If a party makes an explicit statement of fact that is not true yet believes it to be true is called misrepresentation. It should not be with the intention to deceive another party. The consent caused by the misrepresentation is not free consent and it is voidable at the option of the party whose consent is caused by the misrepresentation.
The word ‘misrepresentation’ means a declaration made by a person of the information which is not true while believing that to be true. Misrepresentation is defined under section 18 of the Indian Contract Act, 1872.
Liability in misrepresentation:
If an agent made a misrepresentation in the course of his duty to his principal he is not liable but to his principal. Although, the misrepresentation made by the agent out of the course of his duty the principal is not liable. This concept is described by section 238 of the Indian Contract Act, 1872.
If a party is induced to enter into a contract by an agent by a misrepresentation without the command of the principal; the contract is void at the option of that party.
Voidability of contract:
Section 14 of the Indian Contract Act, 1872 says that if the consent of the party is due to misrepresentation is not free consent.
Section 19 of the same act defines that the agreement is voidable at the option of the party whose consent is made by the misrepresentation.
Hence, if the consent of a party is caused by a misrepresentation made by another party believing it to be true, then the party whose consent is under influence of misrepresentation can make the contract voidable.
Right of rescission:
If the consent of the party to the contract is caused by the misrepresentation then they have the right to rescind the contract. The rescission of the contract should be commuted to another party of the contract. The rules of revocation of the contract are as the rules of revocation of the proposal.
It was held in Abram Steamship Co. v. Westville Shipping Company Ltd, when one party to a contract expresses in an unambiguous manner—by word or deed—that he has resolved to rescind the agreement because of fraud or an essential mistake of a material kind that led to his entering into the agreement, and refuses to be bound by it, the expression of his election—if supported by the facts—terminates the agreement, returns the parties to the pre-contractual state, and puts things back where they were before the contract.
Right to claim compensation:
Compensation is also a remedy to get by the party whose consent is caused by the misrepresentation. When the party who is rescinding the contract has already gained the profit by the contract is entitled to pay the compensation to the other party of the contract.
In Wallis v. Pratt, the supplier sent ‘giant sainfoin seeds’ the seeds of lower quality instead of the ‘English sainfoin seeds’. It is not possible to differentiate between the two. The defect can be identified only after the crop was ready. Hence the buyer was liable to get the compensation.
Noorudeen v. Umairathu Beevi, The defendant obtained an official document from the plaintiff that was described as a hypothecation deed of the plaintiff’s property. In fact, the document signed was a sale deed for the plaintiff’s property that was obtained through fraud and misrepresentation. The sale was made for insufficient compensation, and the plaintiff was a blind man. According to the ruling, a deed that was executed through fraud and misrepresentation was properly thrown out.
In Long v. Lloyd, A misrepresented the fact that his lorry was in excellent condition in order to sell it to B. B found significant flaws in the lorry during its initial journey. Instead of rescinding the contract, he accepted A’s offer to cover half the cost of repairs. On the next trip, B saw a complete breakdown of the lorry and sought to rescind the contract. It was decided that by accepting A’s offer to split the cost of repairs and then continuing to use the lorry, B had confirmed the contract and was no longer permitted to revoke it.
When the consent of the party to a contract is influenced by the misrepresentation, the contract is voidable at the option of the party whose consent was so caused. But if the party was aware of the fact or the defect in the contract, then they are not liable to avoid the contract or for any kind of remedy. However, the misrepresentation should not make with the intention to deceive another party.
Indian Contract Act, 1872
Law of Contract and Specific Relief by Avtar Singh; Ninth Edition
Law of Contract Part I by R.K.Bangia; Edition 2006
Abram Steamship Co. v. Westville Shipping Company Ltd, 1923, AC 773
Wallis v. Pratt, 1911 AC 394
Noorudeen v. Umairathu Beevi, AIR 1998 Ker. 171
Long v. Lloyd, 1958 1 WLR 753
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