Table of Content

No. Title Page Number

1 Abstract 3

2 Introduction 4

3 Content 5-7

4 Conclusion 8

5 Reference 9
Abstract
This paper discussed consent is said to be free when it is not caused by coercion, undue influence,
fraud, misrepresentation, and mistake. Coercion is the committing, or threatening to commit any
act forbidden by the 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. A contract is said to be induced by undue influence 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. Fraud that are described as
deliberate deception to secure unfair or unlawful gain, or to deprive a victim of a legal right.
Misrepresentation is a concept in the contract law of England and some other Commonwealth
countries, referring to a false statement of fact made by one party to another party, which has the
effect of inducing that party into the contract. And the term mistake is used in contract law to
describe the situation in which one or both parties to an agreement acted under an untrue belief
about the existence or non-existence of a material fact.

2
Introduction

A contract is an agreement which is legally binding between the parties. The legislation in
Malaysia governing contracts is the Contracts Act 1950. An agreement will create rights and
obligations that may be enforced in the courts. However there are situations where the parties have
reached agreement but the question arises whether the existence or non-existence of some fact, or
the occurrence or non-occurrence of some event, destroys the basis upon which that agreement
was reached so that the agreement is discharged or in some other way vitiated. According to the
Section 13 of Malaysian Contracts Act, 1950, two or more persons are said to consent when they
agree upon the same thing in the same sense. From the Act, Section 14, consent is said to be free
when it is not caused by coercion, undue influence, fraud, misrepresentation, and mistake. Consent
is said to be so caused when it would not have been given but for the existence of such coercion,
undue influence, fraud, misrepresentation, or mistake.

3
Content

“Coercion” is the committing, or threatening to commit any act forbidden by the 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. It is
immaterial whether the Penal Code is or is not in force in the place where the coercion is employed.
Coercion vitiates free consent. The party or parties whose consent is taken under the effect of
coercion get a right to avoid the contract, if he so likes. However, if the aggrieved party has
received any benefit under the contract which he is avoiding on the basis of Coercion, he has to
return that benefit to the other party or parties. For example, A enters into a contract with B to sell
his horse for RM5000 B takes A’s consent under Coercion. A at the time of entering into an
agreement receives RM5000 as an advance from B. Later on, A avoids the sale of the horse on the
basis of Coercion. A has to return RM5000 to B. He cannot retain the money received as an
advance from B. For the burden of proof, the party avoiding the contract has to prove that coercion
was exercised upon him and his consent received is not voluntary or he has not exercised his
consent freely. The act of committing suicide is forbidden by the Indian Penal Code and on this
basis Madras High Court has decided in Amiraju vs Seshamma that threat to commit suicide
amounts to coercion and the party affected is entitle to avoid the contract. The facts of the case are:
Amiraju held out a threat to commit suicide to his wife and son, if they did not execute a release
in favor of his brother in respect of certain properties. The wife and the son executed the release
deed under the threat. Later on the wife and the son took the plea of coercion to avoid the release
deed.

A contract is said to be induced by “undue influence” 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. For illustration, A being in debt
to B, the money-lender of his village, contracts a fresh loan on terms which appear to be
unconscionable. It lies on B to prove that the contract was not induced by undue influence. A
contract vitiated by undue influence is voidable at the option of weaker party. Undue influence
may be actual or presumed. The court can set aside such contract either wholly or where the weaker
party has enjoyed some benefit under the terms of the contract, then upon just and equitable terms.
For example, A’s son has forged B’s name to a promissory note. B under threat of prosecuting A’s

4
son obtains a bond from A for the amount of the forged note. If B sues on this bond, the court may
set the bond aside. A Parda-nishin woman can be influenced by undue influence. Persons entering
into contracts with such a woman have to be very careful because they may be required to prove
that such woman understood the contents of the contracts; she had free and independent advice
and she exercise her free will. The Privy Council has stated in 1931 in Tara Kumari Vs Chandra
Mauleshwar that the principles to be applied to transactions with such women are not merely
deductions from the law as to undue influence but have to be founded upon wider basis of equity
and good conscience.

“Fraud” includes any of the following acts committed by a party to a contract, or with his
connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce
him to enter into the contract: (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; and (e) any such act or omission as the law specially declares to be fraudulent. For
example, 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 by A. Fraud gives the following rights to the
aggrieved party. (1) He can avoid the contract and file a suit on the other party for damages; or (2)
He can revoke the contract, or (3) He can refuse to fulfill his part of the promise and defend the
suit filed by the other party for the breach of contract for damages or specific performance, or (4)
He can treat the contract as a valid one and ask for the specific performance, or for damages in
addition to the substitution of the original contract. Though “fraud” is a wide term, in Derry V.
Peek the UK House of Lords provided three propositions for establishing fraud: (1) The crime of
fraud must be proved; (2) The representation was made knowingly or without believing its truth
or being reckless as to its truth; (3) Motive of the person is immaterial if he is guilty of fraud.
Moreover, in the English case of Polhill V. Walter the misrepresentor made the false statement for
the benefit of his principal not for his own benefit, but he was held liable for the tort of deceit.
Deceit is difficult to prove and it is not alleged until there is a good ground to believe that fraud
has occurred.

5
 “Misrepresentation” includes— (a) 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; (b)
any breach of duty which, without an intent to deceive, gives an advantage to the person
committing it, or anyone claiming under him, by misleading another to his prejudice, or to the
prejudice of anyone claiming under him; and (c) 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.
The party being affected by misrepresentation has got the following rights: he can avoid or revoke
the contract; or he can affirm the contract and insist on the misrepresentation to be made good, if
it is possible to do so; or he can rely upon the misrepresentation as a defense to an action of the
contract. The aggrieved party shall not be able to exercise any of the above rights in the following
cases: (a) If he comes to know of misrepresentation and even then takes the benefit of the contract
or approves the contract; or (b) if the parties cannot be brought back to their original position. Such
situation arises where the subject matter of the contract has already been consumed or destroyed;
(c) if the contract cannot be rescinded in full, then it cannot be rescinded at all. Such decision has
already been given in Sheffield Nickel Co. vs Dawin; (d) if the aggrieved party has transferred the
rights under the contract ot the third party and the has acquired these rights in good faith and for
consideration. (Phillips Vs Brroks).

The term mistake is used in contract law to describe the situation in which one or both
parties to an agreement acted under an untrue belief about the existence or non-existence of a
material fact. In at least four situations, mistake as a vitiating factor, may make an agreement void
and incapable of being enforced as a valid contract. These are cases of res extincta, res sua, non
est factum and a unilateral mistake about the identity of a party. Apart from these four cases, the
general rule is that the mistake of a party does not affect the validity of a contract. Though "to err
is human", the law does not accept that once a party makes a mistake, he should be forgiven and
released from his obligations. The following kinds of mistake do not generally an agreement: (a)
where a party makes a mistake about his legal rights and powers. For the general rule affirmed in
Agbaje v. Bankole “ignorance of the law is no excuse”. Everybody is presumed to know his or her
legal rights; (b) a mistake as to the true value, quality or characteristic of something contracted for
will usually not affect the agreement. Parties are normally held bound by the contract because rule
that parties must protect their own interest, i.e. caveat emptor (buyer must beware).

6
Conclusion

Mere consent is not enough, free and voluntary consent is necessary for a valid contract.
Free and voluntary consent can be affected by coercion, undue influence, misrepresentation, fraud,
and mistake. However, both statutory and case laws are in favor of the person whose consent was
caused by one of the five above mentioned acts. According to the legal provisions, party to an
agreement whose consent was taken by coercion, undue influence, misrepresentation or fraud has
the authority to validate the contract. In respect of misrepresentation or fraud the party whose
consent was so caused shall be put in the position where he would have been if the representation
had not been made. However, misrepresentation and fraud has no effect upon the party whose
consent was so caused if the party to the contract had the opportunity to find out the truth with
ordinary diligence or had not consented because of such misrepresentation or fraud.

7
References
School of Open Learning. (n.d.). Retrieved from University of Delhi:
https://sol.du.ac.in/mod/book/view.php?id=644&chapterid=365

Sule, I. I. (2011, March 25). EFFECT OF UNDUE INFLUENCE IN CONTRACT. Retrieved from Blogspot:
http://isahismailsule.blogspot.my/2011/03/effect-of-undue-influence-in-contract.html

http://www.lawjournalbd.com/2017/03/no-free-consent-no-contract-a-justification/

THE COMMISSIONER OF LAW REVISION, M. (n.d.). LAWS OF MALAYSIA Act 136 CONTRACTS ACT 1950.