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

Seema falsely tells Tarun that her factory produces 500 units monthly. Tarun, before buying the factory, personally examines the factory accounts, which show only 400 units monthly, and then buys it anyway. Which statement is correct under Section 19?

The contract is not voidable. Tarun examined the accounts and had the means of discovering the truth with ordinary diligence, so his consent was not caused by the misrepresentation. Under Section 19, a false statement alone does not make the contract voidable in such circumstances.

  1. AThe contract is voidable because Seema made a misrepresentation
  2. BThe contract is void because the statement was false
  3. CThe contract is voidable only if Tarun proves Seema acted fraudulently
  4. DThe contract is not voidable, because Tarun's consent was not caused by the misrepresentation and he had means of discovering the truthCorrect

Explanation

The Explanation to Section 19 says a misrepresentation that did not cause consent does not make a contract voidable, and the Exception denies avoidance where the party had means of discovering the truth with ordinary diligence. Illustration (b) mirrors this: the buyer examined the accounts and bought. Falsity alone is not enough, and proving fraud is not the test here.

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