This maxim has emerged as a rule of equity, as a rule of law. It means that when with respect to a material fact of the case either suppression of truth or suggestion of a false statement is proven, then the injured party can seek relief. Both of these are considered to be equally wrong. This maxim is most often useful to rescind the contracts entered between parties, in order to ensure that all material facts are disclosed whilst making any agreement. Therefore an important facet of this maxim is observed under the principal of good faith under genera;l contracts as well as under special legislation like insurance contracts.
Example
Say Mr. Jones and Mr. Carl enter into a contract of sale of a horse, but Mr. Jones does not reveal the known failing health condition of the horse knowingly in order to facilitate the sale. Such a contract will become invalid and voidable at the option of Mr. Carl on account of this maxim.
Case Laws
In K.K. Anathan Pillai v State of Kerala [AIR Ker 234], during an ex parte proceeding, the party that had appeared, did not disclose the comlete material facts in order to get a stay order in their favor. Later, when the court discovered this, it was held that such a stay order issued on untrue facts would be deemed invalid.
In Nand Lal v. State of Jammu & Kashmir [AIR 1960 JK 19], it was held that when the relevant facts of the case are not correctly and precisely mentioned in the petition, then by application of this maxim, the writ petition will be dismissed, without going into the merits of the case.
In Ravindra Ramesh Barkul v Executive Engineer [2017], observed that before holding any person guilty for an offense, this maxim should be applied to confirm that the knowledge of the fact is attributable to him.
Smith v. Richards, 38 U.S. 13 Pet. 26 26 (1839)
Smith v. Richards
38 U.S. (13 Pet.) 26
Syllabus
A bill was filed in the Circuit Court of the Southern District of New York praying that a contract for the purchase and sale of a portion of a tract of land in Goochland County, in the State of Virginia, on which there was a gold mine should be rescinded. The purchaser alleged fraudulent misrepresentations as to the gold mine and other arts of the seller by which he was induced to make the purchase. The court affirmed the decree of the Circuit Court of the Southern District of New York by which the contract was ordered to be rescinded.
It is an ancient and well established principle, that whenever suppressio veri or suggestio falsi occurs, and more especially both together, they afford sufficient ground to set aside any release or conveyance.
The party selling property must be presumed to know whether the representation which he makes of it is true or false. If he knows it to be false, that is fraud of the most positive kind; but if he does not know it, then it can only be from gross negligence, and in contemplation of a court of equity, representations founded on a mistake resulting from such negligence is fraud. The purchaser confides in them upon the assumption that the owner knows his own property and truly represents it. And it is immaterial to the purchaser
whether the misrepresentation proceeded from mistake or fraud. The injury to him is the same whatever may have been the motives of the seller. The misrepresentations of the seller of property to authorize the rescinding a contract of sale by a court of equity must be of something material, constituting an inducement or motive to purchase and by which he has been misled to his injury. It must be in something in which the one party places a known trust and confidence in the other.
Whenever a sale is made of property not present, but at a remote distance, which the seller knows the purchaser has not seen but which he buys upon the representation of the seller, relying on its truth, then the representation in effect amounts to a warranty; at least the seller is bound to make good the representation.
The case is fully stated in the opinion of the Court.
In the Circuit Court for the Southern District of New York, a bill was filed by Guy Richards for the purpose of rescinding a contract made by the appellee with William R. Smith for the purchase of a part of the Goochland gold mine in the State of Virginia, the contract being alleged to be fraudulent. It was agreed by the counsel for the parties that a decree should be entered in the circuit court, pro forma, against the complainant, and accordingly, on 22 April, 1837, a decree was entered rescinding and annulling the contract in relation to the purchase of the Goochland mine, ordering that it be given up to said Guy Richards, that the appellant Smith repay all moneys advanced by said Guy Richards upon said contract and upon the promissory notes made by complainant and delivered to the defendant, so far as said notes had been paid by complainant, &c. From this decree an appeal has been prayed and allowed to this Court.
