3. Flaw in consent
Coercion
(sec15)
Undue influence
(sec 16)
Misrepresentation
(sec 17,18)
Mistake
(sec 20,21)
Faudulent or wilful
(sec 17)
Innocent or
Unintentional
(sec 18)
Mistake of fact
(sec 20)
Mistake of law
(sec 21)
4. Bala Debi vs Majumdar,A.I.R (1956)
Cal 575
An illiterate women executed a deed of
gift in favour of her nephew under the
impression that she was executing a
deed authorizing her nephew to
manage her lands. The evidence
showed that the woman never intended
to execute such a deed of gift, nor was
the deed ever read or explained to her.
Held the deed was void and inoperative.
5. MEANING OF CONSENT
According to Section 13 two or more
persons are said to consent when they
agree upon the same thing in the
same sense.
This means that there should be
perfect identity of mind (consensus ad
idem) regarding the subject matter of
the contract.
6. FREE CONSENT
To make a contract valid not only consent is
necessary but the consent should also be
free.
Section 13 says the consent is said to be
free when it is not caused by any of the
following :
(a) Coercion - sec 15
(b) Undue influence - sec 16
(c) Fraud
(d) Misrepresentation - sec 17,18
(e) Mistake –sec 20,21
7. Coercion
Coercion is committing or threatening
to commit any act forbidden by the
Indian Penal Code, or the unlawful
detaining or threatening to detain any
property to the prejudice of any
person, whatsoever with the intention
of causing any person to enter into an
agreement .
9. Decided case of coercion
Muthta vs Muthu Karuppa,(1927) 50
Mad 786
An agent refused to hand over the
account books of a business to the new
agent unless the principal released him
from all liabilities. The principal had to
release deed as demanded.
Held the release deed was given
under coercion and was at the option
of the principal.
10. Is Threat to commit suicide coercion?
Madras high court has held by a majority
judgment that even a threat to commit
suicide is coercion even though it is not
punishable under the Indian penal code .
Example: A man by giving a threat to
commit suicide induces his wife and son to
execute a deed in favour of him in respect
of certain property and they execute. Held
that the consent of the wife and son has
obtained through coercion.
11. Effect of Coercion-section 19
When the consent of a party to an
agreement is obtained by coercion,the
contract becomes voidable at the
option of the party ,whose consent
is so obtained
The burden of proving that the
consent was obtained through
coercion shall be upon the party who
wants to set aside the contract on
the plea of contract.
12. Example of effect of coercion
Anuj executes a transfer bond for the
house under fear of assault .It will be a
contract voidable at the option of Anuj
since his consent was obtained by
coercion..
A railway company refuses to deliver
certain goods to the consignee, except
upon the payment of an illegal charge
for carriage. The consignee pays the
sum charged in order to obtain the
goods. He is entitled to recover so
much of the charge as was illegally
excessive.
13. 2.UNDUE INFLUENCE-section16
Undue influence is the improper use of
any power possessed over the mind of
the contracting party. According to
section 16 a contract is said to be
affected by undue influence when:
The relations subsisting between
the parties are such that one of the
parties is in a position to dominate
the will of other.
Uses that position to obtain an unfair
advantage over the other.
14. Example of undue influence
By operation you just execute a deed of giving your
Whole property to me
15. Following are the parties that can be
affected by undue influence
Doctor and patient
Lawyer and client
Guardian and ward
Trustee and beneficiary
Teacher and student
16. Decided case on undue influence
In Karnal Distillery Co. ltd V. Ladli
prasad .1958 Punj 190,confirmed by
the supreme court in 1963 S.C
1279,the elder brother was shown to
have exercised undue influence over
his younger brother in respect of a
compromise arrangement, the
transaction was held to be voidable at
the instance of the younger brother.
17. Difference between
coercion and undue influence
Coercion
The consent of the aggrieved party
is taken by committing or
threatening to commit an act
forbidden by Indian penal code.
Undue Influence
The consent of the aggrieved party
is obtained by dominating the party
by taking an unfair advantage of his
position.
Physical force is exercised
Relationship between the promisor
and the promisee is not necessary
Moral force is used in undue
influence
Some sort of relationship must
exist between the two parties to the
contract
18.
19. IMPORTANT POINTS
ABOUT THE CASE
Priyamvada Birla's will, which bequeaths the Rs 5,000
crore (Rs 50 billion) assets of the Madhav Prasad Birla
group to chartered accountant R S Lodha.
The family members have examined the will and the
consensus is that we have the moral and legal right to
challenge the validity of the will.
They also refused to believe that Priyamvada could
have left the will in the custody of the person who was
its beneficiary.
M P Birla had a 25 per cent stake in Pilani Investments
while the holding of BK Birla and GP Birla is 30 per
cent and 25 per cent, respectively.
The balance 20 per cent is held by the Krishna Kant
and Sudershan Kumar families. The Birla clan is
opposing the transfer of MP Birla's 25 per cent stake in
Pilani Investments to Lodha.
20. IMPORTANT POINTS
ABOUT THE CASE
Pilani Investments holds shares in Century Textiles,
Kesoram Industries, Mangalam Cement, Mysore Cements,
Grasim Industries, Hindalco, Indian Rayon, Jay Shree Tea,
Mangalore Refinery, Orient Paper, Saurashtra Chemicals,
Zuari Industries, Birla VXL, Bihar Caustic & Chemicals.
Since these companies hold shares in other Birla
companies, Pilani Investments has indirect holding in
virtually all the companies managed by the Birla group.
The will can also be challenged on another point: 'good
presumption of undue influence' as R S Lodha was
considered very close to Priyamvada Birla. If this is proven,
the will could be declared invalid.
The other basis for invalidation is if it is proven that the
person was not of sound mind while signing it. The brief will
-- apparently a mere four lines -- can be considered unusual
though not bad in law,
22. Meaning of fraud Sec. 17
Misrepresentation of facts may be
intentional or innocent. Intentional
misrepresentation has been termed as
Fraud and innocent misrepresentation
has been termed simply as
‘misrepresentation’ in the contract act.
23. Definition under law
section 17
According to section 17 fraud means and includes any
of the following acts
Committed by a party to a contract or by any one with
his connivance or by his agent with intent to deceive
another party thereto or his agent or to induce him to
enter into contract:
(a) A suggestion as to fact of that which is not true by one
who does not believe it to be true
(b) An active concealment of a fact by one having
knowledge or belief of the fact.
(c) Any other act fitted to deceive
(d) A promise made without any intention of performing it
24. Essential of fraud
There must be a representation and it must be
false.
(Peek vs Gurney(1873) L.R 6 H .L 377)
The representation must relate o material fact
(Bisset vs Wilkinson (1972) A.C 177)
The representation must have been made
before the conclusion of the contract with the
intention of inducing the other party to act upon
it.
The other party must have been induced to act
upon the representation
The other party must have relied upon the
representation and must have been deceived.
(Horsefull vs thomas , (1862) 1 H & C 90)
25. There must be false representation
Peek vs Gurney(1873) L.R 6 H .L 377
The prospectus of a company did not refer
to the existence of a document
disclosing liabilities. This gave the
impression that the company was
prosperous. If the existence of the
document had been disclosed the
impression would have been quite
different. Held, non disclosure amounted
to fraud and anyone who purchased
shares on the faith of this prospectus
could avoid the contract.
26. The representation must relate to
material fact
Bisset vs Wilkinson (1972) A.C 177
The vendor of a piece of land told a
prospective purchaser that, in his opinion
the land would carry 2000 sheep. In fact
the land could carry only a number less
than this. Held there was no
misrepresentation as the statement was
one of opinion which was honestly held
27. Examples of fraud
Manoj was induced to buy shares in a
company on account of a false statement
made by a stranger. It was held that he
could not get out of the bargains because
false statement was not made by the
company or its agent.
Manoj says to deepika his coat is made of
pure wool ,though he knows that it is untrue
.Deepika purchases the coat believing
Manoj’s statement to be true ,It is a fraud by
Manoj and therefore contract is voidable at
deepika’s option.
28. Mere silence without any legal
Duty to speak will not amount
To fraud except where
(a) The circumstances of the case
Are such that regard being
Had to them ,it is the duty of the
Person keeping silence to speak
(b)Silence in itself will be equivalent
To speech
Concealment by mere silence is not fraud
(c ) change of circumstances
(d) Duty to speak-where contracting
Party responses trust
and confidence
29. Decided case on
silence is not a fraud
Hands vs Simpson, fawcett & co ltd (1928)
44T LR 295
H a commercial traveller, obtained an
employment with S. S regarded driving as
an essential part of H’s duties but he did not
specifically ask H if he is qualified to drive a
car. H kept quiet about his disqualification
to drive a car. S contended that H’s silence
is misrepresentation. But it was held that H
was under no duty to volunteer the
information and there was no
misrepresentation.
30. Essentials of fraud
The act must have been committed by a
party to the contract or with his connivance
or by agent .It should not have been
committed by a stranger
The act must have been committed with the
intention of inducing the deceived party to
act upon it-It implies that the assertion
should be such that it would necessarily
influence and induce other party to act
Plaintiff must have suffered
31. Effect of Fraud
Section 19=The party whose consent
to the contract is obtained by fraud
can exercised any of the following
rights:
He may avoid the contract and may (i)
ask for the damages suffered because
of the non fulfillment of the contract
He may insist for the performance of
the contract .
32. Examples of fraud
a) A sells, by auction, to B, a horse which A
knows to be unsound. A says nothing to B
about the horse's unsoundness. This is not
fraud in A.
b) B is A's daughter and has just come of age.
Here, the relation between the parties would
make it A's duty to tell B if the horse, is
unsound.
c)A and B, being traders, enter upon a contract.
A has private information of a change in prices
which would affect B's willingness to proceed
with the contract. A is not bound to inform B.
34. Misrepresentation
Misrepresentation is a false representation
made innocently without any intention of
deceiving the other party .It may include two
things:
(a) wrong statement of a material fact not
known to be false
(b) Non-disclosure of facts where there is a
legal duty to disclose without intention to
deceive
SECTION 18
35. Difference between fraud and
misrepresentation
Misrepresentation fraud
There is no intention to
deceive or to gain any
undue advantage
In fraud the false statement
is made deliberately with a
clear intention of deceiving
the other party
It makes the other contract
only voidable at the option
of the party whose consent
has been so caused
In fraud the injured party
besides avoiding the
contract may also claim the
damages.
37. Mistake of law
Mistake of law is further divided into
three categories
(a) mistake of Indian law
(b) mistake of foreign law
(b) mistake as to private rights of the
parties – treated as mistake of fact .
Here , the agreement will be void in
case of bilateral mistake only.
38. Mistake of fact
Bilateral mistake
Unilateral mistake are two types of
mistake of fact
39. Bilateral mistake
Section 20 states that were both the parties
to an agreement are under a mistake as to
a matter of fact, essential to the agreement
shall be void. The mistake shall be termed
as bilateral mistake of fact only when both
of the following conditions are satisfied
(a) it should be committed by both the
parties
(b) it should relate to a matter of fact
essential to the agreement.
E.g.-A agrees to buy certain horse from B .It
turns out that the horse was dead at the
time of the agreement ,though neither party
was aware about this fact. The agreement
is void.
40. Case of material fact
referring to previous slide
A and B believing themselves to be
married ,made a separation
agreement in which A agree to pay B
Rs 10000 .It was later discovered that
they were not duly married .B claimed
the promised money .The agreement
was held to be void as there was
mistake of fact on their part which was
material to the existence of the
agreement.
42. Mistake as to possibility of
performing the contract
a) Physical impossibility
b) Legal impossibility
43. Unilateral mistake
One party to a contract is under a mistake
of fact, the contract is voidable .unilateral
mistake do not affect the validity of contract
unless they concern some fundamental
Example: A agreed to buy certain wheat
from B believing that they were old.Infact
wheat offered were new. It was held that A
could not avoid the contract on the ground
that he had a mistaken impression as to the
oldness of wheat.
44. Unilateral mistake is fundamental
and affects the character of the
contract , the innocent party is
freed from liability
Mistake as to nature of the contract
Case Foster vs. Mackinnon – illiterate old
man signing pronote thinking as if he was
acting as a witness……
Mistake as to the identity of the person
contracted with
