Difference between Fraud and Misrepresentation

Basis	Fraud (Sec. 17)	Misrepresentation (Sec. 18)
1. Intention	Made knowingly, intentionally, or recklessly to deceive.	Made innocently without any intent to deceive.
2. Knowledge of Falsehood	The person knows the statement is false.	The person believes the statement to be true.
3. Effect on Contract	The contract is voidable at the option of the aggrieved party; he can also claim damages.	The contract is voidable but no damages can be claimed.
4. Legal Consequences	May lead to criminal liability (cheating).	Only civil consequences; no criminal liability.
5. Intention to Induce	Always made with intention to induce the other party.	Made without such intention.
6. Example	Selling a car claiming it was never in an accident, knowing it was.	Selling a car believing it was never in an accident, but it actually was.

Important Case Law

1. Long v. Lloyd

Facts:

The seller told the buyer that a lorry was in “exceptionally good condition.” After purchase, it broke down twice. The seller offered to pay half the repair cost, and the buyer agreed and kept using the lorry. Later, he tried to cancel (rescind) the contract for misrepresentation.

Issues:

Whether the buyer could rescind the contract after discovering the defect and continuing to use the lorry.

Analysis:

The buyer discovered the misrepresentation but still accepted repair payment and used the vehicle, showing he affirmed the contract.

Judgment:

The court held the buyer lost the right to rescind because he accepted the contract after knowing the truth.