Section 161 The Indian Contract Act, 1872
Section 161 – The Indian Contract Act, 1872
Title: Effect of misrepresentation
🔹 Bare Act Language:
Section 161 – "Where a contract is induced by misrepresentation, the contract, if otherwise valid, is not thereby avoided, but the party misled is entitled to compensation in respect of any damage which he has sustained."
🔍 Explanation:
If a contract is entered into because one party misrepresented facts (gave false or misleading information),
The contract does not automatically become void or voidable (i.e., it remains valid),
But the party who was misled can claim compensation (damages) for any loss suffered due to the misrepresentation.
🧠 Key Points:
This section focuses on compensation, not cancellation of contract.
The contract stands firm but the injured party can seek monetary damages.
Misrepresentation here means an innocent or unintentional false statement (not fraud).
For fraud or deliberate misrepresentation, other sections (like Section 19) apply, which allow rescinding the contract.
🔹 Illustration:
A sells goods to B saying they are of a particular brand (honestly believed but actually false).
B buys the goods and later finds out the truth.
B cannot cancel the contract but can claim compensation for damages suffered.
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