Question

Which of the following acts committed by a party to a contract, with intent to induce the other party to enter the contract, is considered as fraud under the provisions of the Indian contract Act, 1872?
(i) A promise made without any intention of performing it.
(ii) A promise made with intention of performing it, but could not be performed on account of pecuniary difficulty.
(iii) The suggestion, as a fact, of that which to his belief is not true.

• A. Only (i) and (ii)
• B. Only (ii) and (iii)
• C. Only (i) and (iii)
• D. (i), (ii), and (iii)

Hint:

The critical difference between fraud and breach of contract lies in the state of mind of the party at the time of making the contract.
If they had a dishonest intent to deceive from the start, it is fraud; if the intent to perform was genuine but failed later, it is a breach.

Answer 1

The Correct Option is C

Step 1: Understanding the Question:
The question asks us to identify which of the given acts are classified as "fraud" under the Indian Contract Act, 1872, when committed with the intent to deceive and induce another party to enter into a contract.

Step 2: Key Legal Principles and Approach:
The statutory definition of "fraud" is laid down in Section 17 of the Indian Contract Act, 1872.
We must match the provided statements with the specific sub-clauses of Section 17.

Step 3: Detailed Explanation:

• Section 17 Analysis: Section 17 defines fraud as including 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:

• Evaluating Statement (i): "A promise made without any intention of performing it."

• This is explicitly listed as fraud under Section 17(3).

• If a person makes a promise knowing from the very beginning that they will not fulfill it, they are committing fraud.

• Thus, statement (i) is correct.

• Evaluating Statement (ii): "A promise made with intention of performing it, but could not be performed on account of pecuniary difficulty."

• This does not constitute fraud because the essential element of "intent to deceive at the time of contract formation" is missing.

• If a party genuinely intended to perform the promise when entering the contract, but later failed due to financial troubles, it is a simple breach of contract, not fraud.

• Thus, statement (ii) is incorrect.

• Evaluating Statement (iii): "The suggestion, as a fact, of that which is not true, by one who does not believe it to be true."

• This is explicitly listed as fraud under Section 17(1) (often called representation of a falsehood).

• Thus, statement (iii) is correct.

• Since only statements (i) and (iii) fall under the statutory definition of fraud, Option (C) is the correct answer.

Step 4: Final Answer:
Under Section 17, fraud requires a dishonest intention at the inception of the contract, making statements (i) and (iii) correct and Option (C) the correct answer.