Section 18 in The Indian Contract Act, 1872
Title: "Misrepresentation" defined.
"Misrepresentation" means and includes—
(1) the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;
(2) 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;
(3) causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement.
Title: Voidability of agreements without free consent.
When consent to an agreement is caused by coercion, 1*** fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.
A party to a contract whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true.
Exception.—If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.
Explanation.—A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised, or to whom such misrepresentation was made, does not render a contract voidable.
(a) A, intending to deceive B, falsely represents that five hundred maunds of indigo are made annually at As factory, and thereby induces B to buy the factory. The contract is voidable at the option of B.
(b) A, by a misrepresentation, leads B erroneously to believe that, five hundred maunds of indigo are made annually at As factory. B examines the accounts of the factory, which show that only four hundred maunds of indigo have been made. After this B buys the factory. The contract is not voidable on account of As misrepresentation.
(c) A fraudulently informs B that As estate is free from incumbrance. B thereupon buys the estate. The estate is subject to a mortgage. B may either avoid the contract, or may insist on its being carried out and the mortgage debt redeemed.
(d) B, having discovered a vein of ore on the estate of A, adopts means to conceal, and does conceal, the existence of the ore from A. Through As ignorance B is enabled to buy the estate at an under-value. The contract is voidable at the option of A.
(e) A is entitled to succeed to an estate at the death of B, B dies: C, having received intelligence of Bs death, prevents the intelligence reaching A, and thus induces A to sell him his interest in the estate. The sale is voidable at the option of A.
1. The words "undue influence" rep. by Act 6 of 1899, s. 3.
Title: Power to set aside contract induced by undue influence.
1[19A. Power to set aside contract induced by undue influence.-- When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused.
Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as to the Court may seem just.
(a) As son has forged Bs name to a promissory note. B under threat of prosecuting As son, obtains a bond from A for the amount of the forged note. If B sues on this bond, the Court may set the bond aside.
(b) A, a money-lender, advances Rs. 100 to B, an agriculturist, and, by undue influence, induces B to execute a bond for Rs. 200 with interest at 6 per cent. per month. The Court may set the bond aside, ordering B to repay the Rs. 100 with such interest as may seem just.]
1. Ins. by Act 6 of 1899, s. 3.
Title: Agreement void where both parties are under mistake as to matter of fact.
Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.
Explanation.--An erroneous opinion as to the value of the thing which forms the subject-matter of the agreement, is not to be deemed a mistake as to a matter of fact.
(a) A agrees to sell to B a specific cargo of goods supposed to be on its way from England to Bombay. It turns out that, before the day of the bargain, the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of the these facts. The agreement is void.
(b) A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void.
(c) A, being entitled to an estate for the life of B, agrees to sell it to C. B was dead at the time of the agreement, but both parties were ignorant of the fact. The agreement is void
Title: Effect of mistakes as to law.
A contract is not voidable because it was caused by a mistake as to any law in force in 1India; but a mistake as to a law not in force in 1 India has the same effect as a mistake of fact.
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A and B make a contract grounded on the erroneous belief that a particular debt is barred by the Indian Law of Limitation; the contract is not voidable.
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1. The original words "British India" have successively been amended by the A.O. 1948 and the A.O. 1950 to read as above.
2. Paragraph 2, ins. by the A.O. 1937, and as amended by the A. O. 1948 was Rep. by the A. O. 1950.
3. The second Illustration to s. 21 rep. by Act 24 of 1917, s. 3 and the Second Schedule.