Misrepresentation in Contract Law

14 Jul 2025 --
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📘 Misrepresentation in Contract Law (Indian Contract Act, 1872)

⚖️ Definition:

Under Section 18 of the Indian Contract Act, misrepresentation refers to a false statement of fact made innocently (i.e., without intent to deceive) which induces the other party to enter into a contract.

🔍 Key Elements of Misrepresentation:

Element	Description
1️⃣ False Representation	A statement of fact that is not true.
2️⃣ Made Innocently	The person believes it to be true; no intention to deceive (unlike fraud).
3️⃣ Relied Upon by the Other Party	The other party must have relied on this false statement while entering the contract.
4️⃣ Induces the Contract	The false statement influences the decision of the other party to contract.

📚 Types of Misrepresentation (Section 18):

Type	Meaning
🔹 Positive Assertion Without Justification	Saying something is true without verifying its truth.
🔹 Breach of Duty Without Intent to Deceive	Where one has a duty to speak truthfully but fails to do so innocently.
🔹 Innocent Causing of Mistake	When the act causes the other party to make a mistake on the subject matter without intent.

📌 Effect of Misrepresentation (Section 19):

The contract is voidable at the option of the party misled.

The affected party may:

Rescind (cancel) the contract, or

Accept the contract and claim damages (if any loss suffered).

However, if the truth could have been discovered with reasonable diligence, the party cannot rescind.

⚖️ Important Case Laws:

Case	Principle
🔹 Derry v. Peek	Distinguished between fraud and misrepresentation.
🔹 Redgrave v. Hurd	Even if the party could have discovered the truth, if they relied on the misrepresentation, they can rescind.
🔹 With v. O’Flanagan	A change in circumstances must be disclosed to avoid misrepresentation.

🆚 Misrepresentation vs Fraud:

Basis	Misrepresentation	Fraud
Intention	No intent to deceive	Intentional deception
Damages	May not always be claimed	Can claim damages
Nature	Innocent	Willful/wrongful

✅ Conclusion:

Misrepresentation involves innocent falsehood that leads to a contract. It invalidates free consent and allows the misled party to void the agreement.