Kuwait Court of Cassation principle number 365

Summary: - Fraud vitiating consent. Its essence. A ruse 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. It rests on a dual intent on the part of the perpetrator of the fraud: deception and misleading, and the intention to induce the misled and deceived person to contract. The determining consideration in assessing the gravity of the ruse is its effect on the contracting party in misleading him and thereby drawing him into contracting. Articles 151, 152, 153 of the Civil Code. - The criterion for assessing the gravity of the ruse underlying fraud. A subjective criterion. Its basis is the contracting party himself, in terms of whether or not the ruse succeeded in misleading him. Its unsuitability as an objective criterion based on the degree of gravity of the ruse itself. - The ruse underlying fraud. It must involve a reasonable degree of deception and deceit. Absence thereof. Effect. It is not considered fraud invalidating the contract, even if it is established that the contracting party was deceived by it, as one who is deceived by simple matters is usually excessively naive. Protecting such persons does not fall within the role of the doctrine of fraud. - Treating lying or concealment as fraudulent ruses invalidating the contract. This may be construed broadly, in keeping with Islamic jurisprudence, whenever it violates a special, distinct 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 acts or words. - Lying descending to the level of fraud. Its nature. That which violates a special duty requiring a person to refrain from it, other than a religious or moral duty. Source of that duty. The law, agreement, or the nature of the transaction itself, which requires strict adherence to truthfulness and candour, or trust and the considerations of good faith upon which contracting should rest, which entitle the defrauded contracting party to place it in the person who deceived and misled him. Lying in itself is insufficient as a basis for fraud. - Giving effect to fraud. Its requirement. That it induced the contracting party to consent to the contract, that he would not have consented to it without it, and that it be connected to the other contracting party. Rule: The provision in Article (151) of the Civil Code that (Annulment of a contract for fraud may be requested by a person whose consent resulted from ruses directed at him with the intention of deceiving him and thereby inducing him to contract, if he proves that he would not have consented to the contract in the manner in which he did had he not been deceived by those ruses, subject to the provisions of Articles 153 and 154), and in Article (152) of the same Code that “Lying when providing information about the facts and circumstances of contracting, or remaining silent about them, shall be deemed ruses constituting fraud if this breaches 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 entitle the defrauded person to place in the person who deceived him,” and in Article (153) thereof that “1- Annulment of a contract on the ground of fraud requires that the ruses have emanated from the other contracting party, his representative, one of his subordinates, a person whom he used as an intermediary in concluding the contract, or a person for whose benefit the contract is concluded ...” signify—as stated in the Explanatory Memorandum—that the essence of fraud is the ruse 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. Fraud therefore requires that its perpetrator resort to a ruse, and do so with the intention of misleading and deceiving the contracting party to make him consent to the contract. Fraud rests on a dual intent on the part of its perpetrator: an intention to deceive and mislead, and an intention to induce the misled and deceived person to contract. The legislature was careful to avoid requiring that the ruses attain a degree of gravity such as to induce the contracting party to contract. The determining consideration is not the degree of gravity of the ruse, but its effect on the contracting party in misleading him and thereby drawing him into contracting. The criterion here is subjective, based on the contracting party himself in terms of whether or not the ruse succeeded in misleading him, rather than an objective criterion based on the degree of gravity of the ruse itself. Naturally, however, the matter does not rise to the level of a ruse unless it involves a reasonable degree of deception and deceit. If it does not, it is not a ruse at all and consequently cannot constitute fraud capable of serving as a basis for annulling 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 naive. Protecting such persons does not fall within the role of the doctrine of fraud. The legislature was also careful to follow Islamic jurisprudence in broadly treating lying or concealment as fraud capable of invalidating the contract, and treating it as equivalent to fraudulent ruses whenever it violates a special, distinct 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 ruse underlying fraud is, in principle, based on material acts (what Islamic jurisprudence calls deception by acts), the legislature was careful in the aforementioned Article (152) to place lying and concealment on the same footing whenever they breach 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 entitle the defrauded person to place in the person who cheated and deceived him (what Islamic jurisprudence calls deception by words). It goes without saying that lying in itself, stripped of any other consideration, does not constitute a sufficient basis for fraud invalidating a contract, notwithstanding 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 a 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, which requires 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 should rest entitle the defrauded contracting party to place in the person who deceived and misled him. Giving effect to fraud requires that it have 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 induced the contracting, although it indicates 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 ruse .. or his representative or one of his subordinates resorted to it.