3. CONTENT
INTRODUCTION
DEFINITION OF CONSENT
DEFINITION OF FREE CONSENT
FACTORS AFFECTINF FREE CONSENT
i. COERCION
ii. UNDUE INFLUENCE
iii. MISREPRESENTATION
iv. FRAUD
MISTAKE
4. INTRODUCTION
According to the Section 10 of the INDIAN
CONTRACT ACT, 1872 lays down that “all
agreements are contracts if they are made by the
free consent of the parties”.
Thus, for the enforceability of an agreement not
only consent of the parties should be there but it
should also be free one.
5. DEFINITION OF CONSENT :
Section 13 defines “Two or more persons are said to consent when
they agree upon the same thing in the same sense”.
DEFINITION OF FREE CONSENT :
Section 14, Consent is said to be free when it is not caused by :
1. Coercion, Sec 15
2. Undue influence,Sec 16
3. Fraud, Sec 17
4. Misrepresentation,Sec 18
5. Mistake,subjectto the provisions of Secs 20,21 and 22
When consent to an agreement is caused by any one of the first four
factors mentioned in the definition of free consent,there is ‘no free
consent’and the contract is voidableat the option of the party whose
consent is so caused (Secs 19 and 19A).
7. COERCION
When a person is forced to give his consent
then coercion is said to be employed.
Sec 15 defines coercion as follows: “Coercion
is the committing or threatening to commit,
any act forbidden by the Indian Panel Code(
45 of 1860) or the unlawful detaining, or
threatening to detain, any property, to the
prejudice of any person whatever, with the
intention of causing any person to enter into
an agreement.”
8. FEATURES OF COERCION
Committing or threatening to commit any act forbidden by
Indian Panel Code.
The unlawful detaining of property or threatening to detain any
property.
Place of coercion.
Coercion may be from the party to the agreement or a stranger.
Coercion may be directed at a party to the agreement or a
stranger.
Intention of the party.
Threat to commit suicide.
Threat to file a suit on a false charge amounts to coercion.
9. EFFECT OF COERCION
(SECS. 19 AND 19A)
Contract becomes voidable.
Principle of equitable restitution applies in the following
two cases:
a. Section 64 provides that if the aggrieved party opts to
rescind(avoid) the voidable contract he must restore the
benefits received by him to the person from whom they
were received.
b. Section 72 lays down that a person to whom anything
has been delivered or money paid under coercion must
return or repay it.
Valid contract
10. UNDUE INFLUENCE
Undue influence is mental, moral or physical domination that deprives a person
of independent judgment and substitutes another person’s objectives in place of
his or her own.
By Halsbury “Undue influence is the unconscientious use by one person of
power possessed by him over another in order to induce the other party to enter
into a contract”.
Sec 16(1) defines undue influence as follows : “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 the other and he
uses that position to obtain an unfair advantage over the other”.
Sec 16(2) provides that when a person is deemed to be in a position to dominate
the will of another:
a. he has apparent real authority over another e.g. master and servant, police
officer and accused
b. he stands in fiduciary relation to the other e.g. doctor and patient, father and
son, guru and disciple
c. he makes contract with mentally distressed person e.g. old illiterate persons
d. he makes contract with pardanashin women e.g women living in seclusion.
11. • Wherever there is presumption of undue influence, the
burden of rebutting the presumption lies on guilty
party. He has to prove that price was adequate, there was
full disclosure of facts to other party and that other party's
consent was free.
12. There is no presumption of undue influence in cases of husband
and wife/mother and daughter/grandsonand grandfather/landlord
and tenant/creditor and debtor and undue influence has to be proved
by aggrievedparty.
Acontract causedby undue influence is voidable at the option of
the aggrieved party. Such partyhas the right to affirm the contract
or repudiate the contract.In case the partydecides to rescindthe
contract,it may have to restore back benefits received from other
partywholly or partlyas perthe directions of court (19A).
13. MISREPRESENTATION
Misrepresentation is a false representation of fact made innocently
or non-disclosure of material fact without any intention to deceive
the other party.
It is a mental state and intention, which distinguishes between fraud
and misrepresentation.
Section 18 defines misrepresentation as follows:
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.
2. Any breach of duty which, without an intent to deceive, gains an
advantage of the person committing it, or any one claiming under
him, by misleading another to his prejudice, or to the prejudice of
any one claiming under him.
3. Causing, however innocently, or party to an agreement, to make a
mistake as to the substance of the thing, which is the subject of the
agreement.
14. CONSTITUENTSAND ELEMENTS OF
MISREPRESENTATION
CONSTITUENTS:
i. Positive unwarranted Assertion
ii. Breach of duty
iii. Causing mistake about the subject matter
ELEMENTS:
i. It must have been made either by the party to the contract or his agent. False
representation made by a stranger will not invalidate the contract.
ii. False statement must relate to the facts material to the contract. In other words,
expression of opinion or intention shall not constitute misrepresentation.
iii. It must be such which the party making the assertion believes it to be true
although the party does not have sufficient ground for its belief.
iv. It must have been acted upon by the other party to the contract. A party cannot
avoid the contract on the basis of representation, if he had the means of
discovering the truth with ordinary diligence.
v. It must be made innocently without the intention of deceiving the other party. It
must also have been made before conclusion of the contract.
15. EFFECTS OF
MISREPRESENTATION
In case of misrepresentation the following
remedies are available to the aggrieved party:
i. He may rescind the contract;
ii. He may insist that the contract shall be
performed and he shall be put in the position in
which he would have been if the representation
made had been true.
16. EXCEPTIONS TO THE RIGHT OF
RESCISSION OF THE CONTRACT
Right of rescission of the contract of the aggrieved party
in case of ‘no free consent’ is not available to him in the
following exceptional cases:
i. Affirmation of contract
ii. Lapse of reasonable time
iii. Rights acquired by the third party
iv. Restoration of the parties to the original position
17. FRAUD
Fraud is an intentional misrepresentation of material existing facts made by
one person to another with knowledge of its falsity and for the purpose of
inducing the other person to enter into a contract.
Fraud is a false statement made knowingly or without belief in its truth, or
recklessly careless whether it be true or false.
Acc to Sec 17, Fraud means and includes any of the following acts
committed by a party to a contract, or with his connivance, or by his agent,
or with intent to deceive another party there to or his agent, or to induce him
to enter into the contract:
1. The suggestion, as a fact of that which is not true, by one who does not
believe it to be true.
2. The active concealment of a fact by one having knowledge or belief of the
fact.
3. A promise made without intention of performing it.
4. Any other act filled to deceive.
5. Any such act or omission as the law declares to be fraudulent.
18. ELEMENTS AND
EFFECTS(SEC19) OF FRAUD
ELEMENTS:
i. The act constituting fraud is committed by the party to the contract.
ii. The fraud must relate to any of the acts given under Sec 17.
iii. The fraud is committed upon the other party to the contract.
iv. The act constituting fraud must have induced the other party to enter into the
contract.
v. The fraud must have deceived the other party and resulted in damage or loss.
EFFECT (SEC 19):
i. He may rescind or set aside the contract.
ii. He may ask for restitution and insist on performance
iii. He may sue for damages, if any.
Exception to Sec 19, A party cannot avoid the contract if his consent was
caused by silence constituting fraud and he had the means of discovering the
truth with ordinary diligence.
19. SILENCE DOES NOT CONSTITUTE
FRAUD
Silence does not constitute fraud as per explanation to Sec
17. Silence will constitute fraud in the following cases:
i. Duty to speak
ii. Silence equivalent to speech
iii. Half truth
iv. Change of circumstances
20. MISTAKE
Mistake may be defined as innocent or
erroneous belief, which leads the party to
misunderstand the other.
