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

Karan misrepresents to Divya that his factory produces 500 units monthly. Before buying, Divya examines the factory accounts, which show only 400 units. She still buys the factory. What is the position?

The contract is not voidable. Where consent is caused by misrepresentation, the contract is not voidable if the party had the means of discovering the truth with ordinary diligence, and Divya could and did check the accounts.

  1. AThe contract is voidable because misrepresentation was made
  2. BThe contract is void because of mutual mistake
  3. CThe contract is not voidable because she had the means of discovering the truth with ordinary diligenceCorrect
  4. DThe contract is voidable only if Karan was also negligent

Explanation

Exception to section 19: where consent was caused by misrepresentation, the contract is not voidable if the party had the means of discovering the truth with ordinary diligence. Divya examined the accounts, so option A is wrong.

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