Kuwait Court of Cassation principle number 162

Summary: - Fraud vitiating consent. Its basis. A stratagem directed at a contracting party with the intention of deceiving him and making him believe something contrary to reality and truth, with the aim of inducing him to consent to contracting. Its basis in a dual intention on the part of the perpetrator of the fraud: deceit and misleading, and the intention to induce the misled and deceived person to contract. The determining consideration in assessing the gravity of the stratagem is its effect on the contracting party in misleading him and thereby drawing him into contracting. Articles 151, 152, 153, Civil Code. - The criterion for assessing the gravity of the stratagem underlying fraud. A subjective criterion. Its basis is the contracting party himself, in terms of whether or not the stratagem succeeded in misleading him. Its unsuitability as an objective criterion based on the degree of gravity characterizing the stratagem itself. - The stratagem underlying fraud. It must involve a reasonable degree of deceit and dishonesty. Absence thereof. Its effect. It is not regarded as fraud invalidating the contract, even if it is established that the contracting party was deceived by it, as one deceived by simple matters is usually excessively naïve. Protecting such persons does not fall within the role of the doctrine of fraud. - Treating lying or concealment as fraudulent stratagems invalidating the contract. Permissibility of an expansive approach thereto in keeping with Islamic jurisprudence whenever it violates a distinct, special duty of truthfulness and candour imposed by law, agreement, the nature of the transaction, or the trust that one party is entitled to place in the other as dictated by the circumstances of contracting. Fraud occurs through deception by conduct or by words. - Lying that descends to the level of fraud. Its nature. That which violates a special duty requiring a person to refrain from it, other than the religious or moral duty. The source of that duty. Law, agreement, the nature of the transaction itself requiring strict adherence to truthfulness and candour, or the trust which considerations of good faith upon which contracting ought to be based entitle the defrauded contracting party to place in the person who deceived and misled him. Lying in itself does not constitute a sufficient basis for fraud. - Giving effect to fraud. Its requirement. It must be what induced the contracting party to consent to the contract, which he would not have accepted without it, and it must be connected to the other contracting party. Rule: The provision in Article (151) of the Civil Code that "A person whose consent resulted from stratagems directed at him with the intention of deceiving him and thereby inducing him to contract may seek annulment of the contract for fraud if he establishes that he would not have consented to the contract in the manner in which he did had he not been deceived by those stratagems, subject to the provisions of Articles 153 and 154"; in Article (152) of the same Code that "Lying when providing information concerning the facts and circumstances of contracting, or remaining silent about them, shall be deemed equivalent to stratagems constituting fraud if this constitutes a breach of a duty of truthfulness or candour imposed by law, agreement, the nature of the transaction, or the special trust which the circumstances of the case are such as to entitle the defrauded person to place in the person who deceived him"; and in Article (153) thereof that "1- For the contract to be annulled on the basis of fraud, the stratagems must have emanated from the other contracting party, his representative, one of his subordinates, a person whom he engaged as an intermediary in concluding the contract, or a person for whose benefit the contract is concluded..." mean—as stated in the explanatory memorandum—that the basis of fraud is the stratagem directed at a contracting party with the intention of deceiving him and making him believe something contrary to reality and truth, with the aim of inducing him to consent to contracting. For fraud to exist, the perpetrator must resort to a stratagem, and must do so with the intention of misleading and deceiving the contracting party so as to make him consent to the contract. Fraud rests on a dual intention on the part of its perpetrator: the intention to deceive and mislead, and the intention to induce the misled and deceived person to contract. The legislature was careful to avoid requiring stratagems to attain a degree of gravity such as to induce the contracting party to contract. The determining consideration is not the degree of gravity characterizing the stratagem, but rather its effect on the contracting party in misleading him and thereby drawing him into contracting. The criterion here is a subjective criterion based on the contracting party himself, in terms of whether the stratagem succeeded in misleading him or did not succeed, and not an objective criterion based on the degree of gravity characterizing the stratagem itself. Naturally, however, the matter does not rise to the level of a stratagem unless it involves a reasonable degree of deceit and dishonesty. If it does not, it is not considered a stratagem in the first place and consequently cannot constitute fraud capable of serving as a basis for annulment of the contract, even if it is established that the contracting party was actually deceived by it. One who is deceived by simple matters is usually excessively naïve. It is not the role of the doctrine of fraud to protect such persons. The legislature was also careful to follow Islamic jurisprudence in adopting an expansive approach to treating lying or concealment as fraud capable of invalidating the contract, and deeming it equivalent to fraudulent stratagems whenever it violates a distinct, special duty of truthfulness and candour imposed by law, agreement, the nature of the transaction, or the trust that one party is entitled to place in the other as dictated by the circumstances of contracting. Although the basic rule is that the stratagem underlying fraud consists of material acts (which is called deception by conduct in Islamic jurisprudence), the legislature was careful, in the aforementioned Article (152), to place lying and concealment on the same footing whenever they constitute a breach of a special duty of truthfulness and candour imposed by law, agreement, the nature of the transaction, or the special trust which the circumstances of the case are such as to entitle the defrauded person to place in the person who cheated and deceived him (which is called deception by words in Islamic jurisprudence). It goes without saying that lying in itself, stripped of any other consideration, does not constitute a sufficient basis for fraud invalidating the contract, despite its reprehensibility and its incompatibility with religion and morals. Rather, lying that descends to the level of fraud is that which violates a special duty requiring the person to refrain from it, other than a mere religious or moral duty. This duty may arise from law, agreement, the nature of the transaction itself requiring strict adherence to truthfulness and candour, or even from the trust which the circumstances of the case and the considerations of good faith upon which contracting ought to be based are such as to entitle the defrauded contracting party to place in the person who deceived and misled him. For fraud to be given effect, it must be what induced the contracting party to consent to the contract, such that he would not have consented to it without it. However, the fact that fraud was the inducement to contract, although it includes an indication that consent was vitiated, is not, alone and in itself, sufficient to render the contract voidable. In addition, the fraud must be connected to the other contracting party, in that he himself resorted to the stratagem .. or his representative or one of his subordinates resorted to it.