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CA Foundation · Business Laws · The Indian Contract Act, 1872

Anita is selling her old car to Bhavin. Bhavin asks whether the car has ever met with an accident. Anita, knowing it had, simply says nothing and Bhavin buys it after inspecting the car, whose repairs are not visible. Which statement is correct under the Indian Contract Act, 1872?

Anita's silence can amount to fraud. Although silence is normally not fraud, it is fraud when the circumstances create a duty to speak, and Bhavin's direct question about accidents created that duty. The contract is therefore voidable at Bhavin's option, not void.

  1. AMere silence is never fraud, so Bhavin cannot avoid the contract
  2. BAnita's silence is fraud only if she also gave a written assurance
  3. CThe contract is void ab initio because of the silence
  4. DSilence can amount to fraud here because, given Bhavin's direct question, Anita had a duty to speakCorrect

Explanation

Mere silence about facts is generally not fraud, but it is fraud where the circumstances impose a duty to speak or where silence is equivalent to speech. Bhavin's direct question created such a duty. Hence the consent is not free and the contract is voidable, not void, at Bhavin's option.

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