This document discusses free consent in contracts. It defines free consent as consent that is not caused by coercion, undue influence, misrepresentation, or mistake. It outlines situations that invalidate consent, including coercion (using unlawful threats), undue influence (exploiting a power imbalance), fraud (intentional misrepresentation), and mistake. For each situation, it provides definitions, essential elements, examples, and the legal effect of invalidating consent. It also discusses differences between coercion and undue influence, as well as fraud and innocent misrepresentation. Overall, the document comprehensively covers the key aspects of free and valid consent as it relates to forming enforceable contracts under Indian law.

1. Free Consent
Chapter 5

2. FREE CONSENT
A contract without free consent is
voidable contract.

3. Flaw in consent
Coercion
(sec15)
Undue influence
(sec 16)
Misrepresentation
(sec 17,18)
Faudulent or wilful
(sec 17)
Innocent or
Unintentional
(sec 18)
Mistake
(sec 20,21)
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 .

8. 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.

9. 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.

10. 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.

11. 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.

12. 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.

13. 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

14. 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.

15. 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

16. 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,

17. 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.

18. 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

19. 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)

20. 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.

21. 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

22. 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.

23. 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

24. 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.

25. 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

26. 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 .

27. 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.

28. 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

29. 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.

30. Mistake
• Mistake are of two type
(a) Mistake of law
(b) Mistake of fact

31. 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.

32. Mistake of fact
• Bilateral mistake
• Unilateral mistake are two types of mistake of fact

33. 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.

34. 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.

35. Bilateral mistake-
Mistake as to subject matter
a) Existence
b) Identity
c) Title
d) Price
e) Quantity
f) Quality

36. Mistake as to possibility of performing the
contract
a) Physical impossibility
b) Legal impossibility

37. 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.

38. 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