FREE CONSENTFree consent of all the parties to a contract is one ofthe essential elements of a valid contract as perrequirement of section 10.The two parties to a contract should have identity ofminds. (consensus ad idem) Or Parties must agree upon the same thing in the samesense.
Important Jargons in this session Free consent: Coercion : Undue Influence: Fraud : Dominate: Deceive: Conceal: Reckless: Omission: Unwarranted: , Assertion: (clear statement of fact) Breach: (A failure to perform some obligations) Rescind: Erroneous:
Cases where consent is not freeFree consent is the consent which has been obtained by the free will of the parties out of their own accord.According to Sec.14, consent is said to be free when it is not caused by:1) Coercion2) Undue influence3) Fraud4) Mis-representation5) Mistake
When consent to an agreement is caused by:Coercion, undue influence etc. the contract is Voidable at the option of the party whose consent was so caused.But when consent is caused by mistake, the agreement is void.
1.CoercionAccording to Section 15, Coercion is threat or force used by one party against another for compelling him to enter into an agreement.Eg. A threatens to shoot B, a friend of C, it C does not let out his house to him. C agrees to do.Such agreement has been brought about by coercion.
2.Undue InfluenceSometimes the parties to an agreement are so related to each other that one party is in a position to dominate the will of the other.One party is compelled to enter into an agreement against his will as a result of ‘Undue Influence’ exerted by the other party who is in dominating position.Example:A, a police officer purchased a property worth Rs.2 lackhs for Rs. 20,000 from B, an accused under his custody. Here police officer is in a position to dominate the will of B by Undue Influence.
3.FraudAccording to Section 17, the term ‘Fraud’ includes all acts committed by a person with an intention to deceive another person.It means a false statement made knowingly or without belief in its truth or recklessly without caring whether it is true or false.
Essentials fo Fraud1) There must be an intention to deceive.2) A false statement made recklessly without inquiring whether it is true or false would amount to fraud. (suggestio falsi)3) Concealment of fact by one having knowledge or belief of fact. (suppressio veri)4) A promise made without any intention of performing it.5) Any such act or omission as the law specially declares to be fraudulent.(any act that attempts to deceive law)
Mere silence is not fraudA party to the contract is under no obligation to disclose the whole truth to the other party. Similarly there is no duty to disclose facts which are within the knowledge of both the parties. ‘Caveat Emptor’let the purchaser beware. Same rule is applicable to contracts.Example;H sold to W some pigs which were to his knowledge suffering from fever. The pigs were sold ‘with all faults’ and H did not disclose the fact of fever to W.Court Decision: There is no fraud. It is the responsibility of the buyer to know what he or she is buying.
Silence is fraud in the following cases:1) Contracts of Insurance2) Contracts of marriage3) Share allotment contracts4) Where the silence itself is equivalent to speech.5) Half truth: sometimes when a person is under no duty to disclose fact, he may become guilty of fraud by non- disclosure if he voluntarily discloses something and then stops half the way.6) Change of circumstances: sometimes a representation is true when made, but due to change in circumstances it becomes false. So it is necessary to communicate the change of circumstances.
MisrepresentationConsent given under misrepresentation of facts is no consent at all.“ A statement made which in fact is not true, under belief that it is true, is misrepresentation”. ORA wrong representation when made innocently is Misrepresentation.Example:A says to B that C’s horse is a very good horse and runs 20 miles at a stretch. A believes the statement to be true. B purchases the horse from C on A’s information. It turns out that the horse is only able to run 2 miles.
Misrepresentation means & includes:-1) The Positive assertion in a manner not warranted by the information of the person making it, of that which is not true though he believes it to be true. Unwarranted Assertion: (Declaration of facts without proper justification) Eg. A on B’s information positively asserted to C that certain third party is going to be Director of the company. C bought the shares on faith of such a statement by A.1) Any Breach of duty which, without an intent to deceive, gains an advantage to the person committing it. This is known as “Constructive fraud”Example: A correctly states all relevant information regarding monthly sales of Rs.50,000 to B. But during the period when contract was signed, sales came down to Rs. 5000 pm. A , unintentionally keeps quit. It was a case of misrepresentation. B was entitled to rescind the contract.3) committing a mistake as to the subject-matter of the contract.(misrepresentation)
Misrepresentation of Fact: Consent given under misrepresentation of fact is no consent at all and gives the right to the party whose consent is so caused to avoid the contract.Misrepresentation of Law: Misrepresentation of general rule of law gives no right to avoid a contract.
Mistake: Mistake may be defined as an erroneous belief concerning something. It means that parties intending to do one thing, have by intentional error, done something else.Mistake of Fact:Mistake of fact may be either bilateral (by both parties) or unilateral (by one party only) mistake.a) Bilateral Mistake “where both the parties to an agreement are under a mistake as to a matter of fact, essential to the agreement, the agreement is void”Both the parties understand the contract in different way. Hence there is total absence of consent. “so void ab initio”
Conditions for a bilateral Mistake There must be a mistake as to the formation of contract; the mistake must be of both the parties; It must be mistake of fact and not of law; It must be about a fact essential to the agreement.Mistake as to the subject-matter: (void)Mistakes regarding existence, identity, title, price, quantity, quality etc.Existence: If the subject matter doest not exist at the date of the contract & both parties are unaware about it.Identity: there are two ships from Mumbai, A contracts with B for the cargo in the small ship, but B had big ship in mind.Title: where both the parties are unknown to the fact that the buyer is already the owner of that which the seller wants to sell him.
b) Unilateral mistake: section 22 provides that if one party alone is under a mistake of fact, the contract is voidable.If a man due to his own lack of reasonable care does not ascertain what he is contracting about, he must face the consequences.A wanted to sell his old house for Rs. 5 lacs. But by mistake he offered to sell his new house to B at that price. Here the contract is not voidable. A can not ignore the contract.
Mistake of LawMistake of law is of two type: Mistake of law in force in India: Mistake of law not in force in India (foreign law)1) Mistake of law in force in India: A contract entered into on an erroneous belief as to a law in force in India is very much valid and cannot be avoided. This is based on “ignorantia juris non-excusat” Which means “ignorance of law is not an excuse.” or every one should have knowledge of the law of his country.
2) Mistake of law not in force in India(foreign law): Mistake of foreign law is treated as the mistake of fact and so agreement in such case is void.