1. FREE CONSENT
Free consent of all the parties to a contract is one of
the essential elements of a valid contract as per
requirement of section 10.
The two parties to a contract should have identity of
minds. (consensus ad idem)
Or
Parties must agree upon the same thing in the same
sense.

2. 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:

3. Cases where consent is not free
Free 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) Coercion
2) Undue influence
3) Fraud
4) Mis-representation
5) Mistake

4. 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.

5. 1.Coercion
According 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.

6. 2.Undue Influence
Sometimes 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.

7. 3.Fraud
According 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.

8. Essentials fo Fraud
1) 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)

9. Mere silence is not fraud
A 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.

10. Silence is fraud in the following cases:
1) Contracts of Insurance
2) Contracts of marriage
3) Share allotment contracts
4) 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.

11. Misrepresentation
Consent 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”.
OR
A 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.

12. 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)

13. 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.

14. MISTAKE
Mistake
Mistake Mistake
of Law of fact

15. 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”

16. 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.

17. 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.

18. Mistake of Law
Mistake 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.

19. 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.