Problems based on Contract and the solution -4

Indian Contract Act, 1872

TANMOY MUKHERJEE INSTITUTE OF JURIDICAL SCIENCE

Dr. Tanmoy Mukherjee

Advocate

Problems based on Contract and the solution -4

 

Tanmoy Mukherjee

Advocate

Question-

Raju induced Kali to buy his motorcycle saying that it was in a very good condition. After taking the motorcycle, Kali complained that there were many defects in the motorcycle. Raju proposed to get it repaired and promised to pay 75% cost repairs. After a few days, the motorcycle did not work at all. Now Kali want to rescind the contract. Decide giving reasons and relevant provisions of law.

Fact-

-Raju induced Kali to buy a motorcycle by saying it was in very good condition.

-After purchase, Kali found many defects.

-Raju then offered to get it repaired and promised to pay 75% of cost of repairs.

-Later, the motorcycle stopped working.

-Kali now wants to rescind the contract.

Legal Relevant provisions and Principles of law-

Misrepresentation (Sec. 18) + fraud (Sec. 17)-

If a party makes a false statement of a fact intending the other to rely on it, and the other party is thereby induced to enter into a contract, the contract becomes voidable at the option of the aggrieved party.

Misrepresentation- A false statement believed to be true (Sec. 18).

Fraud- A false statement made knowingly or without belief in its truth, or recklessly.

Here, Raju represented that the motorcycle was in ‘very good condition’, which was false, and it induced Kali to buy it.

Thus, it is either Fraud (if made knowingly) or Misrepresentation (if made innocently).

Effect of Misrepresentation/Fraud (Sec. 19)-

-A contract obtained by Misrepresentation or fraud is voidable at the option of the person whose consent was caused.

-Such person (Kali) may:

i) rescind the contract or

ii) insist on performance

Right to rescind (Secs 19 & 64)-

The aggrieved party must rescind when they discover the truth.

Here-

-Kali discovered defects immediately.

-Later the motorcycle stopped working completely.

-No acceptance of defects or waiver occurred.

Thus, the right to rescind remains.

Subsequent offer to repair does not remove fraud-

-Raju's offer to pay for 75% of repairs doesn't cure the original wrongdoing.

-Kali's right u/s 19 remain intact.

 Application of law to given problem-

→ Raju Induced Kali to purchase the motorcycle by falsely saying that it was in 'excellent condition'.

→This was a false representation regarding a material fact.

→ Kali relied on this representation and purchased the motorcycle.

→This satisfies the elements of misrepresentation/fraud.

→ After discovering defects and further failure of the motorcycle, Kali is legally entitled to rescind the contract.

→ Under Sec. 19, Kali can demand.

-Recession of contract, and

-Restoration of money paid. (Refund)

Raju's offer to repair does not take away Kali's statutory right.

Kali is entitled to rescind the contract u/s 19 of ICA, 1872 because his/her consent was obtained by Misrepresentation/fraud.

 Kali can demand a refund of the purchase price and return the motorcycle.