QUESTION:LAW OPTIONAL UPSC QUESTION |YEAR 1990|QUESTION 6(b)
A takes on hire a fishing trawler from B for the purpose of deep sea fishing. The trawler was imported by B and was never used by him. Under the contract A was to get the necessary repairs done in the trawler to make it sea-worthy, for which B would pay. After it was certified seaworthy, A was to pay monthly rent, while the repairing was being done, A discovered that the refrigeration equipment of the trawler was not capable of bringing down the temperature to such a low level as is necessary to use the trawler for deep sea fishing. A sues for declaration that the contract is void and for recovery of the expenses incurred on repairs. There is no evidence that during the negotiation for contract there was any discussion about the quality of the refrigeration of the trawler, but the purpose of chartering of trawler was known to B. How will you decide?
Answer line : This is a problem question – thus following subjects must be touched
Relevant Legal Provision : Sec: 17 Indian Contracts Act – Fraud.
Issue involved : Whether B has committed fraud ?
Whether silence of B amounts to fraud ?
Conclusion : Whether you decide B liable or not ?
Case Law to refer : I.T.C. Limited vs George Joseph Fernandes & Anr on 6 February, 198
This is a problem based question thus following discussions given – The aspirants are expected to provide their own analysis and answer based on the below sketch.
ISSUE 1 : Whether the contract is void ?
ISSUE 2 : Whether B is liable for payment of repairs ?
RELEVANT LEGAL PROVISION : sec: 17 Indian Contracts Act – This provision defines what is fraud – Explanation to sec: 17 is directly involved.
ISSUE 1 : Whether the contract is void ? Contract would be void only when it was affected by fraud and the affected party wants to call it off.
Thus sub issue are as follows :
· Whether B has committed fraud ?
· Whether B’s silence amounts to active concealment ?
· Whether B had duty to speak ?
· Whether A can reasonable find out the fault in refrigeration system on examination ?
· Whether B is actually aware of the fault in refrigeration as he just imported it and did not use the same ?
ISSUE 2 : Whether B is liable for payment of repair ? If contract is void then B is liable or else he is not.
CASE TO REFER : I.T.C. Limited vs George Joseph Fernandes & Anr on 6 February, 198 – Similar facts – held to be mutual mistake of parties. Aspirants need not agree with the case .
QUESTION: UPSC QUESTION | YEAR 2014 | QUESTION 6 (a)
X and Co. in its prospectus represented that A, B and C would be the directors of the company. This was true and on the basis of this P and Q applied for shares. However, before the allotment took place, there were changes in directors. Is the allotment of P and Q subject to their choice or it stands cancelled due to change in directors? Discuss.
Answer line : Mere silence is no fraud – sec: 17 – explanation – but fraud when there are change of circumstances. Discuss – case : Rajagopala Iyer V. South Indian Rubber works – similar facts – held : subject to the choice of the allotee the allotment could be avoided. If you differ state the same – and rationale for it.
INTRODUCTION : Section 17 of ICA defines fraud and by the explanation to the section it was clearly held that mere silence is not fraud unless and until –
Silence is equal to speech
There is duty to speak
Change of circumstances
The above circumstance given in the question falls under change of circumstances. Sometimes a representation is true when made, but it may, on account of change of circumstances, become false when it is acted upon by the other party. In such circumstances, it is the duty of the person who made the representation to communicate the change of circumstances.
SIMILAR CASE LAW : Rajagopala Iyer Vs South Indian Rubber Works.
FACTS : A company’s prospectus represented that certain persons would be the directors of the company. This was true. But before the allotment took place, there were changes in the directorate, some directors having retired.
HELD : This change without communication entitle the allotee to avoid the allotment. Give your own discussion with apt conclusion.