Fraudulent misrepresentation in a lump sum contract can support damages where cost estimates induced the bargain.

A lump sum contract does not become a rate contract merely because curtailed work is valued at scheduled rates for additions or omissions. The court also held that the plaintiff's case was one of positive fraudulent misrepresentation, not mere non-disclosure: the cost estimates were represented as correct, relied on in negotiations, and induced the bargain. On that basis, damages were recoverable for fraud and the plaintiff was entitled to the additional amount that would have been payable had the estimates included the omitted items. The alternative contractual claim failed, and no further amount was payable for the office buildings.

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Issues: (i) Whether the suit contracts ceased to be lump sum contracts and became rate contracts because deductions for curtailed work were made according to scheduled rates; (ii) whether the plaintiff's fraud case rested on non-disclosure or on a positive fraudulent misrepresentation; (iii) whether the plaintiff proved that it was induced to enter the contracts by fraudulent misrepresentation as to the cost estimates; (iv) if so, whether damages were recoverable under Section 19 of the Indian Contract Act, 1872 or under the law of torts, and in what amount; (v) whether the alternative claim for Rs. 84,800 was sustainable; and (vi) whether any decree was payable for construction of the office buildings.

Issue (i): Whether the suit contracts ceased to be lump sum contracts and became rate contracts because deductions for curtailed work were made according to scheduled rates.

Analysis: The contract documents described the work as a lump sum contract and expressly provided a schedule of rates only for additions, alterations, and curtailments not covered by the original work. The use of scheduled rates for valuing omitted work did not alter the intrinsic character of the bargain.

Conclusion: The contracts remained lump sum contracts; this contention failed.

Issue (ii): Whether the plaintiff's fraud case rested on non-disclosure or on a positive fraudulent misrepresentation.

Analysis: The pleadings and correspondence showed an affirmative case that the published cost figures were represented as correct and material to the tendering decision. The case was not one of mere silence or non-disclosure so as to attract the exception to Section 19.

Conclusion: The plaintiff's case was based on positive fraudulent misrepresentation, not mere non-disclosure.

Issue (iii): Whether the plaintiff proved that it was induced to enter the contracts by fraudulent misrepresentation as to the cost estimates.

Analysis: The published estimates omitted the cost of extra items that were already known to the responsible officers, while the tender negotiations proceeded on those estimates as if they were correct. The surrounding documents, including the agenda and resolution of the Board, showed that the estimates were treated as a foundation for negotiations and that the plaintiff relied on them in reducing its offers.

Conclusion: Fraudulent misrepresentation was proved and it induced the plaintiff to enter the contracts.

Issue (iv): Whether, upon proof of fraud, damages were recoverable under Section 19 of the Indian Contract Act, 1872 or under the law of torts, and in what amount.

Analysis: A defrauded party may insist on performance and claim to be put in the position it would have occupied had the representation been true. On that basis, the plaintiff was entitled to the additional amount that would have been payable if the extra work had been reflected in the estimate, after accounting for the negotiated reductions.

Conclusion: Damages were recoverable, and the plaintiff was entitled to Rs. 2,02,960.

Issue (v): Whether the alternative claim for Rs. 84,800 was sustainable.

Analysis: The contract expressly authorised deduction or addition at scheduled rates for curtailed or extra work. The deductions made on that basis were therefore in accordance with the bargain.

Conclusion: The alternative claim failed.

Issue (vi): Whether any decree was payable for construction of the office buildings.

Analysis: The office construction was covered by the contract and was payable at the fixed contractual rate, which had already been applied.

Conclusion: No further amount was payable for the office buildings.

Final Conclusion: The appeal succeeded only to the extent of the fraud-based damages claim, while the remaining monetary claims were rejected.

Ratio Decidendi: A contractual representation as to cost is fraudulent when it is made as a material fact without honest belief in its truth and is relied upon to induce the bargain; in a lump sum contract, scheduled rates used only for extras or curtailments do not convert the contract into a rate contract.

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