Question

X sells by auction to Y, a horse which X knows to be of unsound state of mind. X says nothing to
Y about the horse’s unsound state of mind. Whether X can be held liable under the Indian
Contract Act, 1872. Explain. Decide with the help of relevant statutory provisions and case laws.

Answer 1

Answer:

Solution:

Section to which the given problem relates: Section 17.

Case (a)

Decision:

This contract is valid.

Reason:

Mere silence as to the facts likely to affect the willingness of a person to enter into a contract is not a fraud. Here, it is not the duty of the seller to disclose defects.

Case(b)

Decision:

This contract is not valid.

Reason:

It becomes Xs duty to tell V about the unsoundness of the horse because a fiduciary relationship exists between X and his daughter V. Here, X's silence is equivalent speech and hence amounts to fraud.

Case (C)

Decision:

This contract is not valid.

Reason:

Here X's silence is equivalent to speech and hence amounts to fraud.

Explanation:

Answer 2

Answer:

Case (a)

Decision:

This contract is valid.

Reason:

Mere silence as to the facts likely to affect the willingness of a person to enter into a contract is not a fraud. Here, it is not the duty of the seller to disclose defects.

Case(b)

Decision:

This contract is not valid.

Reason:

It becomes Xs duty to tell V about the unsoundness of the horse because a fiduciary relationship exists between X and his daughter V. Here, X's silence is equivalent speech and hence amounts to fraud.

Case (C)

Decision:

This contract is not valid.

Reason:

Here X's silence is equivalent to speech and hence amounts to fraud.