Indian Contract Act 1872
Undue Influence
The term undue influence means the unfair use of one’s
superior power in order to...
Indian Contract Act 1872
In following conditions one party is presumed to be in a
position to dominate the other.
a. Where...
Indian Contract Act 1872
Effects of Undue Influence(Sec 19 A)
‘When consent to an agreement is caused by undue influence,
...
• Allcard V Skinner [(1887) 36 Ch. D 145] –
A contract induced by undue influence is only
voidable and therefore could be ...
Indian Contract Act 1872
The defense
1. The party, who has influence over the other has disclosed
all material facts to th...
Indian Contract Act 1872
Coercion
1. No free consent
2. The contract is voidable at the
option of the party whose
consent ...
Indian Contract Act 1872
Consent by Fraud
It may be defined as an intentional, deliberate or
willful misstatement of facts...
Indian Contract Act 1872
1.

The suggestion, as to the fact, of that which is not true, by one who does not
believe it to ...
Indian Contract Act 1872

Silence as a fraud
Explanation to Sec 17 says
‘ Mere silence is no fraud, unless the circumstanc...
Indian Contract Act 1872
Effects of Fraud(Sec.19)
‘When consent to an agreement is caused by fraud, the
agreement is a con...
Indian Contract Act 1872
Misrepresentation(Sec.18)
Misrepresentation is an innocent misstatement of facts which
are materi...
Indian Contract Act 1872
Essential Elements
1. The misrepresentation must be of material facts(difference
between opinion ...
Indian Contract Act 1872
Consent by Mistake(Sec.20)
It may be defined as incorrect belief about something
which leads one ...
Indian Contract Act 1872
1.
2.
3.
A.
1.
2.
3.
4.
5.
6.
7.

Essential Element
The mistake must be of both the parties
The m...
Indian Contract Act 1872
Effects(Sec.20)
‘Where both the parties to an agreement are under a
mistake as to a matter of fac...
Indian Contract Act 1872
Essentials
1. The mistake of fact must be about the essential fact of the
agreement.(Raja Singh V...
Indian Contract Act 1872
Mistake of Law
1. The mistake of law of the land(Indian Law)
The concept is based on a maxim ‘ign...
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Undue influence fraud misrepresentation

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Undue influence fraud misrepresentation

  1. 1. Indian Contract Act 1872 Undue Influence The term undue influence means the unfair use of one’s superior power in order to obtain the consent of a person who is in a weaker position. Sec.16(1) says ‘A contract is said to be induced by undue influence where the relations subsisting between the parties, are such that one of the parties is in a position to dominate the will of other, and uses that position to obtain an unfair advantage over the other. It contains the following elements 1. The subsisting relations between the parties are such that one of the parties is in a position to dominate the will of other. In Smith v Kay(1859) Lord Kingsdown observed ‘The principle applies to every case where influence is acquired and abused, where confidence is reposed and betrayed’
  2. 2. Indian Contract Act 1872 In following conditions one party is presumed to be in a position to dominate the other. a. Where one party holds a real or apparent authority over the other. b. Where one party stands in a fiduciary relation to the other. c. Where one party makes a contract with another in a mental distress. (Mannu Singh V. Umadatt Pandey (1890) 2. The dominant party uses his superior position to obtain an unfair advantage over the weaker party. Priyamvada Birla V. R S Lodha 3. By the use of that dominant position, an unfair advantage has been obtained
  3. 3. Indian Contract Act 1872 Effects of Undue Influence(Sec 19 A) ‘When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused. Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as the court may seem just’ Presumption of domination of will 1. Where one party holds a real or apparent authority over the other. 2. Where one party stands in a fiduciary relationship to the other 3. Where one party makes a contract with the other who is in mental distress.
  4. 4. • Allcard V Skinner [(1887) 36 Ch. D 145] – A contract induced by undue influence is only voidable and therefore could be affirmed expressly or by conduct.
  5. 5. Indian Contract Act 1872 The defense 1. The party, who has influence over the other has disclosed all material facts to the other. 2. The contract is advantageous to the weaker party. 3. The consideration is adequate 4. The weaker party was in receipt of independent advice and was free to exercise it. Burden of proof Once it is proved that 1. The superior party was in a position to dominate his will. 2. The bargain appears to be unconscionable in nature, The burden of proof that such contract was not induced by undue influence shall lie upon the person who is in a position to dominate the will of the other.
  6. 6. Indian Contract Act 1872 Coercion 1. No free consent 2. The contract is voidable at the option of the party whose consent was obtained by coercion 3. Relationship between the parties is immaterial 4. It can be initiated/employed by/against even a stranger 5. The consent is obtained by committing/threatning or (detaining/threatning to detain property) to commit an act forbidden by IPC 6. The force used is of physical nature Undue Influence 1. No free consent 2. The contract is voidable at the option of the party whose consent was obtained by undue influence 3. Some kind of relationship must exist, which dominates. 4. It must be exercised by a party who is in the position to dominate the will of other 5. The consent is obtained by dominating the will and taking an unfair advantage 6. The force is of moral nature.
  7. 7. Indian Contract Act 1872 Consent by Fraud It may be defined as an intentional, deliberate or willful misstatement of facts, which are material for the formation of a contract. Here intention to deceive is most important. Sec 17 of Indian Contract Act says ‘Fraud means and includes any of the following acts committed by a party to a contract or with his connivance or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract.
  8. 8. Indian Contract Act 1872 1. The suggestion, as to the fact, of that which is not true, by one who does not believe it to be true. 2. Active concealment of a fact by one having knowledge or belief of the fact. 3. A promise made without any intention of performing it 4. Any other act to deceive which the law declares to be fraudulent’ Basic elements 1. False statement of fact a. there is a statement, which is false for obtaining wrongful gains b. the statement relates to the facts c. the statement is made by a person who knows that it is not true 2. Active concealment of a fact a. there is a concealment of fact b. the concealment is active(efforts are made to conceal the fact) c. the concealment is made by a party who has the knowledge of it 3. A promise made without any intention of performing it (Shireen mall V. John james Taylor AIR 1952 Punj.227 4. Any other act fitted to deceive 5. Such act or omission as the law specially declares to be fraudulent
  9. 9. Indian Contract Act 1872 Silence as a fraud Explanation to Sec 17 says ‘ Mere silence is no fraud, unless the circumstances of the case are such that regard being had to them, it is the duty of the person keeping silence to speak, unless his silence, is, in itself, equivalent to speech’ Analysis The silence amounts to fraud in the following two cases 1. Where there is a duty to speak 2. Where the silence is equivalent to speech 3. Half truth 4. Change of circumstances(circumstantial changes in contractual clauses)
  10. 10. Indian Contract Act 1872 Effects of Fraud(Sec.19) ‘When consent to an agreement is caused by fraud, the agreement is a contract voidable at the options of the party whose consent was so caused’ Exceptions 1. Where the silence amounts to fraud, the contract is not voidable, if the other party had the means of discovering the truth with ordinary diligence. Thus a party cannot complain of fraudulent silence if he had the means of discovering the truth with ordinary means. 2. Where the fraud does not induce the other party to enter into a contract, the contract is not voidable. Thus if the consent is given independently in spite of fraud, the contract is not voidable.
  11. 11. Indian Contract Act 1872 Misrepresentation(Sec.18) Misrepresentation is an innocent misstatement of facts which are material for a contract. ‘Misrepresentation means and includes 1. The positive assertion, in a manner not warranted by the information of person making it, of that which is not true, though he believes it to be true. 2. Any breach of duty which without an intent to deceive, gains an advantage to the person committing it, or anyone claiming under him, by misleading another to his prejudice or to the prejudice of anyone claiming under him. 3. Causing however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement.
  12. 12. Indian Contract Act 1872 Essential Elements 1. The misrepresentation must be of material facts(difference between opinion and statement) Smith V. Land and Housing Corporation(1884) 2. The misrepresentation must be false but the person making it honestly believes it to be true 3. The misrepresentation must induce the other party to enter into contract 4. The misrepresentation must have been addressed by one party to the party misled. 5. Change of circumstances, may amount to misrepresentation Effects of Misrepresentations(Sec.19) ‘When consent to an agreement is caused by misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused’
  13. 13. Indian Contract Act 1872 Consent by Mistake(Sec.20) It may be defined as incorrect belief about something which leads one party to misunderstand the other. Types of mistake 1. Mistake of fact a. Bilateral(Mutual) mistake b. Unilateral mistake 2. Mistake of law Mutual Mistake It may be defined as a mistake in which both the parties to an agreement are confused about the facts, which are essential to the agreement
  14. 14. Indian Contract Act 1872 1. 2. 3. A. 1. 2. 3. 4. 5. 6. 7. Essential Element The mistake must be of both the parties The mistake of fact must be about the essential fact of the agreement. The mistake must be about existing fact Types of Bilateral Mistake Mistake about subject matter Mistake about the existence of the subject matter Mistake about the title of the subject matter Mistake about the substance of the subject matter Mistake about the quality of the subject matter Mistake about the quantity of the subject matter Mistake about the price of the subject matter Different subject matter in the minds of both the parties
  15. 15. Indian Contract Act 1872 Effects(Sec.20) ‘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’ B. Mistake about possibility of performance(Sec.56) ‘An agreement to do an act impossible in itself is void’ It means an agreement for an impossible act is void. Unilateral mistake An unilateral mistake is that where one party to an agreement is confused about the facts which are essential to the agreement. Generally unilateral agreements do not render an agreement void but there are certain mistakes which renders an agreement void.
  16. 16. Indian Contract Act 1872 Essentials 1. The mistake of fact must be about the essential fact of the agreement.(Raja Singh V. Chaichoo Singh,AIR,1940,Patna 201) 2. The mistake of fact must defeat the true consent of the parties(Slower V Potter(1940) Types 1. Mistake about the identity of the parties to an agreement. 2. Mistake about the nature of the agreement Effects Sec.22 of Indian Contract Act says ‘A contract is not voidable merely because it was caused by one of the parties to it under a mistake as to the matter of fact.
  17. 17. Indian Contract Act 1872 Mistake of Law 1. The mistake of law of the land(Indian Law) The concept is based on a maxim ‘ignorentia juris non excusat’ Sec.21 of India Contract Act says ‘A contract is not voidable because it was caused by a mistake as to any law in force in law Mistake of foreign law, does have the same effect. * Please consult the books as provided in the course plan.
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