CHAPTER 6

FREE CONSENT

CONSENT

According to Section 13 of the Act has defined consent as "Two or more persons are said to consent
when they agree upon the same thing in the same sense".

Thus consent involves identify of minds or consensus ad idem.

FREE CONSENT:

The word "free consent" is defined in Section 14 of the Contract Act as follows

"Consent is said to be free when it is not caused by

1. Coercion (Section 15)

2. Undue influence (Section 16)

3. Fraud (Section 17)

4. Misrepresentation (Section 18)

5. Mistake (Section 20,21 and 22)

COERCION [SECTION. 15]

(a person is compelled to enter into a contract by the use of force by the other party or under threat)

Section 15 of the Indian Contract Act defines coercion as

"the 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 whatever, with the
intention of causing any person to enter into an agreement".

Example: X beats Y and compels him to sell his car for Rs. 50,000. Here, Y's consent has been obtained
by coercion because beating someone is an offence under the Indian Penal Code.

ESSENTIAL CHARACTERISTICS OF COERCION

(a) Committing or threatening to commit any act forbidden by the Indian Penal Code

(b) Unlawful detaining or threatening to detain any property

(c) Intension of causing any person to enter into an agreement

(d) Coercion can be applied either by a party to the contract or even by a stranger.

(e) The place of coercion is immaterial.

NB: Threat to commit suicide amounts to coercion

EFFECTS OF COERCION

According to Section 19 states that,

'when the consent of a party to an agreement is obtained by coercion, the contract becomes voidable
at the option of the party, i.e., such party can put an end to the contract if he so chooses'.

According to Section 72 of the Act,

A person to whom anything has been delivered or money paid under coercion must return or repay it.

Duress:(Equivalent term to coercion as per English Law)

Threatened violence over the person of another, with a view to obtaining his consent to the agreement.
If the threat is with regard to the goods or property of the other party, it is not duress.

UNDUE INFLUENCE [SEC.16 (1)]

"where the relations subsisting between the parties are such that one of the parties is in a position to
dominate the will of the other, and uses that position to obtain an unfair advantage over the other".

Persons in Dominant Positions

a) Real or apparent authority:

Where he holds a real or apparent authority over the other,

e.g. Master and the servant , principal and teacher, manager and worker, employer and employee

b) Fiduciary relationship: Fiduciary relation means a relation of mutual trust and confidence,

E.g., Doctor and patient, parent and child, guardian and ward, publisher and author, spiritual advisor and
discipline.

c) Mental distress:
Where he contracts with a person whose mental capacity is temporarily or permanently affected by
reason of age, illness, or mental or bodily distress.

Eg: medical attendent and his patient, aged women and one who supports her.

EFFECTS OF UNDUE INFLUENCE

An agreement caused by undue influence shall be Voidable at the option of the party whose consent has
been so obtained.

Distinction between Coercion and Undue Influence

Basis of Distinction Coercion Undue Influence

1. Nature of force It involves physical force. It involves moral pressure.

2. Relationship Parties to a contract may or may Parties to a contract are related

not be related to each other. to each other under some sort of
relationship.

3. Consent Consent is obtained by giving a Consent is obtained by

threat of an offence dominating the will.

FRAUD (SECTION 17)

(cheating another party)

Fraud means intentional or wilful representation of fact to deceive the other party or to cause him to
enter into a contract, it is said to be fraud.

The term "fruad" includes all acts committed by a person with a view to deceive another person. "To
deceive" means to "induce a man to believe that a thing is true which is false".

(a) the suggestion, as to a fact, of that which is not true, by one who does not believe it to be true;

(b) the active concealment of a fact by one having knowledge or belief of the fact;

(c) a promise made without any intention of performing it;

(d) any other act fitted to deceive;

(e) any such act or omission as the law specially declares to be fraudulent.
 ELEMENTS OF FRAUD

1. The act must have been committed by a party to the contract:

The fraud must be committed by a party to a contract or by anyone with his connivance or by his agent.
It should not have been committed by a stranger.

2. Suggestion of an untrue fact:

3. Active concealment or willful concealment of a fact:

4. A promise made without any intention of performing it:

5. Any other act fitted to deceive

6. Any such act or omission which the law specially declares to be fraudulent:

7. The representation etc. must relate to a fact

8. The act must have in fact deceived the other party:

If a person has committed a fraudulent act to deceive the other party, but the other party has not been
actually deceived by his act, it will not be taken as a fraud on his part.

9. Plaintiff(aggrieved party) must have suffered:

There is no fraud without damages, and therefore, to constitute fraud it is necessary that the plaintiff
must have suffered some loss of money or money's worth or some other tangible detriment capable of
assessment.

SILENCE AS FRAUD

Silence is not a fraud, unless the law create a obligation to speak.

Eg 1:If X sells by auction to Y, a horse which X knows to be unsound,X says nothing to Y about the
unsoundness of the horse, Here X commits no fraud.

Eg 2:A and B Being traders enter up on a contract. A has a private information of a change in price which
would affect B's willingness to proceed with the contract. He is not bound to inform B regarding the
change in price.

Exceptions :(in following cases silence is treat as fraud)

1). Where Circumstances create a duty on the part of the person keeping silence to speak.
A) Contract of Uberrimae fidei ( utmost good faith):- in the case of contract at most good faith the law
imposes upon parties the duty of making it true and a full disclosure of all material facts.

Examples of such contracts are contract of insurance, marriage, family settlement, partnership,
allotment of shares, guarantee, sale of immovable property.

B) Fiduciary Relationship :- Where one-party reposes trust and confidence in other party, such other
party must to reveal the truth.

Fiduciary relationship exist between parents and children, principal and agent, trustee and beneficiary,
guardian and water, solicitor and client.

2)Silence, in itself will be equivalent to speech

B says A " if you do not deny it, I shall assume that the horse is sound. A says nothing. Here A's silence is
equivalent to speech. If the horse is unsound A's silence is fraudulent.

Effects of Fraud

1. Right to rescind the contract

2. Right to sue for damages

3. Right to insist upon performance:

MISREPRESENTATION [SEC. 18]

The term 'Misrepresentation' means a false representation of fact made innocently or nondisclosure of
a material fact without any intention to deceive the other party.

A false representation made by a person may be either:

1. Innocent or unintentional, i.e., without any intention of deceiving the party.

2. Intentional or willful or deliberate, i.e., with the intention of deceiving the party( fraudulent
misrepresentation)

According to Section 18 defines the term 'misrepresentation' as follows:

"Misrepresentation" means and includes -

i) 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;

ii) any breach of duty which, without any intent to deceive, gains an advantage to the person
committing it, or anyone claiming under him, by misleading another to his prejudice, or to the prejudice
of any one claiming under him;

iii) Causing, however innocently, a party to an agreement, to make a mistake as to the substance of the
thing which is the subject of the agreement.

ESSENTIALS OF MISREPRESENTATION

1.The representation must be of facts material to the contract.

2.The representation must be untrue.

3.The representation must be made with a view to inducing the other party to enter into contract.

4.The person making the representation honestly believes it to be true.

DIFFERENCE BETWEEN FRAUD AND MISREPRESENTATION

Fraud Misrepresentation

1. There is misstatement of concealment of fact, 1. The misstatement of fact is made innocently

deliberately made with the intention to deceive without any bad intention.
the others party or to induce him to enter into a
contract

2. The fraud is intentional or willful wrong. The 2. The misrepresentation is an innocent wrong.
person making an untrue statement knows that it The person making the false statement believes it
is not true. to be true.

3. In case of active fraud, the aggrieved party has a 3. The aggrieved party cannot rescind the contract
right to rescind(cancel) the contract if it was possible for him with ordinary diligence to
discover the truth.

4. A fraud is a criminal act too. 4. It is not a criminal act.

5. Not only is the contract voidable at the option 5. It makes the contract voidable at the option of
of aggrieved party, but it also gives rise to an the party misrepresented(aggrieved party) .
independent action in tort for damages.
6. The aggrieved party in addition to the normal 6. The aggrieved party cannot claim to damages.
remedies can claim also damages.

MISTAKE

Mistake may be defined as an erroneous belief concerning something. The contract is invalid.

Classification of Mistakes

Mistake may be of two types :

1.Mistake of law : a) Mistake of Indian law b) Mistake of Foreign law

2.Mistake of fact: a) Bilateral mistake b) Unilateral mistake

1. Mistake of Law

A. Mistake of Indian law : "ignorance of law is no execuse "

If a person does not know the law of his country, he must then suffer the consequences.

Contract is not voidable.

B. Mistake of Foreign law : A person is supposed to know, the laws of his country but he cannot be
expected to know the laws of other countries. Thus if both the parties are under a mistake relating to a
foreign law, the contract will be void.

2.Mistake of fact : Mistake relating to terms and conditions or any facts essential to the agreement is
known as mistake of fact.

A. Bilateral Mistake : If both the parties to an agreement are under a mistake of fact essential to the
agreement, such mistake is called bilateral mistake of fact.

Conditions:

I) The mistake must be mutual

II) Mistake must be of fact and not of law

III) Mistake must relate to a fact which must be essential to the agreement: A simple opinion about the
value of the subject matter is not to be deemed to be a mistake of the material fact. The mistake wanted
to cut the root of the agreement. Then the contract become void.

Types of bilateral mistake :

a) Mistake as to the subject matter:

When both the parties to an agreement are working under a mistake relating to the subject matter, the
agreement is void. Mistake to the subject matter covers the following cases:

1.Mistake regarding the existence of the subject matter

2.Mistake regarding the identity of the subject matter

3. Mistake regarding the title of the subject matter

4.Mistake regarding the quantity of the subject matter

5.Mistake regarding the quality of the subject matter

6. Mistake regarding the price of the subject matter

b. Mistake regarding the possibility of performance a) Physical Impossibility b) Legal impossibility

B. Unilateral mistake

A contract is not voidable merely because it was caused by one of the parties to it being under a mistake
regarding a matter of fact.

Where the Unilateral mistake is fundamental and affect the character of the contract, the innocent party
is freed from liability. In the following cases even though the mistake is unilateral, the agreement would
be void.

1. Mistake as to the identity of the person contracted with

2. Mistake as to the nature of the contract.