Misrepresentation in contract law

Introduction

Misrepresentation is the act of inducing another party’s decision by stating false information in a contract. A statement of fact that induces the other party to enter into a contract is known as representation. Representation when wrongly made becomes misrepresentation. Wrongful representation is of two kinds inducing the other party to enter into a contract without an intention to deceive and inducing the contracting party’s decision with an intention to deceive. The former is known as misrepresentation and the latter as fraud. Misrepresentation may be expressed by words or implied by the conduct of the parties. A contract becomes legally enforceable if it fulfills all the essentials of a contract. A contract becomes legally enforceable when the parties are competent with their consent and agreed to do or not to do something for some consideration. The consent of the parties is important in a valid contract. The consent of the party must be free. Consent is said to be free when it is not caused by coercion, fraud, undue influence, misrepresentation, or mistake. The contracts made with misrepresenting a party become voidable at the option of the aggrieved party. Section 18 of the Indian contract act defines misrepresentation.

Definition

According to section 18 of the Indian contract act, 1872, misrepresentation means and includes

  1. The positive assertion, in a manner not warranted by the information of the person making it, of that what is not true, though he believes it to be true
  2. 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 any one claiming under him
  3. 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

Essentials of misrepresentation

  • It must be a representation of material fact a mere expression of opinion doesn’t amount to misrepresentation
  • It must be made before the conclusion of the contract with a view to inducing the other party to enter into a contract
  • It should be made with an intention that it should be acted upon by the person to whom it is addressed
  • It must have been acted upon and must have induced the contract
  • It must be wrong but the person who made it must honestly believe it to be true
  • It must be made without any intention to deceive the other party
  • It need not be made directly to the plaintiff. A wrong statement of facts made to a third person with the intention of communicating it to the plaintiff also amounts to misrepresentation

Types of misrepresentation

  • Unwarranted statements
  • Breach of duty
  • Inducing mistakes in subject matter

Unwarranted statements

When a person positively makes a false statement based on an unwarranted source he believes it to be true known as misrepresentation. A statement is said to be warranted when it is based on a trustworthy source.

For example, the land was purchased with the consideration of constructing a duplex. The seller represented there is no difficulty in building a duplex there. Later it is discovered that to construct a duplex there should be proper construction worth 10 lakhs needed for the discharge of sewage. Here the seller is unaware of the fact even though he is innocent It leads to misrepresentation. The contract is voidable at the hands of the aggrieved party.

Breach of duty

Once a duty is established between two parties it must be duly performed by the parties. If the parties fail to perform their duty it leads to a breach of duty. Any breach of duty which brings an advantage to the person committing it by misleading the other to his prejudice is a misrepresentation.

In Khandu Charan Polley v Chanchala Bhuinya, the plaintiff having no time to read the contents of a deed, signed it as he was given the impression by the defendant that it contained nothing but formal letters already settled between them. The deed, however, contained a release in favor of the defendants. The court held that the contract is voidable at the option of the plaintiff.

Inducing mistakes in the subject matter

Inducing mistake about subject matter leads to the mistake of facts. The mistake of fact is of two types bilateral mistake and unilateral mistake. The mistake may be caused by miscommunication or ignorance. However innocently the party to a contract makes a mistake as to the substance of the thing which is the subject of the agreement is also misrepresentation under section 18 (3) of the Indian contract act. The subject matter of every agreement is supposed by the parties to possess a certain value or quality.

Suppression of vital facts

Misrepresentation also arises from the suppression of vital facts. Cases of concealment or suppression will either fall under section 18(2) when it amounts to a breach of duty or under section 18(3) when it leads to another party making a mistake about the subject matter of agreement. In matters of matrimony, it has been held that the qualifications of the spouse are a material fact. Where the girl had high academic qualifications and agreed to matrimony because she was told that her match was in an attractive job whereas he was only an employee in a factory, the court held that it was a misrepresentation and therefore annulment of the marriage would be decreed

Inducement

Fraud or misrepresentation which did not cause the consent to a contract of the party of whom such fraud was practiced or to whom such misrepresentation was made does not render a contract voidable

Effects of Misrepresentation

  1. The agreement is voidable at the option of the aggrieved party
  2. He may not only avoid the contract but also claim damages in case of breach

Conclusion

For a valid contract, there should be no misrepresentation. Misrepresentation means is a false statement of a material fact made by one party which affects the other party’s decision in agreeing to a contract. Misrepresentation is defined in section 18 of the Indian contract act 1872. If the consent of the party acquired through misrepresentation makes a contract voidable.

 

References

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

IF YOU ARE INTERESTED IN PARTICIPATING IN THE SAME, DO LET ME KNOW.

Do follow me on FacebookTwitter  Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at secondinnings.hr@gmail.com

In the year 2021, we wrote about 1000 Inspirational Women In India, in the year 2022, we would be featuring 5000 Start Up Stories.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.