Fraud represents intentional deception. Under Section 17 of the Act, it occurs when a party makes a false statement with the deliberate intention to deceive the other party and induce them to enter into a contract.
1. Statutory Elements of Fraud
Section 17 states that fraud includes any of the following acts committed by a party to a contract:
- Suggestio Falsi: The active suggestion of a fact which is not true, by one who does not believe it to be true.
- Active Concealment (Suppressio Veri): The active hiding of a defect or fact by one having knowledge of it (e.g., placing paint over a structural crack in a house).
- A promise made without any intention of performing it.
- Any other act fitted to deceive.
2. Does Silence Amount to Fraud?
The general rule is that mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud. A seller is not bound to disclose all defects to a buyer (the rule of Caveat Emptor—Let the buyer beware).
Exceptions: Silence will amount to fraud in two situations:
- Duty to Speak (Contracts of Utmost Good Faith - Uberrimae Fidei): Where there is a fiduciary relationship, or in insurance, family settlement, and marriage contracts, the law imposes a strict duty to disclose all material facts.
- Silence is equivalent to speech: e.g., if A says to B, "If you do not deny it, I shall assume the horse is sound." B remains silent. Here, B's silence is equivalent to saying the horse is sound, and if it is not, it is fraud.