The Indian Contract Act, 1872
17. “fraud defined “
“Fraud” means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agents,1 with intent to deceive another party thereto his agent, or to induce him to enter into the contract;
(1) the suggestion as a fact, of that which is not true, by one who does not believe it to be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
Explanation.—Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak2, or unless his silence, is, in itself, equivalent to speech.
(a) A sells, by auction, to B, a horse which A knows to be unsound. A says nothing to B about the horse’s unsoundness. This is not fraud in A.
(b) B is A’s daughter and has just come of age. Here the relation between the parties would make it A’s duty to tell B if the horse is unsound.
(c) B says to A—‘‘If you do not deny it, I shall assume that the horse is sound”. A says nothing. Here, A’s silence is equivalent to speech.
(d) A and B, being traders, enter upon a contract. A has private information of a change in prices which would affect B’s willingness to proceed with the contract. A is not bound to inform B.
Cases where there is duty to speak
It is the duty of the assured to put the insurer in possession of all material facts affecting the risk covered; Mithoo Lal Nayak v. L.I.C. of India, AIR 1962 SC 814.
Pleading and proof of fraud
The transaction designed to defeat the plaintiff creditors was fraudulent. Fraud was fully carried into effect in letter and spirit. In as much as the plaintiff himself was the preparator of fraud, he should not be granted any discretionary relief. Once it is found that the parties are in pari delicto the court will not assist the party who enters into illegal transaction and makes that transaction the basis of his claim; Sultan Ahmad v. Rashid Ahmad, AIR 1990 All 47.
1. Cf. section 238, infra.
2. See section 143, infra.