Difference between Fraud and Misrepresentation
|Statute||Section 17 of the Indian Contract Act, 1872 defines the term 'fraud.'||Section 18 of the Indian Contract Act, 1872 defines the term 'misinterpretation.'|
|Definition||Fraud is defined as the deliberate and malicious fabrication of information to deceive the other party.||Misinterpretation is described as an accidental or unintended act of providing inaccurate information to the other party.|
|Variation In Extent Of Truth||In fraud, the person making a claim is aware that the assertion is false.||In misrepresentation, the party making a claim believes his statement is truthful, but it later turns out to be false.|
|Consent||Conscious deception is used by the guilty party to obtain the other party's consent.||The other party's consent is obtained unintentionally due to the guilty party's misrepresentation of information.|
|Claim||The party that has been wronged has the right to seek compensation.||The aggrieved party does not have the right to sue the other party for monetary damages.|
|Is A Result Of||Fraud is a result of dishonesty.||Misinterpretation is a result of misinterpretation of facts.|
|Voidable||If the truth can be determined through reasonable diligence, the contract is voidable.||If the truth can be determined through reasonable diligence, the contract is not voidable.|
|Consequence||In the event of fraud, the party who was deceived may cancel the contract and seek compensation.||In the event of misrepresentation, the aggrieved party has the right to cancel the contract.|
Fraud Case Laws
- In Lillykutty v Scrutiny Committee (2005), a false certificate was obtained to gain an unfair advantage. It was held that every solemn act is tainted by fraud. Furthermore, any activity by the authorities or the individuals claiming a right/privilege under the Indian Constitution that undermines the constitutional objective shall be viewed as a constitutional fraud.
- In Jewson & Sons Ltd v Arcos Ltd (1933) 47 Ll.L.Rep. 93, it was held that giving a false impression and encouraging someone to act upon it was constituted fraud, even though each fact was literally true.
Misrepresentation Case Laws
- In BSkyB v. EDS (2010), EDS asserted deceptive misrepresentations about its ability to perform a project within a given time frame and, specifically, claimed that it had conducted a sufficient study to make this claim. As a result, the court determined that BSkyB was persuaded to enter into a contract with EDS due to these misrepresentations. The contract had a liability limit of £30 million, but both parties agreed that such a restriction is ineffective for limiting responsibility for misrepresentation.
- In the case of R.C.Thakkar v. Bombay Housing Board (1972), erroneous estimates were provided in a tender. While thinking that the estimate was correct, the contractor cut the expenses. The court ruled that the tender's statements amounted to misrepresentation. The defendants were thus unable to use the defence that the plaintiff might have inferred the actual expenses via reasonable diligence.
Therefore, it can be inferred that fraud is a deliberate conduct, whereas misrepresentation is an unintentional act. Fraudulent actions are civil wrongs, and the person doing them can be sued in court by the injured party even if the aggrieved party has a means of knowing the truth in the usual course of action. On the other hand, misrepresentation is not a civil wrong since the party making the incorrect representation honestly has no awareness of the actual facts, so the aggrieved party cannot sue the other party in court but can cancel the contract.