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CSEET · Business Laws and Management · Elements of Law of Contracts

Asha falsely tells Kiran that a factory makes 500 units a year, though it makes only 400. Before buying, Kiran examines the factory accounts, which show 400 units, and then buys the factory. What is the position?

The contract is not voidable. Under the exception to section 19, a misrepresentation does not make a contract voidable if the party misled had the means of discovering the truth with ordinary diligence, as Kiran did by examining the accounts.

  1. AThe contract is voidable at Kiran's option because a misrepresentation was made
  2. BThe contract is void because of mutual mistake
  3. CThe contract is not voidable, since Kiran had the means of discovering the truth with ordinary diligenceCorrect
  4. DThe contract is voidable at Asha's option

Explanation

The Exception to section 19 says a contract is not voidable for misrepresentation if the party had the means of discovering the truth with ordinary diligence. Illustration (b) covers this very situation, where the buyer examined the accounts. Option A ignores this exception.

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