FRAUD UNDER CONTRACT LAW OF UK
CHAPTER I
1.1 INTRODUCTION
A contract is simply a promise enforceable by law. Modern contract law owes its history to the nineteenth century. It emerged as a response to and critique of the medieval practice of subsistence farming in both England and America.[1] Contract law of the UK began to develop and diverge towards the 12th and 13th centuries. Both, the civil justice system and criminal justice system in the UK deals with fraud. The deliberate use of deception or dishonesty to disadvantage or cause loss to another person or party is called fraud. The Fraud Act 2006 of the UK divides the crime of fraud into three parts:
1. fraud by false representation
2. fraud by failing to disclose information
3. fraud by abuse of position.
As per the wordings of this Act, mainly the first two paragraphs of Section 2 of the Fraud Act, 2006 (Fraud by false representation):
“A person is in breach of this section if he:
i) dishonestly makes a false representation
ii) intends, by making the representation to make a gain for himself or another or to cause loss to another or to expose another to a risk of loss.
A representation is considered to be false if it is untrue or misleading and the person making it knows that it is or might be untrue or misleading.”
A large number of disputes involve issues of fraud. Lew, Mistelis, and Kroll, authors of a leading text on comparative international commercial arbitration, discern that “allegations of illegality and fraud have always raised serious problems as to the arbitrability of a dispute”. So, it is suggested that we understand legal developments in other common law jurisdictions such as the United Kingdom and the United States of America.[2] Referring to the case of Wallis v. Hirsch[3], in which there was an allegation of fraud to arbitration, the Court held that the parties involved could not consider it for arbitration. Whereas in the case of Russel v. Russel[4] where there was a partnership dispute between two brothers in which there were allegations of fraud, the Court referred it to arbitration. This was mainly because of the reason that the party charged with fraud was content to arbitrate and also the parties were family members. So the court felt it better to refer it to an impartial ally. Until the enactment of the Arbitration Act in the1996, the line of precedent was continuously being applied in the UK. A series of cases were decided on the basis that a person against whom fraud is alleged should not be deprived of his day in court.[5] This research paper aims to understand the concept of fraud under contract law of the UK with the help of some case laws and understand its scope and applicability in India.
1.2 REVIEW OF LITERATURE
The Arbitrability of Fraud in Indian Law[6] is an article which talks about the comparative analysis of international law with English and American jurisprudence and Indian law. This article aims at giving a sustainable solution regarding the arbitrability of fraud under Indian law by taking into account UK law. The limitation of this article is that it speaks only about the arbitrability of fraud and does not take into account the bigger picture of understanding the concept of fraud specifically according to UK laws.
Measuring the impact of Fraud in the UK[7] is an article which deals with some fraud data collections in the UK. It also reviews the strengths and weaknesses of the data collection processes. This article helps us understand some of the strategies to tackle the problem of fraud data collections and hence it tries to build our knowledge on fraud under the contract law of the UK. Yet, one of the limitations of this article is that it talks only about the frauds in the field of data collection and does not mention anything about the general concept of fraud involved in other day-to-day activities.
A legal approach to tackling contract cheating?[8] is another article which talks about fraud. It gives us a detailed understanding of contract cheating. It deals with the legal position of contract cheating and some flaws involved in it. This article also gives some suggestions to lawmakers. These suggestions are based on the UK laws and aim to improve the balance in the system and hence tackle the problem of contract cheating or fraud. This article talks solely about the UK perspective of dealing with contractual cheating and does not look into any specific details as per Indian law which the researcher wishes to discuss in this particular research project.
Fraud by misrepresentation of a material fact[9] is an article that helps us understand the concept of fraud by false representations through many case laws. This article helps us understand the facts and judgments given under various cases of fraud by misrepresentation and thus helps us understand this concept in a better manner. A limitation of this article is that it talks only about fraud by misrepresentation and not about fraud by any other means. It is also very short and only gives us a brief idea about the concept using case laws.
1.3 RESEARCH QUESTIONS
The following questions would be answered through this research:
1. How is fraud under contract law of the UK related to the Indian scenario?
2. What are the limitations in referring cases involving fraud to arbitration?
3. What is fraud data collection as per UK law?
1.4 OBJECTIVE OF RESEARCH
The objectives of this research project are as follows:
1. To analyze the concept of fraud under contract law of the UK and linking it with Indian laws.
2. To examine some cases related to fraud being referred to arbitration.
3. To throw some light on fraud data collections in UK and measures to tackle it.
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[1] Morton J. Horwitz, The Historical Foundations of Modern Contract Law, 87 Harward Law Review, 917, 917-956 (1974). [2] Aditya Shiralkar, The Arbitrability of Fraud in Indian Law, 8 SCC J-23 (2020). [3] Wallis v. Hirsch (1857), 1 C.B.(N.S.) 316:26 L.J.C.P. 72:140 E.R. 131:28 L.T.(O.S.) 159: 107 R.R. 677. [4] Russel v. Russel (1880) LR 14 Ch D 471. [5] Supra note 4. [6] Supra note 2. [7] Michael Levi and John Burrows, Measuring the Impact of Fraud in the UK: A Conceptual and Empirical Journey, Vol.48, The British Journal of Criminology, 293, 293-318(2008). hehe [8] Supra note 2. [9] M. M. Caldwell, Fraud by Misrepresentation of a Material Fact, Vol.2, Virginia Law Review, 322-326 (1896).
AUTHOR DETAILS:
Name : Akhila Sunil Nedungadi
Course: BBA LLB
University: Symbiosis Law School, Hyderabad
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