Section 18 of Indian Contract Act
18. “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.
Final Thoughts
Introduction
Section 18 of the Indian Contract Act, 1872 defines “Misrepresentation”. It deals with false statements made during contract formation which lead the other party to enter into a contract under a wrong belief. Even though the person making the false statement may not intend to cheat, the law still protects the other party from being misled.
Types of Misrepresentation
(1) Positive Assertion Without Proper Basis: This means making a statement that is not true, even if the person believes it is true, without having enough correct information to support it.
Example: A says to B that his land has no legal disputes because he believes so, but he never checked the records. Later, it is found that the land is under litigation. A did not lie knowingly, but he gave a wrong statement without verifying. This is misrepresentation.
(2) Breach of Duty Without Intention to Deceive: This happens when someone has a duty to share correct information but fails to do so, and due to this, he or someone else gets an unfair advantage.
Example: An agent does not tell the buyer certain flaws in a product he is selling on behalf of the principal. He does not lie, but he also does not share important facts. If the buyer is harmed, this is misrepresentation.
(3) Innocently Causing a Mistake About the Subject of the Agreement: This happens when a party, without bad intention, leads the other party to make a mistake about the main subject of the agreement.
Example: A sells a painting to B saying it is original, honestly believing it is, but later it turns out to be a duplicate. A had no intention to cheat, but still misled B. This is misrepresentation.
Essential Elements of Misrepresentation
To prove misrepresentation, the following points must be shown:
- A false or incorrect statement was made.
- It was made without any intention to deceive.
- The person making the statement believed it to be true.
- The other party relied on this statement and entered into the contract.
- The party suffered some loss or harm due to this reliance.
Difference Between Misrepresentation and Fraud
| Point | Misrepresentation | Fraud |
|---|---|---|
| Intention | No intention to deceive | Intention to deceive |
| Knowledge of Falsehood | Believes statement is true | Knows it is false |
| Effect on Contract | Voidable at the option of the other party | Also voidable, with possible damages |
| Remedy | Rescission of contract | Rescission + damages |
Effect of Misrepresentation on a Contract
When a contract is entered into due to misrepresentation, it becomes voidable under Section 19 of the Indian Contract Act. This means the party who was misled can choose to:
- Cancel (rescind) the contract, or
- Accept the contract as it is.
However, if the misled party had the means to discover the truth with ordinary care, then they cannot cancel the contract.
Conclusion
Section 18 protects the fairness of contracts by ensuring that parties are not misled, even by honest mistakes. While misrepresentation is not as serious as fraud, it still affects the trust and purpose of the agreement. Indian Contract Law allows the affected party to come out of such unfair contracts, thereby promoting justice and good faith in contractual relations.