Wednesday, 11 July 2012

What is Fraud

The term ‘fraud’ includes all acts committed by a person with an intention to deceive another person.
Fraud is the willful representation made by a party to a contract with the intent to deceive the other party or to induce such party to enter into a contract. It means made knowingly or without belief in its truth or recklessly without caring whether is it true or false.

Accordingly to Section 17, fraud means and includes any of the following acts done with intent to deceive or to induce a person to enter into a contract.

1. A False Suggestion as to fact known to be false or not believed to be true. A False statement made recklessly without inquiring whether it is true or false would amount to fraud. But if a statement which turns out to be false is made in the honest beleief that it is true there is no fraud.
Case: - PEEK V. GURNEY (1873)

2. The Active concealment of fact by one having knowledge or belief of fact. If a person conceals a fact which is material to the contract and it is duty to disclose it, it will be a case of fraud. Mere non-disclosure is not a fraud, where there is no duty to disclose. ‘Caveat Emptor’ or ‘Buyer Beware’ is the rule in contracts of sale of goods, but in contracts of absolute faith mere silence about materials facts will be taken as fraud.

3. A promise made without any intention of performing it. The initial intention not to perform the promise that is being made is a necessary element to constitute fraud. Thus, where a person orders and obtains possession of goods with the intention of not paying for them, he commits fraud.

4. Any other act fitted to deceive. The intention to deceive and the fitness of the act for deceit must be present. Thus, where a party, who by false impersonation includes another to enter into a contract with him under the belief that he is somebody that he is somebody else, commits fraud.

5. Any such act or omission as the law specially declares to be fraudulent. It is fraudulent to conceive of any act that attempts to deceive law. Thus, where a contract is based against the policy of insolvency law, or a secret agreement is formed between the insolvent and the party, it is nothing short of a fraud on insolvency law.

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