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CMA Foundation · Fundamentals of Business Laws and Business Communication · Capacity of Parties, Free Consent

Meera, a trader, sells goods to Karan and knows that prices of the goods will fall sharply next week. She says nothing about it, and Karan buys at the current price. Under Section 17, Meera's silence is:

Meera's silence is not fraud. Under the Explanation to Section 17, mere silence about facts is not fraud unless there is a duty to speak or the silence equals speech. The illustration states that a trader holding private information about price changes is not bound to inform the other party.

  1. AFraud, because she had knowledge of a fact affecting Karan's willingness
  2. BFraud, because a promise was made without intention of performing it
  3. CNot fraud, because mere silence is not fraud and traders have no duty to disclose private price informationCorrect
  4. DMisrepresentation that makes the contract void

Explanation

The Explanation to Section 17 says mere silence as to facts likely to affect willingness is not fraud unless there is a duty to speak or silence is equivalent to speech. Illustration (d) says a trader with private information of a price change need not inform the other. No promise was made, so option 2 of the fraud definition does not apply.

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