Chapter II - Of Contracts, Voidable Contracts and Void Agreements
Section 17
Section 17: Fraud
Section 17 defines fraud in contract formation, including knowingly false assertions, active concealment and a promise made without an intention to perform. It also explains when silence can amount to fraud.
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This article is for general information. Refer to the Indian Contract Act, 1872 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
“Fraud” means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract:—
(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
Explanation.—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.
Illustrations
(a) A sells, by auction, to B, a horse which A knows to be unsound. A says nothing to B about the horse’s unsoundness. This is not fraud in A.
(b) B is A’s daughter and has just come of age. Here, the relation between the parties would make it A’s duty to tell B if the horse is unsound.
(c) B says to A—“If you do not deny it, I shall assume that the horse is sound.” A says nothing. Here, A’s silence is equivalent to speech.
(d) A and B, being traders, enter upon a contract. A has private information of a change in prices which would affect B’s willingness to proceed with the contract. A is not bound to inform B.
Rule and business relevance
The listed acts require the relevant party, connivance or agency connection and the statutory intent to deceive or induce the contract. Mere silence about a material fact is not generally fraud under the explanation, but a duty to speak or silence equivalent to speech can bring it within the rule.
Limits and related provisions
Later non-performance alone does not establish that a promise was made without an intention to perform at the outset. Silence must be assessed in its circumstances rather than treated as always lawful or always fraudulent. The representation's role in causing consent matters for Section 19 relief.
Hypothetical business example
Hypothetical: a seller fabricates capacity figures and conceals records to induce a business purchase. The buyer preserves the statements, knowledge evidence and reliance history; the issue is the formation conduct and intent, not simply that the investment later disappointed.
Practical decision flow
Identify the precise assertion, concealment, promise or omission and who made or authorised it.
Gather evidence of knowledge or intention and any duty to disclose at the relevant time.
Connect the conduct to consent and assess the available contractual response under Section 19.
Check the applicable legal framework
This guide explains the central provision. Applicable State amendments, the agreement, transaction date and other governing laws can affect its application. Check the current legal framework before relying on it for a commercial decision.
Practical checklist
Do
- Identify the precise assertion, concealment, promise or omission and who made or authorised it.
- Gather evidence of knowledge or intention and any duty to disclose at the relevant time.
- Connect the conduct to consent and assess the available contractual response under Section 19.
Avoid
- Later non-performance alone does not establish that a promise was made without an intention to perform at the outset. Silence must be assessed in its circumstances rather than treated as always lawful or always fraudulent. The representation's role in causing consent matters for Section 19 relief.
Glossary
- Active concealment
- Deliberately hiding a fact with the knowledge or belief described in the definition.
- Silence equivalent to speech
- Silence which communicates a representation in the particular circumstances.
Frequently asked questions
Is every broken promise fraud?
No. The promise limb requires an absence of intention to perform when the promise was made.
Can silence be fraudulent?
Yes, where the circumstances create a duty to speak or silence is itself equivalent to speech.
Does a false statement unrelated to consent automatically make the contract voidable?
Section 19's causation explanation must also be considered; the link to consent is material.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026