Fraud
Also called: Fraud under the Contract Act
Under Section 17 of the Contract Act, specified acts by a party to a contract, or with his connivance, or by his agent, done to deceive the other party or induce him to contract.
Explained
Section 17 of the Indian Contract Act, 1872 defines fraud as any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party or his agent, or to induce him to enter into the contract: the suggestion as a fact of that which is not true by one who does not believe it to be true; the active concealment of a fact by one having knowledge or belief of it; a promise made without any intention of performing it; any other act fitted to deceive; and any act or omission which the law specially declares to be fraudulent.
The elements are a false representation or its equivalent, knowledge or absence of belief in its truth, intention to deceive or induce, and actual inducement. Under the Explanation, mere silence about facts likely to affect the other's willingness is not fraud, unless the circumstances impose a duty to speak or the silence is itself equivalent to speech. The difference from misrepresentation under Section 18 is the state of mind: misrepresentation is a false statement made innocently, in the belief that it is true, while fraud is deliberate.
Under Section 19, consent caused by fraud makes the contract voidable at the option of the deceived party, who may instead insist on performance and be placed in the position he would have been in if the representation were true. The exception, that the contract is not voidable if the party could have discovered the truth with ordinary diligence, applies only to misrepresentation and to silence fraudulent within Section 17, not to active fraud. Damages for deceit are also available in tort.
Procedure follows the substance. Order VI Rule 4 of the CPC requires particulars of fraud to be pleaded. Under Section 17 of the Limitation Act, 1963, limitation for a suit based on fraud runs only from when the fraud is discovered or could with reasonable diligence have been discovered, and a suit to cancel a voidable instrument falls under Article 59 of the Schedule.
What the law says
“Fraud” means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto of his agent, or to induce him to enter into the contract:—
(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
Defines fraud and explains when silence is fraud
“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;
Defines misrepresentation, the innocent counterpart
When consent to an agreement is caused by coercion,*** fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.
A party to a contract whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true.
Exception.—If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.
Contract induced by fraud is voidable; ordinary diligence exception
(a) the suit or application is based upon the fraud of the defendant or respondent or his agent; or
(b) the knowledge of the right or title on which a suit or application is founded is concealed by the fraud of any such person as aforesaid; or
(c) the suit or application is for relief from the consequences of a mistake; or
Limitation postponed until fraud is discovered
In all cases in which the party pleading relies on any misrepresentation, fraud, breach of trust, wilful default, or undue influence, and in all other cases in which particulars may be necessary beyond such as are exemplified in the forms aforesaid, particulars (with dates and items if necessary) shall be stated in the pleading.
Particulars of fraud must be stated in the pleading
Example
Illustration (a) to Section 17: A sells by auction to B a horse which A knows to be unsound, and says nothing about it. This is not fraud in A.
For the exam
- Section 17 ICA lists five acts; the act must be by a party, with his connivance, or by his agent.
- Mere silence is not fraud unless there is a duty to speak or silence equals speech.
- Fraud makes the contract voidable, not void (Section 19).
- Ordinary diligence exception does not apply to active fraud.
- Limitation runs from discovery of fraud (Section 17, Limitation Act).
425 questions in the Law Maker question bank use this term. Practise Contract Law questions
Judgments
- Trojan and Co. Ltd. v. Rm. N.N. Nagappa Chettiar (1953)Where shares are bought under a fraud, damages are the difference between the price paid and the real value of the shares on the date of purchase; a court cannot grant relief on a case not pleaded.
- Prem Singh v. Birbal (2006)Article 59 of the Limitation Act applies to instruments that are voidable and prima facie valid, not to those void ab initio; on the facts, the plaintiff's suit to set aside a registered sale deed was held time-barred.
Related terms
- MisrepresentationAn untrue statement or a breach of duty that misleads a party into a contract without intent to deceive. It makes the contract voidable (Sections 18 and 19 of the Indian Contract Act).
- CoercionCommitting or threatening any act forbidden by the penal code, or unlawfully detaining or threatening to detain property, to anyone's prejudice, with intent to make a person enter into an agreement (Section 15, Contract Act).
- Undue influenceUnder Section 16 of the Contract Act, where one party is in a position to dominate the will of the other and uses that position to obtain an unfair advantage. The contract is voidable.
- Voidable contractAn agreement enforceable by law at the option of one or more of the parties but not at the option of the other or others. Section 2(i) of the Indian Contract Act, 1872.
- FraudulentlyDoing anything with the intention to defraud, but not otherwise (Section 2(9) of the BNS). The intention involves deceit and an intended injury to the person deceived.
Further reading
Checked 6 November 2026. Statutory text is quoted from the Bare Acts library, taken from India Code. See the full glossary.