DEC 2013, PART C

Answer:
The issue to be discussed in this question is whether Mr Cheong Fatt can
rescind and claim for damages for contracts entered with Mariam and Summit Gold
Resort (M) Sdn Bhd under fraud and misrepresentation.
Section 10(1) of the Contracts Act 1950 provides that all agreements are
contract if they are made by free consent of parties competent to contract, for a
lawful consideration with a lawful object, and are not expressly declared to be void.
Thus, from this provision it is important to note that an agreement must be made by
free consent of the parties for it to become a contract. Consent is defined under
Section 13 of the Contract Act 1950 as a situation where two or more persons agree
upon the same thing in the same sense. Meanwhile, Section 14 of the same Act
provides that consent is free when it is not caused by coercion, undue influence,
fraud, misrepresentation and mistake. Consent is said to be so caused when it
would not have been given but for the existence of such coercion, undue influence,
fraud, misrepresentation and mistake.
Section 17 of the Contracts Act 1950 stated that fraud includes any of the
following acts committed by a party to contract, or with his connivance, or by his
agent, or to induce him to enter into the contract such as :
(a) the suggestion, as to a fact, of that which is not true by one who does not
believe it to be true. In which in this provision, the suggestion elements are
necessary, a suggestion as to a fact, the fact suggested is not true and the
suggestion was made by a person who does not believe it to be true. This can be
seen in the case of Kheng Chwee Lian v Wong Tak Thong. In this case, the
respondent bought a half share of the land from the appellant and paid the
purchase price. After that, R was induced to sign another agreement which he was
allocated a smaller portion of land from the earlier agreement (a suggestion as to a
fact). It was held that the misrepresentation was a fraudulent as the judge found
that the respondent had been misled to sign the second agreement and wasnt
aware that pursuant to it would giving up his bigger portion of land in return for a
smaller area.

(b) the active concealment of a fact by one having knowledge of belief of the
fact. In which, the suggestion elements are necessary: firstly, an active concealment
of fact and secondly; the concealment was made by a person who has knowledge of
it. This can be seen in the case of Tay Tho Bok & Anor v Segar Oil Palm Estate Sdn
Bhd, where the plaintiff had agreed to purchase from the defendant 11 pieces of
land totaling about 65 acres. After paying a deposit about 10% and signing the
agreement, the plaintiff found that 4.06 acres of the land was used by the Public
Utility Board of Nasional Bhd for transmission cables. The plaintiff argued that the
purchase price of the land should be reduced to take into account these
encumbrances in the form of these structures. The defendant refused saying that
they were not aware of any land acquisition by the authorities that they did not
represent to the plaintiff that transmission lines did not run across the land
(concealment of a fact). At the date of the completion, the plaintiff only paid the
lower price. The defendant returned the cheque and purported to forfeit the deposit.
It was held that the defendant knew about the structures on the land to signing
through an agent and the plaintiff had been deliberately misled and deceived by it.
This was held to amount to fraud under section 17.
And (c) no intention to perform the promise.
Next, (d) any other act fitted to deceive. It is vested to the court whether or
not such act has intention to deceive the other. This can be illustrated in the case of
Kheng Chwee Lian v Wong Tak Thong.
Fraud differs from misrepresentation in terms of intention to deceive the
other party to enter into contract. In Derek & Ors v Peek, a company submitted its
plans to run trains to the Board of Trade and applied for a special Act to permit it to
run trains by steam power. The Act, which provided that the trains might be run with
steam power subject to the consent of the Board of Trade, was passed. The director
of the company had issued prospectus stating that the company had the right to
use steam or other mechanical power. The respondent had invest in the shares of
the company based on the statement. However, Board of Trade refused consent for
the company.
Next, whether silence amount to fraud. Silence generally does not amount to
fraud or misrepresentation. However, there are exception to the rule which are if

there is a fiduciary relationships, if there is a contract of utmost good faith, where

silence is as good as speech, where silence is regarding an undisclosed fact whether
half-truth or partial disclosure gives a false impression, where the representation is
true when made but becomes untrue subsequently the representor is under a duty
to disclose as well as where there is concealed fraud.
Lastly, remedy. Section 19 in Contracts Act 1950 whereby an innocent party
has the option to rescind or affirm the contract. When a contract is rescinded, S65
and S66 apply. However in Mithoolal Nayak v Life Insurance Corp of India, held that
a person cannot seek to recover money for an action for money had and received
under s65. There is an exception to this section, which is the contract is not
voidable if the party whose consent was so caused was able to ascertain the truth
of the matter by exercising ordinary diligence. Specific Relief Act has also provided
the remedy in Section 30 and 34 (1) (a).