Silence is fraud:
1. Duty of person to speak:
Where the circumstances of the case are such that it is the duty of the person observing silence to speak. For example, in contracts of uberrimae fidei (contracts of utmost good faith).
Following contracts come within this category:
(a) Fiduciary Relationship: Here, the person in whom confidence is reposed is under a duty to act with utmost good faith and make full disclosure of all material facts concerning the agreement, known to him.
Example: A broker was asked to buy shares for client. He sold his own shares without disclosing this fact. The client was entitled to avoid the contract or aflrm it with a right to claim secret profit made by broker on the transaction since the relationship between the broker and the client was relationship of utmost good faith. (Regier V. Campbell Staurt)
(b) Contracts of Insurance: In contracts of marine, fire and life insurance, there is an implied condition that full disclosure of material facts shall be made, otherwise the insurer is entitled to avoid the contract.
(c) Contracts of marriage: Every material fact must be disclosed by the parties to a contract of marriage (Hazi Ahmed v. Abdul Gassi).
(d) Contracts of family settlement: These contracts also require full disclosure of material facts within the knowledge of the parties.
(e) Share Allotment contracts: Persons issuing ‘Prospectus’ at the time of public issue of shares/ debentures by a joint stock company have to disclose all material facts within their knowledge.
2. Where the silence itself is equivalent to speech:
Following contracts come within this category:
(a) Fiduciary Relationship: Here, the person in whom confidence is reposed is under a duty to act with utmost good faith and make full disclosure of all material facts concerning the agreement, known to him.
Example: A broker was asked to buy shares for client. He sold his own shares without disclosing this fact. The client was entitled to avoid the contract or aflrm it with a right to claim secret profit made by broker on the transaction since the relationship between the broker and the client was relationship of utmost good faith. (Regier V. Campbell Staurt)
(b) Contracts of Insurance: In contracts of marine, fire and life insurance, there is an implied condition that full disclosure of material facts shall be made, otherwise the insurer is entitled to avoid the contract.
(c) Contracts of marriage: Every material fact must be disclosed by the parties to a contract of marriage (Hazi Ahmed v. Abdul Gassi).
(d) Contracts of family settlement: These contracts also require full disclosure of material facts within the knowledge of the parties.
(e) Share Allotment contracts: Persons issuing ‘Prospectus’ at the time of public issue of shares/ debentures by a joint stock company have to disclose all material facts within their knowledge.
2. Where the silence itself is equivalent to speech:
For example, A says to B“If you do not deny it, I shall assume that the horse is sound.” A says nothing. His silence amounts to speech.
In case of fraudulent silence, contracts is not voidable if the party whose consent was so obtained had the means of discovering the truth with ordinary diligence (Exception to section 19)
In case of fraudulent silence, contracts is not voidable if the party whose consent was so obtained had the means of discovering the truth with ordinary diligence (Exception to section 19)
No comments:
Post a Comment