2. DEFINITION OF CONSENT
According to section 13 of Indian Contract Act “
Two or more persons are said to have consent when
they agree upon the same thing in the same sense.”
In English law, this is called ‘consensus – ad –
idem’
3. EFFECT OF ABSENCE OF CONSENT
When there is no consent at all, the
agreement is void – ab – initio’.
It is not enforceable at the option of either
party
4. DEFINITION OF FREE CONSENT
Section 14 of Indian Contract Act states that, “
Consent is said to be free when it is not caused by :
1. Coercion u/s 15
2. Undue Influence u/s 16
3. Fraud u/s 17
4. Misrepresentation u/s 18
5. Mistake u/s 20,21,22 ”
5. EFFECT OF ABSENCE OF FREE
CONSENT
If consent is due to coercion, undue
influence, fraud, Misrepresentation the
contract is voidable at the option of party
whose consent was not free [19,19A]
6. 1. DEFINITION OF COERCION
According to section 15 of ICA, “ Coercion is
committing or threatening to commit any act
forbidden by the Indian Penal Code or An unlawful
detaining or threatening to detain any property of
any person with the intention of inducing any
person to enter into an agreement. ”
7. COERCION: SEC 15
1. Committing or threatening to commit any act forbidden
by the IPC 1860 with an intention to cause any person
to enter into an agreement.
2. The unlawful detaining or threatening to detain any
property with an intention to cause any person to enter
into an agreement.
8. 3. The act constituting coercion, may be directed
at any person & not necessarily at the other
party to the agreement.
4. It does not matter whether the IPC is or is not
in force where the coercion is employed. If suit
is filed in India the said provision will apply.
9. EFFECTS OF COERCION
1. Voidable u/s Sec 64
2. The party exercising coercion exposes himself to
criminal liability under the IPC, besides an action in
contract.
3. Burden of proof lies on the party who wants to set
aside the contract on the plea of coercion.
10. 2. DEFINITION OF UNDUE INFLUENCE
According to section 16(1), “ A contract is said
to be induced by undue influence where the
relations subsisting (existing) between the parties
are such that, one of the party is in a position to
dominate the will (wish) of the other & uses the
position to obtain an unfair advantage over the
other. ”
11. PRESUMPTION OF UNDUE INFLUENCE
u/s 16(2)
In the following cases undue influence is presumed to exist & the
burden of proof lies on the party who is in a position to dominate the
will of the other:
1. The person holds a real or apparent authority over the
other, e.g., master & servant, police officer & accused,
doctor & patient, etc.
2. Fiduciary relationship e.g., father & son, Mother &
daughter, Grandson & grandfather solicitor & client,
trustee & beneficiary, promoter & company, etc.
12. 3. Where he makes a contract with a person whose
mental capacity is temporarily or permanently affected
by reason of age, illness or mental or bodily distress.
13. NO PRESUMPTION OF UNDUE
INFLUENCE
In the following cases law does not presume undue
influence & the burden of proof lies on the party alleging
that undue influence existed:
Husband & wife
Creditor & debtor
Landlord & tenant.
14. EFFECTS OF UNDUE INFLUENCE
Voidable
Sec. 64: Court has the discretion to direct the aggrieved
party to refund the benefit in part or in whole or set aside
the contract without any direction for refund of benefit.
There is no criminal liability in case of undue influence.
15. 3. MEANING OF FRAUD
Fraud is the willful representation made by a
party to a contract, or by his agent, with intent to
deceive the other party or to induce such party to
enter into a contract. In other words, it is a false
statement made knowingly or without caring
whether it is true or false.
16. DEFINITION OF FRAUD u/s17
Fraud means & includes any of the following acts
committed by a party with an intention to deceive or
induce the other party to enter into a contract:
1. The suggestion that a fact is true when it is not true and the
person making the suggestion does not believe it to be
true.
2. The active concealment of a fact by a person having
knowledge or belief of the fact is fraud. (However, mere
non-disclosure is not a fraud, if there is no duty to disclose).
17. 3. A promise made without any intention of
performing it.
4. Any act or omission declared by law to be
fraudulent.
5. Any other act fitted to deceive.
18. ESSENTIAL ELEMENTS OF FRAUD
1. There must be a representation or assertion and it must be false.
2. The representation must relate to a material fact which exists now
or existed in the past.
3. The representation must have been made before the conclusion
of the contract with the intention of inducing the other party to act
upon it.
4. The representation or statement must have been made with a
knowledge of its falsity or without belief in its truth or recklessly,
not caring whether it is true or false.
19. 5. The other party must have been induced to act upon the
representation or assertion.
6. The other party must have relied upon the
representation and must have been deceived.
7. The other party acting on the representation or
assertion, must have subsequently suffered some loss.
20. ACTION FOR FRAUD
1. Fraudulent statement must be instrumental in inducing the
party to enter into a contract.
2. The plaintiff must have been actually deceived by the
fraudulent statement.
3. No action will lie if the plaintiff does not sustain any loss or
injury.
4. The contract is not Voidable if the party had enough
means at its disposal to discover the truth with ordinary
diligence.
21. EFFECTS OR CONSEQUENCIES OF
FRAUD U/S 19:
1. Right to rescind the contract u/s 19(1).
2. He can insist on the performance of the contract on
the condition that he shall be put in the position in
which he would have been if the representation made
had been true. u/s 19(2)
3. The aggrieved party can also claim damages.
4. Fraud by a stranger to the contract does not affect the
contract.
22. SILENCE AS TO FACTS
The general rule is that a person before entering
into a contract need not disclose to the other party the
material facts which he knows, but he must refrain
from making active concealment (like concealing a
crack on the surface of a table by filling it and
repolishing it). This means mere silence is not fraud.
23. SILENCE AMOUNTS TO FRAUD/
EXCEPTIONS
Mere silence as to facts likely to affect the willingness of a
person to enter into a contract is not fraud, unless:
1. Such a person is under a duty to speak or
2. Silence is in itself equivalent to speech.
3. If a representation becomes false due to change of
circumstances at the time when the contact is entered into.
4. If a seller fails to inform the buyer as to a latent defect.
5. If a trustee does not make the full disclosure of facts to the
beneficiary while entering into a contract.
24. 4. MEANING OF MISREPRESENTATION
A representation means a statement of fact made by one
party to the other either before or at the time of contract,
relating to some matter essential to the formation of the
contract, with an intention to induce the other party to enter
into a contract.
It may be expressed by words spoken or written or implied from
the acts or conduct of the parties.
In law, a representation when wrongly made without an intention
to deceive the other party is known as misrepresentation.
25. DEFINITION OF MISREPRESENTATION
The word misrepresentation means a statement
of fact made by one party to other, either before or
at the time of contract, with regard to some matter
essential for the contract. In simple words, we can
say that “A representation when wrongly made
innocently is called misrepresentation.”
26. DEFINITION OF MISREPRESENTATION
u/s 18
There is misrepresentation:
1. When a person positively asserts that a fact is true when
his information does not warrant it to be so, though he
believes it to be true.
2. When there is any breach of duty by a person which brings
an advantage to the person committing it by misleading
another to his prejudice.
27. 3. When a party causes, however innocently, the other
party to the agreement to make a mistake as to the
substance of the thing which is the subject of the
agreement.
28. REQUIREMENTS OF MISREPRESENTATION
1. It must be a representation of material fact the truth with
ordinary diligence.
2. It must be made before the conclusion of the contract
with a view to inducing the other party to enter into a
contract.
3. It must be made with the intention that it should be acted
upon by the person to whom it is addressed.
29. 4. It must actually have been acted upon and must have
induced the contract.
5. It must be wrong but the person who made it honestly
believed it to be true.
6. It must be made without any intention to deceive the
other party.
7. It need not be made directly to the plaintiff.
30. EFFECTS OF MISREPRESENTATION u/s 19
1. Voidable
2. May choose to rescind or avoid the contract or
3. Affirm the contract & insist that he shall be placed in a
position in which he would have been, if the
representation made had been true.
4. The remedy is lost if the other party had sufficient means
of discovering the truth with ordinary diligence.
31. 5. DEFINITION OF MISTAKE
It may be defined as an erroneous belief
concerning about something. It means that the
parties intending to do one thing, have by
intentionally done something else. It may be of two
types:
1. Mistake of Fact
2. Mistake of Law
33. MISTAKE OF INDIAN LAW
Mistake of law does not give right to the parties to set
aside the contract & hence such a contract is not
Voidable. This is based on the maxim “Ignorantia non-
excusat” . Hence no relief can be granted on the
grounds of mistake of law.
However, if one of the parties make a mistake of law,
through the inducement, whether innocent or otherwise,
of the other party, then the contract may be avoided.
34. MISTAKE OF FOREIGN LAW
Mistake of foreign law stands on the same
footing as mistake of fact. Here the agreement is
void in case of bilateral mistake only.
35. BILATERAL MISTAKE
Where the parties to an agreement
misunderstood each other & are at cross
purposes, there is a bilateral mistake.
In this case there is no agreement as there is no
consensus and hence the agreement is void.
In case of bilateral mistake of an essential fact,
the agreement is void ab initio.
36. ESSENTIALS OF BILATERAL MISTAKE
The mistake must be mutual, i.e., both the parties must
misunderstand each other so as to nullify consent.
Mistake must relate to some fact and not an opinion.
The fact must be essential to the agreement: mistake as
to the existence, identity, title, quantity, quality of the
subject-matter of the contract.
Mistake as to the possibility of performing the contract:
Physical impossibility
Legal impossibility
37. UNILATERAL MISTAKE
Where only one of the contracting parties is under a mistake,
as to the matter of fact essential to the contract, it is a
unilateral mistake.
38. In case of unilateral mistake the contract is:
1. Valid: if the mistake is caused due to ones own negligence
or lack of reasonable care.
2. Voidable: if the mistake is caused by fraud,
misrepresentation, etc.
3. Void ab initio: where the mistake is with regard to the
identity of a person & where such identity is crucial to the
agreement or the mistake is with regard to the nature of a
written document.
