Indian Contract Act Section 18 — “Misrepresentation” defined

CHAPTER II OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS

Commercial / Corporate

Summary

Sub-section (1) covers a person making a positive statement of fact as true when they do not have the information to back it up, and the statement turns out to be false. Even if the person honestly believes the statement is true, it still counts as misrepresentation because they asserted it without proper basis.

Sub-section (2) covers a breach of duty where someone gains an advantage, either for themselves or for someone claiming under them, by misleading another person to that other person's disadvantage. This applies even when there is no intent to deceive, so the breach of duty alone is enough to make it misrepresentation.

Sub-section (3) covers causing a party to an agreement to make a mistake about the substance of what the agreement is about, even if the person causing the mistake does so innocently. The key point is that the mistake goes to the core of the subject matter of the agreement, not just a minor detail.

Official Text

“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.