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CMA Intermediate · Business Laws and Ethics · Indian Contracts Act, 1872

Anil fraudulently tells Bhavna that his flat in Pune is free from any mortgage, and Bhavna buys it. She later finds the flat is mortgaged. Which statement is correct as per the Act?

Bhavna may either avoid the contract or insist that it be performed and the mortgage debt redeemed. Consent caused by fraud makes a contract voidable at the option of the deceived party, who may also demand to be placed as if the representation were true.

  1. AThe contract is void from the beginning and Bhavna has no other option
  2. BBhavna may avoid the contract, or insist on performance and that the mortgage debt be redeemedCorrect
  3. COnly Anil may avoid the contract because he made the statement
  4. DThe contract is valid and Bhavna has no remedy

Explanation

Under section 19, consent caused by fraud makes the contract voidable at the option of the deceived party. She may also insist on performance and be put in the position as if the representation were true (Illustration (c)). Option A is wrong because the contract is voidable, not void.

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