| Principle When a person represents to another something as a true fact knowing well that it is not true he is guilty of fraud The person subjected to fraud may avoid an agreement. |
| Facts A presents a horse for sale. The horse is kept on display so that anyone interested could examine it. The horse has a cracked hoof and it is cleverly concealed by the owner. B tells A 'If you do not deny it I shall assume that the horse is sound'. A keeps silent B purchases the horse. |
A) B can avoid the agreement on discovery of the defect (as per Section 17, Indian Contract Act, illustration 'c')
B) B cannot avoid the agreement, as the horse was on display and he could have satisfied himself of its soundness by personal examination
C) B cannot avoid the agreement as A did not make any representation to mislead him. He merely kept silent so that B could find things out by himself
D) None of the above
Correct Answer: A
Solution :
According to Section-17 of the Indian Contract Act, 1872and the principle given here, A was duty bound to speak about the soundness of horse, when B asked that, "if you do not deny it, I shall assume that horse is sound." Here 'A's silence is equivalent to speech. Son B can avoid the agreement on discovery of the defect.
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