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

Rajesh sells his shop to Mohan and, while negotiating, keeps silent about a pending municipal demolition notice on it. Mohan never asked about notices and could have inspected the municipal records with ordinary diligence. Which statement is most accurate?

The contract is valid. Mere silence is not fraud unless a duty to speak exists or the silence amounts to speech. Mohan could have discovered the notice through ordinary diligence by checking municipal records, so his consent is treated as free and the contract is not voidable.

  1. AThe contract is voidable, as mere silence about a material fact is always fraud
  2. BThe contract is void because of Rajesh's silence
  3. CThe contract is valid, because mere silence is not fraud unless there is a duty to speak or the silence is equivalent to speech, and Mohan could have found out with ordinary diligenceCorrect
  4. DThe contract is voidable only if Rajesh made a false statement in writing

Explanation

Mere silence about facts likely to affect willingness to contract is not fraud unless the circumstances impose a duty to speak or the silence is equivalent to speech. Moreover, if consent was given under circumstances where the party had the means of discovering the truth with ordinary diligence, the contract is not voidable on that ground. In a sale of immovable property, the buyer is expected to inquire. Hence the contract stands.

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