CONCEPT OF FREE CONSENT
IN A CONTRACT FORMATION
MUHAMMAD JUNAID
LECTURER DEPARTMENT OF LAW
THE UNIVERSITY OF FAISALABAD
MISREPRESENTATION
⚫ Misrepresentation Under Section 18 of the Contract
Act 1872 means an innocent and unintentional
misstatement of facts about the contract, made by
one party to lead the other party to enter into a
contract.
⚫ A wrong but innocent representation is called
misrepresentation. if a misrepresentation is made
wrongly and intentionally, it is fraudulent
misrepresentation and fraud in fact.
⚫ A statement made without any intention to deceive
or gain advantage from the other party but without
verification and confirmation believing to be true.
EXAMPLES
⚫ A is selling his 40marlas land to B,A is believing the
land to be 40 marlas but when the land was
measured it was 38marlas rather then 40marlas.
Example
⚫ A is selling his second hand corolla model 2015 to B,
which A has bought from his friend. A makes a
innocent statement that this car is non-accidental
and fully in its original condition's B bought the car
from A and later on check it through a expert, that
this car is accidental, is another example of
misrepresentation. So in this case the contract is
voidable at the option of B and he may cancel or
rescind the contract.
Types of Misrepresentation
⚫ There two main types of Misrepresentation
⚫ Innocent Misrepresentation
⚫ Fraudulent Misrepresentation/Fraud
Essential of Misrepresentation
⚫ The misrepresentation should be made innocently
and believing it to be true by the defendant is known
as innocent Misrepresentation.
⚫ If the misrepresentation is made knowingly is
known as fraudulent Misrepresentation or Fraud.
⚫ The representation must be made to lead the
plaintiff to enter into the contract.
Effect of misrepresentation and Remedies for the
plaintiff/Aggrieved Party
⚫ The Effect of a contract made under the influence of
Misrepresentation is Voidable.
⚫ The following remedies are available to the plaintiff.
⚫ He may cancel/rescind the contract and restore the respective
considerations to each other. In case of loss the aggrieved party can
claims damages.
⚫ The aggrieved party may carry on the contract through affirmation or
acceptance without asking any damages. once the contract is accepted
through affirmation it can no longer be cancelled.
⚫ The Plaintiff may ask for Damages in Lieu of rescinding a contract
and the contract is going to be validated.
Fraud
⚫ Under Section 17 of the Contract Act, defines
Fraud: “The term fraud includes all the intentional
misstatements and acts to deceive the other party
and to induce the other party to enter into the
Contract.
⚫ Fraud is intentional deceiving someone.
⚫ It may be by the defendant himself or through his
employees/agents
Essential Ingredients of Fraud
⚫ Intentional misstatement to deceive someone.
⚫ Making promise without any intention to perform it.
⚫ Active concealment of Fact.
⚫ Any Act with intention to deceive the other party.E.g
Promise without any intention to fulfill.
INTENTIONAL MISSTATEMENT TO DECEIVE SOME ONE
⚫ A offers shoes to the public at large that the shoes he
offers is 100% made of leather, but in fact those
were fake leather shoes and A knows that very well
is an intentional Misstatement to deceive the
other to buy shoes from A shop is a fraud.
⚫ Example no.2
⚫ Local wrist watch and sunglass sell out to be
made of japan,infact those were local
products with fake logos and stamps.
⚫ Fake engine oil and lubricant selling out to
be original
Active Concealment of Facts
⚫ When the party to the contract conceals the material
defects and facts about the thing offered is known as
active concealment of facts.
⚫ According to section16(A) of sale of goods Act,the
seller or offeror is bound to disclose to the buyer
about the faults in the goods he is selling. Otherwise
that concealment of material defect is fraud.
⚫ Any Example….?
Example
⚫ Selling a car claiming to be fully original company
painted but in reality it was fully sprayed with local
painter is Active concealment of facts.
⚫ Selling a Car with noisy engine in high speed, but
was not told to the defendant is concealment of facts
⚫ Selling Sacrificial animals for Eid-ul-Azha which
have some defects like crack horns,were stick
together by adhesive glue which otherwise are not fit
religiously to scarify for Eid. This is also
concealment of Facts and amount to fraud.
Promise without intention of performing
⚫A person while Entering into a contract with no
intention to fulfill his side of the duty also amount to
fraud.
Any Example…..?
Examples
⚫ A agrees to buy certain shoes from B, Through Bank
cheque.A delivers the shoes to B and received the
cheque, the cheque was dishonored because there
was no amount in B‘s account's has committed
fraud.
⚫ A promises B that he is an FIA director(in fact he
was not an FIA Director) and will give B a job in FIA,
provided B gives A pkr 5lacs in advance..A takes the
money and disappeared for two years has
committed fraud.
Any Act with intention to Deceive
⚫ A person can adopt many ways and methods to
deceive the other party and it is not possible to
mentioned all the ways and methods. However all
the unfair ways which a man can adopt to deceive
the other is fraud.
⚫ Can cheating in examination is fraud…..?
solution
⚫ Yes, this is clearly mentioned on the top of the
question paper that cheating in not allowed in the
Examination. It is a kind of contract between the
students and the University, now if you deceive the
university it is fraud.
EFFECT OF FRAUD AND REMEDIES FOR THE PLAINTIFF
⚫ The Contract made by Fraud is voidable at
the option of the party defraud (the
plaintiff)/Aggrieved Party.
⚫ The plaintiff may cancel/rescind/terminate the
contract and the parties to the contract restore the
respective mutual Considerations to each other.
⚫ The Plaintiff may carry on with the contract
through affirmation or acceptance
⚫ The Plaintiff may sue for Damages in Lieu/place
of rescinding a contract and the contract is
validated.
Comparison Between Misrepresentation and Fraud
Misrepresentation Fraud
⚫ Misrepresentation may be
innocent misstatement by
⚫ Fraud is an intentional
false statement to
the defendant of which induce the other or
the defendant himself is
deceive the other party
not aware off, to induce
the other party to enter to the contract.
into the contract.
⚫ Misrepresentation may be
fraudulent Misstatement
which amount to fraud.
Comparison between Misrepresentation and Fraud
Misrepresentation Fraud
⚫ The effect of ⚫ The effect of Fraud on
Misrepresentation on the contract is Also
the contract is voidable voidable.
⚫ Plaintiff can sue for ⚫ Plaintiff can also sue
damages for damages
LOSS OF RIGHT OF RESCISSION/CANCELLATION
IN VOIDABLE CONTRACTS
⚫ A Contract Under the Coercion, Undue Influence,
Misssrepresentation or Fraud is voidable at the
option of aggrieved party or plaintiff. The plaintiff
has the option either to rescind the contract or to
affirm the contract. BUT THE PLAINTIFF RIGHT
OF RESCISSION OR CANCELLATION IS LOST IN
THE FOLLOWING CASES.
⚫ By Affirmation
⚫ Restitution not possible
⚫ Lapse of time period
AFFIRMATION
⚫ If after becoming aware of his right to rescind the
contract the plaintiff affirms the agreement either by
express words or by his conduct impliedly the right
of rescission is lost.
Example
⚫ A bought a car from B who was the first owner of the car
and best friend of B.B Assures A that the car is non-
accidental car, but later on it was discovered by A that car
was actually accidental. In spite of the facts A started
using the car without any objection Or he may call B by
saying that although the car you sold to me is accidental
but anyways I accept this car with heavy heart.
this means A has accepted the contract and lost the right of
recession.
What do you think in this Case B has committed
fraud or Innocent misrepresentation…?
(2)Restitution not Possible
⚫ If the aggrieved party is not in a position to restore
the benefits/Consideration obtained by him under
the contracts of coercion,fraud,undue influence and
misrepresentation the right of rescission is lost by
the aggrieved party.
⚫ For example: the subject matter of the contract is
lost or destroyed or wasted from the aggrieved party.
Example
⚫ Johar bought a car from rizwan where rizwan has
committed fraud, by selling accidental car under the
impression that the car was non-accidental car.
⚫ The car was also stolen from johar and even after a
year of search it was impossible to recover the car by
the police Authority.
⚫ So what could be the possible remedies with Johar
in this situation?
No remedy.
Lapse of time
⚫ In case the aggrieved party fails to exercise his
remedy in time against the fraud the right of
rescission is lost.
⚫ Time Limitation for recession of Contract Under
Limitation Act 1908 Schedule 1 section 114 is
THREE years from the date when the fraud first
comes to the knowledge of the plaintiff.
