11-30-2011, 07:17 PM
Misrepresentation
Q. What is misrepresentation? What is its effect on the contract. (1994)1. Introduction:
Misrepresentation means misstatement of a fact material to a contract. A mere expression of opinion can not be called misrepresentation. If a misrepresentation is made wrongly and intentionally, it is said to be fraud. Misrepresentation does not amount to a criminal act. It entiles the party to avoid the contract and there can be no suit for damages.
2. Definition of misrepresentation:
According to sec. 18
Misrepresentation means and includes
(i) The positive assertion in a manner not warranted by law the information of the person making it, of that which is not true, though he believes it to be true or,
(ii) Any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or any one claiming under him by misleading another to his prejudice or to the prejudice of any one claiming under him.
(iii) Causing however, innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject matter of the agreement.
3. Types of misrepresentation:
Following types are included in misrepresentation
(I) Unwarranted statements:
When a person positively asserts that a fact is true when his information does not warrant it to be so though he believe it to be true. This is misrepresentation.
Case law sheffied nickel co
Vs
UNVIN
1867 LR 2 HL 149
A, the owner of a gold mine sold the mine to M. During the preliminary discussion. A had made certain statement about the mine, which were incorrect, though A honestly believed to be true. After having worked for 6 months M discovered the true position. There is misrepresentation.
(II) 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.
(III) Mistake about subject matter:
The subject matter of every agreement is supposed by the parties to possess certain value or quality. If one of the parties leads the other, however innocently, to make a mistake as to the nature of quality of the subject after, there is misrepresentation.
Case law dambardhar
Vs
State of Orrisa
Air 1980 Cri 188
The government auctioned certain forest coupes. A part of land was occupied by the tenants. The forest department knew that fact but did not disclose to the purchaser. The contract was held to be vitiated by misrepresentation.
4. Essentials of misrepresentation:
Following are essential of misrepresentation:
(I) Innocently representation:
The representation should be made innocently and believing it to be true.
(II) Untrue:
The representation must be untrue.
(III) Must relate to the fact:
The representation must relate to the fact essential to the contract.
(IV) Induce to other party to enter into contract:
The representation must induce the other party to enter into contract.
(V) No desire to deceive the other party:
It must be made without any desire to deceive the other party.
(VI) Loss:
The other party must suffer a loss.
5. Effect of misrepresentation:
(i) the aggrieved party can avoid the contract,
(ii) The aggrieved party can accept the contract and ask the other party for restoration.
Case law
P. L. D. 1999 Lac. 235
It was held such contract obtained by one person is not void but voidable at the option of the other party which can be availed by it by exercising that option.
6. Cases when aggrieved party has no remedy:
Following are cases when aggrieved party has no remedy.
(i) If consent was given with the knowledge of misrepresentation,
(ii) If third party has acquired rights in the subject mater of contract in good faith and for value.
(iii) If the aggrieved party had the means of discovering the truth with ordinary.
7. Burden of proof in case of misrepresentation:
The burden of proof that misrepresentation was used lies on the party who wants to set aside the contract.
8. Constructive fraud
Misrepresentation includes constructive fraud. In constructive fraud there is no intention to deceive, but where the circumstances are such as to make the party who derives a benefit from the transaction equally answerable in effect as if he had been actuated by motive of fraud or decit.
9. Conclusion:
To conclusion it can be said that, misrepresentation means misstatement of fact about the contract made by one party induce the other party to enter into a contract. The contract is voidable at the option of the party whose consent is caused.