Indian Contract Act Section 17 — “Fraud” defined

CHAPTER II OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS

Commercial / Corporate

Summary

Fraud includes any of the following acts done by a party to a contract, or with that party's knowledge and approval, or by that party's agent, with the aim of deceiving the other party or their agent, or to persuade them to enter into the contract.

Sub-section (1) covers suggesting something as a fact that is not true, when the person making the suggestion does not believe it to be true.

Sub-section (2) covers actively hiding a fact when the person hiding it knows or believes that fact to be true.

Sub-section (3) covers making a promise without any intention of actually keeping it.

Sub-section (4) covers any other action that is designed to deceive.

Sub-section (5) covers any act or failure to act that the law specifically declares to be fraudulent.

The explanation states that simply staying silent about facts that might affect a person's willingness to enter into a contract is not fraud, unless the circumstances are such that the silent person has a duty to speak, or unless the silence itself amounts to speaking.

Official Text

“Fraud” means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent2, 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.

Explanation.—Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak3, or unless his silence is, in itself, equivalent to speech. Illustrations willingness to proceed with the contract. A is not bound to inform B.