|Directions: Given below is a statement of legal principle, followed by a factual situation. Apply the principle to the facts and select the most appropriate answer among the alternatives.|
|Principle Mere silence as to the facts likely to affect the willingness of a person to enter into a contract is not a fraud, unless the circumstances of the case are such that, on close examination it is found to be the duty of the person keeping silent to speak, or unless his silence is, in itself, equivalent to speech.|
|Facts X sells by auction to Y, a horse which X knows to be of unsound state of mind X says nothing to Y about the horse's unsound state of mind Give the correct answer|
A) X can be held liable for fraud
B) X can be held liable for misrepresentation
C) X cannot be held liable, because he did not say anything positive about the mental state of the horse
D) X cannot be held liable because it is the buyer who must be aware of the things
Correct Answer: C
Solution :X cannot be held liable. The reason is he did not say anything positive about the mental state of the horse.
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