty, which without an intent to deceive gains an advantage to the person committing it, or anyone claiming under him, by misleading another to his prejudice or the prejudice of anyone claiming under him.
• Causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement.

Difference between Fraud and Misrepresentation