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  • A contract without free consent is not voidable because all contracts will be with free consent. That is democracy and liberty. Silvio LLanos-de la Hoz
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  • I am thinking that is a very important contribution to learn about communication with others.
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  1. 1. CONSENT A contract without free consent is voidable contract. Prof Shweta Verma, Faculty,IMM
  2. 2. Prof Shweta Verma, Faculty,IMM 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)
  3. 3. Bala Debi vs Majumdar,A.I.R (1956) Cal 575 <ul><li>An illiterate women executed a deed of gift in favor 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. </li></ul>Prof Shweta Verma, Faculty,IMM
  4. 4. MEANING OF CONSENT <ul><li>According o 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. </li></ul>Prof Shweta Verma, Faculty,IMM
  5. 5. FREE CONSENT <ul><li>To make a contract valid not only consent is necessary but the consent should also be free. </li></ul><ul><li>Section 13 says the consent is said to be free when it is not caused by any of the following : </li></ul><ul><li>(a) Coercion-sec 15 </li></ul><ul><li>(b) Undue influence –sec 16 </li></ul><ul><li>(c) Misrepresentation –sec 17,18 </li></ul><ul><li>(e) Mistake –sec 20,21 </li></ul>Prof Shweta Verma, Faculty,IMM
  6. 6. Coercion <ul><li>SECTION 15 –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 intension of causing any person to enter into an agreement . </li></ul>Prof Shweta Verma, Faculty,IMM
  7. 7. Prof Shweta Verma, Faculty,IMM An example of Coercion
  8. 8. Decided case of coercion Muthta vs Muthu Karuppa,(1927) 50 Mad 786 <ul><li>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 pincipal had to release deed as demanded. Held the release deed was given under coercion and was voidable at the option of the principal. </li></ul>Prof Shweta Verma, Faculty,IMM
  9. 9. Is Threat to commit suicide coercion? <ul><li>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 . </li></ul><ul><li>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. </li></ul>Prof Shweta Verma, Faculty,IMM
  10. 10. Effect of coercion-section 19 <ul><li>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 </li></ul><ul><li>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. </li></ul>Prof Shweta Verma, Faculty,IMM
  11. 11. Example of effect of coercion <ul><li>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.. </li></ul><ul><li>A railway company refuses to deliver up 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. </li></ul>Prof Shweta Verma, Faculty,IMM
  12. 12. 2.UNDUE INFLUENCE-section16 <ul><li>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: </li></ul><ul><li>The relations subsisting between the parties are such that one of the parties is in a position to dominate the will of other. </li></ul><ul><li>Uses that position to obtain an unfair advantage over the other. </li></ul>Prof Shweta Verma, Faculty,IMM
  13. 13. Example of undue influence Prof Shweta Verma, Faculty,IMM By operation you just execute a deed of giving your Whole property to me
  14. 14. Following are the parties that can be affected by undue influence <ul><li>Doctor and patient </li></ul><ul><li>Lawyer and client </li></ul><ul><li>Guardian and ward </li></ul><ul><li>Trustee and beneficiary </li></ul><ul><li>Teacher and student </li></ul>Prof Shweta Verma, Faculty,IMM
  15. 15. Decided case on undue influence <ul><li>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. </li></ul>Prof Shweta Verma, Faculty,IMM
  16. 16. Difference between coercion and undue influence Prof Shweta Verma, Faculty,IMM 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
  17. 17. Prof Shweta Verma, Faculty,IMM
  18. 18. IMPORTANT POINTS ABOUT THE CASE <ul><li>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. </li></ul><ul><li>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. </li></ul><ul><li>They also refused to believe that Priyamvada could have left the will in the custody of the person who was its beneficiary. </li></ul><ul><li>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. </li></ul><ul><li>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. </li></ul><ul><li>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. </li></ul><ul><li>Since these companies hold shares in other Birla companies, Pilani Investments has indirect holding in virtually all the companies managed by the Birla group. </li></ul><ul><li>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. </li></ul><ul><li>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, </li></ul>Prof Shweta Verma, Faculty,IMM
  19. 19. 3.Fraud Prof Shweta Verma, Faculty,IMM Section 17
  20. 20. Meaning of fraud <ul><li>Misrepresentation of facts may be intentional or innocent. Intentional misrepresentation has been termed as Fraud and innocent misrepresentation has been termed simply as ‘misrepresentation’ </li></ul><ul><li>in the contract act </li></ul>Prof Shweta Verma, Faculty,IMM
  21. 21. Definition under law section 17 <ul><li>According to section 17 fraud means and includes any of the following acts </li></ul><ul><li>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: </li></ul><ul><li>(a) A suggestion as to fact of that which is not true by one who does not believe it to be true </li></ul><ul><li>(b) An active concealment of a fact by one having knowledge or belief of the fact. </li></ul><ul><li>(c) Any other act fitted to deceive </li></ul><ul><li>(d) A promise made without any intention of performing it </li></ul>Prof Shweta Verma, Faculty,IMM
  22. 22. Essential of fraud <ul><li>There must be a representation and it must be false. </li></ul><ul><li>(Peek vs Gurney(1873) L.R 6 H .L 377) </li></ul><ul><li>The representation must relate o material fact </li></ul><ul><li>(Bisset vs Wilkinson (1972) A.C 177) </li></ul><ul><li>The representation must have been made before the conclusion of the contract with the intention of inducing the other party to act upon it. </li></ul><ul><li>The other party must have been induced to act upon the representation </li></ul><ul><li>The other party must have relied upon the representation and must have been deceived. </li></ul><ul><li>(Horsefull vs thomas , (1862) 1 H & C 90) </li></ul>Prof Shweta Verma, Faculty,IMM
  23. 23. <ul><li>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. </li></ul>There must be false representation Peek vs Gurney(1873) L.R 6 H .L 377 Prof Shweta Verma, Faculty,IMM
  24. 24. The representation must relate to material fact Bisset vs Wilkinson (1972) A.C 177 <ul><li>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 </li></ul>Prof Shweta Verma, Faculty,IMM
  25. 25. Examples of fraud <ul><li>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. </li></ul><ul><li>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. </li></ul>Prof Shweta Verma, Faculty,IMM
  26. 26. Prof Shweta Verma, Faculty,IMM 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
  27. 27. Decided case on silence is not a fraud <ul><li>Hands vs Simpson, fawcett & co ltd (1928) 44T LR 295 </li></ul><ul><li>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. </li></ul>Prof Shweta Verma, Faculty,IMM
  28. 28. Essentials of fraud <ul><li>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 </li></ul><ul><li>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 </li></ul><ul><li>Plaintiff must have suffered </li></ul>Prof Shweta Verma, Faculty,IMM
  29. 29. Effect of Fraud <ul><li>Section 19=The party whose consent to the contract is obtained by fraud can exercised any of the following rights: </li></ul><ul><li>He may avoid the contract and may (i) ask for the damages suffered because of the non fulfillment of the contract </li></ul><ul><li>He may insist for the performance of the contract . </li></ul>Prof Shweta Verma, Faculty,IMM
  30. 30. Examples of fraud <ul><li>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. </li></ul><ul><li>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. </li></ul><ul><li>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. </li></ul>Prof Shweta Verma, Faculty,IMM
  31. 31. Misrepresentation Prof Shweta Verma, Faculty,IMM
  32. 32. Misrepresentation <ul><li>Misrepresentation is a false representation made innocently without any intention of deceiving the other party .It may include two things: </li></ul><ul><li>(a) wrong statement of a material fact not known to be false </li></ul><ul><li>(b) Non-disclosure of facts where there is a legal duty to disclose without intention to deceive </li></ul><ul><li>SECTION 18 </li></ul>Prof Shweta Verma, Faculty,IMM
  33. 33. Difference between fraud and misrepresentation Prof Shweta Verma, Faculty,IMM 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.
  34. 34. Mistake <ul><li>Mistake are of two type </li></ul><ul><li>Mistake of law </li></ul><ul><li>Mistake of fact </li></ul>Prof Shweta Verma, Faculty,IMM
  35. 35. Mistake of law <ul><li>Mistake of law is further divided into three categories </li></ul><ul><li>(a) mistake of Indian law </li></ul><ul><li>(b) mistake of foreign law </li></ul><ul><li>(b) mistake as to private rights of the parties </li></ul>Prof Shweta Verma, Faculty,IMM
  36. 36. Mistake of fact <ul><li>Bilateral mistake </li></ul><ul><li>Unilateral mistake are two types of mistake of fact </li></ul>Prof Shweta Verma, Faculty,IMM
  37. 37. Bilateral mistake <ul><li>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 </li></ul><ul><li>(a) it should be committed by both the parties </li></ul><ul><li>(b) it should relate to a matter of fact essential to the agreement. </li></ul><ul><li>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. </li></ul>Prof Shweta Verma, Faculty,IMM
  38. 38. Case of material fact referring to previous slide <ul><li>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. </li></ul>Prof Shweta Verma, Faculty,IMM
  39. 39. Unilateral mistake <ul><li>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 </li></ul><ul><li>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. </li></ul>Prof Shweta Verma, Faculty,IMM

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