P sells by auction to Q a horse which P knows to be unsound. The horse appears to be sound but P knows about the unsoundness of the horse. Is this contract valid in the following circumstances under the Indian Contract Act, 1872:
(a) If P says nothing about the unsoundness of the horse to Q.
(b) If P says nothing about it to Q who is P’s daughter who has just come of age.
(c) If Q says to P “If you do not deny it, I shall assume that the horse is sound.” P says nothing.

Question

P sells by auction to Q a horse which P knows to be unsound. The horse appears to be sound but P knows about the unsoundness of the horse. Is this contract valid in the following circumstances under the Indian Contract Act, 1872: 
(a) If P says nothing about the unsoundness of the horse to Q. 
(b) If P says nothing about it to Q who is P’s daughter who has just come of age. 
(c) If Q says to P “If you do not deny it, I shall assume that the horse is sound.” P says nothing.

Accepted Answer

According to Section 17 of the Indian Contract Act, 1872, mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech. Hence, in the instant case, 
(i) This contract is valid since as per section 17 mere silence as to the facts likely to affect the willingness of a person to enter into a contract is not fraud. Here, it is not the duty of the seller to disclose defects. 
(ii) This contract is not valid since as per section 17 it becomes P’s duty to tell Q about the unsoundness of the horse because a fiduciary relationship exists between P and his daughter Q. Here, P’s silence is equivalent to speech and hence amounts to fraud. 
(iii) This contract is not valid since as per section 17, P’s silence is equivalent to speech and hence amounts to fraud.

Question Scenario

Suggested Answer

1. Provisions of the Act / Applicable Law

Ready to Practice More Law Cases?