Definition of Misrepresentation

Section 18 of The Indian Contract Act defines Misrepresentation: “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.

Essential Elements of Misrepresentation

1. A false statement of fact or law.
2. The statement must be made honestly (without intent to deceive).
3. The other party must rely on that statement.
4. The false statement must induce the contract.

Types of Misrepresentation (Section 18)

1. Innocent Misrepresentation – False statement believed to be true.
2. Negligent Misrepresentation – Made carelessly without verifying truth.
3. Misrepresentation by Silence or Omission – Failure to disclose material facts when there is a duty to speak.

Examples of Misrepresentation

• A car dealer says a car has “never been in an accident,” believing it to be true, but it had minor damage earlier.
• A property agent says “the land is commercial,” believing wrongly that it was converted — this induces the buyer.
• A seller of a horse confidently states to a buyer that the horse is “perfectly sound and healthy,” genuinely believing it to be true based on the veterinarian’s last check-up a month ago. However, the horse had developed an illness a few days before the sale, which the seller was unaware of. The assertion, though innocent, is a misrepresentation.
• A seller shows a buyer a sample of rice, asserting it is from the “current harvest.” Both parties enter the contract on this understanding. The seller honestly believed this, but the rice was actually from the previous year’s stock. This is an innocent misrepresentation as to the substance of the thing.

Important Case Law

1. Horsfall v. Thomas (1862) 1 H & C 90

Facts:

The defendant sold a gun to the plaintiff, concealing a defect. However, the plaintiff never inspected the gun and was not aware of the misrepresentation at the time of contract.

Issues:

Whether a buyer can claim misrepresentation or fraud if he did not rely on the false statement or concealment?

Analysis:

The court held that for misrepresentation or fraud to be valid, the false statement must have induced the contract.

Judgment:

The court ruled that since the buyer did not rely on the concealment, there was no misrepresentation or fraud. The case established that inducement is a necessary element of misrepresentation.