Answer for Law of Contract

The issue raised in the question is whether fraudulent misstatement made by the Defen Defendan dantt (Mani (Maniam) am) amoun amountt to a voida voidable ble contr contrac actt which which rend render er the plain plaintif tifff (Mr  (Mr  Cheong Fatt) to claim the return of his deposit?

n order to advise Mr Cheong Fatt! the area of law that must be further discussed is regarding the consent of a party to a contract" n order to form a valid contract! there must be a free consent" t was one of the essential elements of contract" #ccording to $ection %&(%) of the Contract #ct! 'all agreements are contracts if they are made by free consent of parties competent to contract" The importance of free consent was further  elaborated in $ection % of the Contract #ct where it is stated that 'two or more person are said to consent when they agree upon the same thing in the same sense"

$ection %* of the Contract #ct list down all the circumstances where consent was not given freely" n this question! the consent was not freely given because there is an element of fraud as stated in $ection %* (c)" #s a general rule! it may be stated that whenever a person cause another to act on a false representation which the ma+er  himself does not believe to be true! he is said to have committed a fraud" Fraud is defined in $ection %, to include acts which are committed with intent to induce another  party to enter into contract"

The definition of fraud under Common -aw was defined by the .ouse of -ords in the case of Derry v Peek (1889) 14 App Cas 337. /nder a $pecial #ct incorporating a tramway company! it was provided that the carriages might be moved animal power and with the consent of the 0road of Trade! by steam power" The directors of the company in question issued a prospectus containing a statement that by the special act the company had the right to use stream power instead of horses" The plaintiff bought shares in the company relying on the statement" The 0oard of Trade later refused to give approval for the use of steam power" power" The company was wound up and the plaintiff 

sued the directors for deceit based on their false statement" The .ouse of -ords held that the defendant were not liable since the statement as to steam power was made by them in honest belief that it was true" Their lordship opined that a plaintiff in an action for  deceit must prove actual fraud" Fraud is proved by showing that a false representation has been +nowingly made! without belief in its truth or rec+lessly without caring whether  it be true or false" $ection %, under Contract #ct lays down five different act which may constitute fraud" Firstly! $ection %, (a) the suggestion! as to fact" 1f that which is not true by one who does not believe it to be true" $econd! $ection %, (b) the active concealment of a fact by one having +nowledge of belief of the fact" Third! $ection %, (c) a promise made without intention of performing it" $ection %, (d)! any other act fitted to deceive" -astly! $ection %, (e) any such act or omission as the law specially declares to be fraudulent" n this case! $ection %,(b) was applicable" The requirement under $ection %,(b) is that the must be an active concealment of a fact and the concealment was made by a person who has the +nowledge about it"

-oo+ing bac+ at our local authority under $ection %,! which defines fraud with reference to the intention with which the one contracting party performs certain acts" The acts performed are representations made by that contracting party which refers to the representor either by positive action! by conduct or even by silence to the other  party (representee)" The representor must perform the act with the intent to deceive the representee or to induce the representee to enter into contract" t means that the representor must ma+e the representation +nowing it to be false"

2eference can be made to Tay Tho 0o+ 3 #nor v $egar 1il 4alm 5state $dn 0hd 6%7789 M-: %;% .C" n his particular case! the plaintiff had agreed to purchase from the defendant %% pieces of land totaling about 8< acres" #fter paying a deposit %&= and signing the agreement! the plaintiff found that about *"&8 acres of the land was being used by the 4ublic /tility 0oard of >asional 0hd for transmission cables" The plaintiff 

argued that the price of the land should be decreased" The defendant in reply said that they were not aware of any land acquisition by the authorities and that they did not represent to the plaintiff that the transmission lines did not run across the land" The court held that the defendant already +new about the structures of the land prior signing to the contract" The misrepresentations were made though an agent and the plaintiff  had deliberately misled and deceived by it" This was held to amount to fraud under  $ection %,"

f there is an eistence of fraud in the contract between the two parties! the contract is said to be voidable at the option of the representee" #ccording to $ection %7 of the Contracts #ct!when the consent to an agreement is caused by fraud! the agreement is a contract voidable at the option of the party whose consent was so caused" n applying to our question! the intention of the party must be ta+en into a consideration" Maniam also has no intention to deceive Mr Cheong Fatt in order to induce him in entering the contract" This is because there is no evidence showing that Maniam had done any act of deceiving Mr Cheong Fatt into entering the contract" 1ther  than that! silence does not constitute fraud" Maniam argued that he did not ma+e any representation about the transmission lines that runs across the land" Therefore he is not liable for fraud"

@e must distinguish this case from Tay Tho 0o+ 3 #nor v $egar 1il 4alm 5state $dn 0hd 6%7789 M-: %;% .C" n this case! the defendant has the +nowledge about the eistence of the structures of the land prior to signing of the contract" The intention to deceive another contracting party was essential for the court in ma+ing their decision" This law is refuted in our question! where Maniam did not +now that a portion of the land was used by Tenaga >asional 0erhad for transmission cables" .e did not ma+e any representation that the transmission lines did not run across the land" Mr Cheong Fatt

on the other hand also did not as+ any question about it" Therefore there is no active concealment of fact as Maniam did not hide any information from Mr Cheong Fatt" 1ther than that! since there is no element of fraud eists in the contract! the contract shall not become voidable at the option of the innocent party" n conclusion! Mr Cheong Fatt cannot claim fraud under the law of contract because he cannot prove that Maniam had eercised fraudulent misrepresentation"