PRINCIPLE : Fraud includes the suggestion, as a fact, of that which is not true, by one who does not believe it to be true or the active concealment of a fact by one having knowledge or belief of the fact, with intent to deceive another party or her agent to enter into the contract. FACTS : Wind-on Ltd. is a leading manufacturer of wind turbines to harness wind energy to produce electricity. It is based out of Nagaland in India and has been manufacturing wind turbines since the early 1990s with national and international fame. Z Infrastructures Ltd. is a leading infrastructure firm with a proven track record in building energy installations and highways across India. Z Infrastructures wanted to expand its portfolio and operate a wind energy park to supply clean electricity. Representatives from Wind-on and Z Infrastructures carried out extensive negotiations, advised by leading law firms and commercial advisory firms on both sides, for the latter to establish a wind park in Odisha. Z Infrastructure wanted Wind-on to guarantee that the turbines will generate 54 lakhs Kwh of energy per turbine annually. Wind-on’s stated position was that generation of energy is dependent on availability of wind and they could not guarantee it. However, they provided an “estimate” in the contract for supply of turbines that the turbines will be able to generate around 50 lakhs Kwh per turbine annually. The turbines were supplied by Wind-on and operated by Z Infrastructure in Odisha for over 2 years. During this period, Z Infrastructure found that the average energy generation of each turbine came to around 35 lakhs Kwh annually. They were frustrated as the actual generation of each turbine was significantly lower than the generation estimate provided by Wind-on. They reached out to Lal & Co., a leading dispute resolution law firm to understand if they could initiate action against Wind-on for fraudulently representing the generation estimate of each turbine. You are a lawyer at Lal & Co., and were asked if Wind-on had committed fraud by providing an inflated energy generation estimate

Option A: Yes, as Wind-on was an expert in the wind turbine business and Z infrastructure relied on its expertise as a new entrant in the field

Option B: No, as Wind-on clearly specified that the energy generation figure was merely an estimate and it could not provide a guarantee

Option C: Yes, as Wind-on should have predicted a figure that was closer to the actual generation figure of 35 lakhs Kwh per turbine per annum

Option D: Yes, as Wind-on should not have provided any estimate at all

Correct Answer

Option: b

Explanation

Chapter II, Section 17 of The Indian Contract Act defined “Fraud”

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