Fraud

Hi guys, for today i will share about the topic of fraud. Section 14(c) of Contract Act 1950 (CA) mentioned that free consent in a contract does not affected by any fraud, which is defined under section 17 of CA. This section stated that fraud includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract. In other words, whenever a person causes another to act on a false representation which the maker himself does not believe to be true, he is said to have committed a fraud.

Under this section, there are 5 acts that have been laid down that may constitutes fraud. There are:-1. The suggestion, as to 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 of belief of the facts.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 especially declares to be fraudulent.
Therefore, we cam explore to each of the acts respectively. Firstly, the suggestion, as to a fact, of that which is not true by one who does not believe it to be true. Section 17(a) has similar requirements as in Section 18 (a) in that there must be a false representation of fact addressed to the party misled. The only difference is the state of mind of the maker of the statement. Under section17 (a) state the maker of statement does not believe it to be true. We can refer to the case of KhengChweeLian v Wong Tak Thong where it was held that the second agreement was void due to the respondent was induced into signing the second agreement by the misrepresentation regarding the area granted to him, which misrepresentation was fraudulent within the meaning of section17(a) and (d) of Contracts Act 1950. This circumstances give the meaning where one party induces the other to contract on the faith of representations made to him, anyone of which is untrue, the whole contract is considered as having been obtained fraudulently.
Secondly, the active concealment of a fact by one having knowledge of belief of the facts. Where a party to a contract actively conceals or prevents certain material information from reaching the other party to the contract, this active concealment amount to fraud . It is illustrated in the case of Horsfall v Thomas where the plaintiff ordered a gun from the def. The def inserted a metal plug to conceal the defect in the weak spot in the gun. The Court held, this act amount to active concealment with intention to deceive or to induce the other party to enter into the contract .
Under section 17(b) of CA active concealment is mentioned and rise the question of the difference between caveat emptor. The situation under section 17(b) together with Illustration (c) and (d) must not be confused with the general rule of caveat emptor that silence does not amount to misrepresentation or fraud, which is a party to contract is not bound to disclose material facts to the other party. Under the general rule, the alleged party does not do anything active to hide the information. Based on the illustrations , there was only passive concealment of material facts by A. Thus, A did not do anything active to conceal from B the horse’s unsoundness and the change in prices .This is not amount to fraud . According to Keates v Cardogan, silence as to the ruinous state of the property is an act of passive concealment
Thirdly, a promise made without any intention of performing it. Where a promise is made without any intention of performing it , it is an act of fraud under section 17(c) of the CA. It is either the promisor knows that when he makes the promise he cannot perform it or he makes a promise that he intends to break. Referring to the case of MUI Plaza SdnBhd v Hong Leong Bank Bhd, the plaintiff claimed fraud against the defendant under section 17( c) for making a promise without any intention of performing it. It was held, the plaintiff has a cause of action to recover damages for fraudulent misrepresentation and for the tort of deceit.
Next, any other act fitted to deceive. This circumstances falls under section 17(d) where it is a catch-all clause to prevent any fraud escaping the net of the law. According to the case of Loi Hieng Chiong v Kon Tek Shin, the court found that the appellant was not honest as to the true value of his land at Sibu when he persuaded the Respondent to exchange the lands and that it was not fair ,just and reasonable having regard to the accepted value of the Appellant’s land . The Appellant had perpetrated fraud in the exchange of the land titles.
Lastly, any such act or omission as the law especially declares to be fraudulent. Where any law specially declares certain acts or omissions to be fraudulent, such act or omission amounts to fraud under section 17 (e) of CA. For example, silence or non disclosure. The general rule is mere silence or non-disclosure would not constitute fraud. However, there are certain circumstances whereby silence or non-disclosure may constitute fraud as provided under the explanation to section 17 of CA. From the explanation, the main points that can be sorted out is the law puts a duty upon a person in a position of trust and confidence a duty to speak and disclose all relevant information to the person reposing trust and confidence in him in any transaction between them. In some circumstances, the silence is in itself equivalent to speech.
Regarding to the standard of proof of fraud, we can refer to the case of Ang Hiok Seng v Yim Yut Kiu which stated that all cases on agreement and contracts are dealt with in civil courts. An allegation of fraud in any civil proceedings could be an allegation based on a civil offence or criminal offence. If it is based on a criminal offence which is on offence of criminal breach of trust or misappropriation of money, the court must apply the criminal burden of proof of beyond reasonable doubt. Moreover, under Section 19 of CA stated about the contract become voidable as to the effect of fraud. However, there are exceptions that make contract is not voidable within circumstances which are where the misrepresentation or fraud did not affect the misled party’s consent to enter into the contract and where the misrepresentation or fraud by silence could have been discovered by the misled party had he exercised ordinary diligence before entering into the contract.Therefore, we need to be more careful when entering a contract in order to prevent ourselves from involving a contract with fraud.
Finally it is the end of my explanation for this topic. I am a bit exhausted today since there were so many tests within this week..huhu😰