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This article discusses fraud and deceit in torts, their elements, damages and remedies to it.
When a person intentionally and knowingly deceives another person into an action that
damages them, it is a type of a legal injury that occurs. Deceit specifically requires the
tortfeasor to make a factual representation very well knowing of the fact that it is false, or
indifferent or reckless about its truthfulness, intending that the other person relies on it, and
then act in reliance on it, to his own harm. Under section 421 of the IPC or the Indian Penal
Code and 17 of the Indian Contract Act (ICA), fraud is defined.
Fraud – a false or untrue representation of the fact, that is made with the knowledge of its
falsity or without the belief in its truth or a reckless statement which may or may not be true,
with intention to induce a person or individual to act independent of it with the result that the
person acts on it and suffers damage and harm. In other words, it is a wrong act or criminal
deception with an intention to result in financial or personal gain. In Dr. Vimla vs Delhi
Administration [1], it was held that fraud is an intention to deceive involving deceit and
injury to another person as its two elements.
Illustration: False insurance claims made by one to their insurer in case of a motor accident.
Deceit– a tort arising from an untrue or false statement of facts which are made by a person,
recklessly or knowingly, with an intention that it shall be acted upon by the other person, who
would suffer damages as a result. In other words, it is the practice or action of deceiving
someone by misrepresenting the truth. In Ram Chandra Singh vs Savitri Devi [2] it was held
that deceit was a fraudulent misrepresentation that consisted of leading a man into damage by
recklessly and willfully causing him to believe and trust an act according to it.
Illustration: Drawing a cheque and presenting it to the creditor in the knowledge that it will
not be paid.
Fraudulent misrepresentation means a lie that is used to trick someone into an agreement
which would cause some harm to them. Misrepresentations can be spoken, written, gestured,
or even made through silence. A claim for fraudulent misrepresentation is found in the tort of
deceit.
Example- If a jeweler sells a diamond ring which is later discovered to be a is crystal, then it
is a fraudulent misrepresentation.
The case is brought forward by either The victim or the aggrieved party brings forward
the local state or the federal prosecutors. the case to the court.
A person accused intended on The victim has to prove that the person being
committing fraud needs to be proved. accused has misrepresented the facts although he
knew that they were false.
Actual damage may not have occurred. Actual damage needs to have occurred.
Success by the state results in the Success by the plaintiff results in restitution in the
punishment of the defendant by fine, form of damages.
imprisonment, etc.
Examples- Mail fraud, Securities fraud, Examples- Check forgery, pyramid schemes, selling
Tax evasion, etc. fake or counterfeit items on the internet, etc.
Knowledge of falsity- The defendant must know that the representation was false, or at least
had no genuine belief that it was true. In Derry v. Peek [4]-
An act incorporating a tram company provided that, with the consent of the Board of
Trade, carriages could be moved by animal power, by steam power.
The directors issued a prospectus stating that the company was entitled to use steam
power instead of horses under the Act. The complainant took shares in this statements
faith.
An act incorporating a tram company provided that, with the consent of the Board of
Trade, carriages could be moved by animal power, by steam power.
The trading board declined their consent to use steam power and the company was
wound up.
In an action against the directors for false statement, they were held not to be liable
for the misrepresentation as they honestly believed that the statement was true even
though they were guilty of some carelessness in making it.
Acting on the statement- The defendant made the representation with the intent that the
plaintiff should act upon it. In Langridge v. Levy [5]-
The defendant sold a gun for use by himself and his sons to the plaintiff’s father,
representing that the gun was made by a well-known manufacturer and safe to use, the
son used the gun that exploded wounding his hand.
It was held that the defendant was liable to the son because there was a contract
between them, not on his warranty, but for deceit.
Damage by acting on the statement- That the plaintiff acted in reliance on the statement and
suffered damage as a consequence. No action will lie for a false statement unless the plaintiff,
in fact, relies upon it.
In Denton v. G.N. Ry. Co. [6]-
A train that had been taken off was announced as still running in a railway company’s
current timetable.
This was a misrepresentation and a person had missed an appointment by relying on it
and the loss incurred was held to have a deceit action.
Half-truths: It is a statement which only tells a part of the truth. It can be a false
representation if the left out part of the statement makes what is said to be misleading and
conveys some other meaning. Example- If A says, “I am a good driver. In the past thirty
years, I have gotten only four speeding tickets.” This statement is true, but irrelevant if he
started driving a week ago.
Failure to meet statutory requirements: In some circumstances, there is a statutory duty of the
person to reveal some particular information. If in such cases he fails to do so then it can
amount to a false representation.
References
[1]- 1963 AIR 1572, 1963 SCR Supl. (2) 585
[2]- AIR 2004 SC 4096
[3]-100 Eng. Rep. 450 (K.B. 1789)
[4]- (1889) LR 14 App Cas 337,, UKHL 1
[5]- Meeson & Welsby 519 (1837)
[6]- 854 S.W.2d 885 (Tenn. Ct. App. 1993)
[7]- AC 465,, 2 All ER 575,, 3 WLR 101,, UKHL 4
[8]- [1941] 2 All ER 205, HL
[9]- [1969] 2 QB 158