Basis

Fraud

Misrepresentation

Section

Sec. 17, ICA

Sec. 18, ICA

Meaning

Deliberate false statement or concealment of fact with the intent to deceive.

False statement made innocently, believing it to be true, without intent to deceive.

Intention

Always made knowingly and with intent to deceive.

Made without intention to deceive, due to mistake or negligence.

Knowledge of Falsity

The person knows the statement is false or makes it recklessly.

The person believes the statement is true but it turns out false.

Right to Avoid Contract

The aggrieved party can rescind the contract and also claim damages.

The aggrieved party can only rescind the contract, but generally cannot claim damages (unless negligence is proved separately).

Nature of Wrong

Fraud is both a civil wrong and a criminal offence.

Misrepresentation is only a civil wrong.

Effect on Contract

Contract is voidable at the option of the deceived party.

Contract is voidable at the option of the deceived party.

Example

A sells a horse to B saying it is perfectly healthy, knowing it has a hidden disease.

A sells a horse to B saying it is healthy, genuinely believing so, but the horse has a disease unknown to A.

Key Case Laws

Derry v. Peek (1889) – False statement made knowingly or recklessly amounts to fraud.

Redgrave v. Hurd (1881) – Even an innocent misrepresentation allows rescission of contract.