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Question
Principle: When a person represents to another something like a true fact knowing well truly that it is not true," he is guilty of fraud. The person subjected to fraud may avoid an agreement.
Factual Situation: A presents a horse for sale. The' horse is kept on display so that anyone interested could examine it. The horse has a cracked hoof and it is cleverly concealed by the owner. B tells "if you do not deny it, I Shall assume that the horse is sound." A keeps silent. B purchases the horse.
Decision
Options
B can avoid the agreement on the discovery of the defect
B cannot avoid the agreement, as the horse was on display and he could have satisfied himself of its soundlessness by personal examination
B cannot avoid the agreement as A did not make any representation to mislead him. He merely kept silent so that B could find things by himself
None of the above
Solution
B can avoid the agreement on the discovery of the defect
Explanation:
(a)
B can avoid the agreement on the discovery of the defect is correct as the ruling principle clearly states that if the seller KNOWINGLY OR INTENTIONALLY hides truth or misrepresents untrue facts as true, he is guilty of fraud. In the present situation despite B's announcement that without A's denial he will consider the horse as sound, A did not disclose the truth to B. Hence B can void the contract as the fraudulent intention of A is clearly established.
(b)
B cannot avoid the agreement, as the horse was on display and he could have satisfied himself of its soundlessness by personal examination is incorrect. Although one can't deny the fact that the horse was on display and could be examined by B for its soundlessness on a declaration by B that he would consider the horse to be sound If A didn't deny it, the onus of telling the defect in the horse is on A and thus concealment of a defect by A will be considered intentional and fraudulent in nature.
(c)
B cannot avoid the agreement as A did not make any representation to mislead him. He merely kept silent so that B could find things by himself is also incorrect. Intentional silence will also amount to lying or concealment of truth.
(d)
None of the above is not applicable.
