Section 17 The Indian Contract Act, 1872
📘 Section 17 – The Indian Contract Act, 1872
Topic: Fraud
🔹 Bare Text of Section 17:
"Fraud" means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract:
The suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
The active concealment of a fact by one having knowledge or belief of the fact;
A promise made without any intention of performing it;
Any other act fitted to deceive;
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:
– It is the duty of the person keeping silence to speak, or
– Silence is, in itself, equivalent to speech under the circumstances.
🧾 Explanation in Simple Terms:
Fraud under contract law refers to intentionally deceiving someone to enter into a contract. The act must be:
Deliberate, and
Intended to mislead or induce the other party.
🔍 Types of Fraud (Under Section 17):
| Clause | Nature of Fraud | Example |
|---|---|---|
| (1) | Lying about a fact | A sells a car claiming it’s new, knowing it’s not. |
| (2) | Hiding the truth | A hides that a house is under litigation while selling. |
| (3) | False promise | A agrees to supply goods with no intention of doing so. |
| (4) | Any deceptive act | Using a fake identity to sign a contract. |
| (5) | Legally declared fraud | Insider trading in securities contracts. |
❗ Important Notes:
Mere silence is not fraud unless:
There's a duty to disclose (e.g., insurance contracts).
The silence is intended to mislead.
⚖️ Case Law:
Derry v. Peek (1889)
Held: A false statement made honestly, believing it to be true, is not fraud, though it may be misrepresentation.
✅ Impact of Fraud:
A contract induced by fraud is voidable at the option of the party deceived (Section 19, ICA).
The party can rescind the contract or insist on performance and claim damages.
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