DIFFERENCE BETWEEN FRAUD & MISREPRESENTATION

Section 18 of the Contracts Act defines misrepresentation and covers situations of innocent misrepresentation. The basic difference between misrepresentation and fraud is that in fraud the person making the representation does not himself believe in the truth of the statement he is making whereas in situations of innocent misrepresentation the person making the statement may believe that what he is saying is true. This is due to the fact that the person making the statement is simply repeating what another person has asserted to be true.In cases of fraud, the person making the statement is a complete liar and is making the statement to deceive others to enter into a contract.However this is just the general rule.

The Exceptions- Section 19

If such consent was caused by misrepresentation or by silence,fraudulent within the meaning of Section 17, the contract is nevertheless not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.

However this exception cannot be relied on by the Defendant when he had made a false and fraudulent misrepresentation.

Beca (Malaysia) Sdn. Bhd v Tan Choong Kuang & Anor [1986] 1 MLJ 390,SC, it was held

" The buyers could not be expected to know that the developers had no licence at the time.It would be expecting too much of the buyers to say that they 'had means of discovering the truth with ordinary diligence" to quote the words of Section 19 of the Contracts act 1950.

In contrast to the common law,the rule is 'no one is entitled to make a statement which on the face of it conveys a false impression and then excuses himself on the ground that the person to whom he made it had the available means of correction.