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Free Consent For Contract

Ruby Sharma

Introduction
Free consent of all the parties to a
contract is an essential of a valid
contract as per requirement of section
10.
When there is no consent at all, the
agreement is void ab-initio, i.e. it is not
enforceable at the option of either party.
Consent defined: two or more person are
said to consent when they agree upon
the same thing in same sense ( sec 13).
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Consent Is Not Free When It Is


Caused By:

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COERCION
In simple words, coercion is threat or force

used by one party against another for


compelling him to enter into an agreement.
Section 15 of Indian Contract Act defines
coercion as the committing or threatening to
commit any act forbidden by the Indian Penal
Code or an unlawful detaining or threatening
to detain, any property to the prejudice of any
person with the intention of inducing any
person to enter into an agreement.
Consent obtained at the point of pistol or
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intimidation, threat of imprisonment and threat to


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commit suicide with the intention of causing a

Essentials of Coercion
There must be clear threat.
The threat should be to commit an act

forbidden by law.
It must be uttered with the intention of
causing the other party to enter into an
agreement.

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Types of Coercion
Threat to file a suit-A threat to file a suit does not amount

to coercion unless the suit is on false charge. Threat to


file a suit on false charge is an forbidden by the Indian
Penal Code and thus will amount to ant act of coercion.
Threat to commit Suicide.
Effect of Coercion
Section 19 provides that an agreement consent to which is
obtained by coercion is voidable at the option of the party
whose consent is so obtained.
Burden of proof : it lies on the party who wants to set aside
the contract on the plea of coercion.
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Undue Influence
Section 16(1) provides that 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 the position to
obtain an unfair advantage over the
other.
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A person is deemed to be in a position


to dominate the will of another:
Where he holds a real or apparent authority

over the other e.g. relationship between


master and servant, public officer and
accused, income tax officer in relation an
assessee.
Where he stands in a fiduciary relationship
to the other. Fiduciary relation means a
relation of mutual trust and confidence. like
father and son, guardian and ward, solicitor
and client, doctor and patient, trustee and
beneficiary.
Where he makes a contract with a person
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whose mental capacity is temporarily or

Effect of Undue Influence


When consent to an agreement is caused by undue influence ,

the agreement is a contract voidable at the option of the party


whose consent was so caused. Such contract may be set aside
either absolutely or subject to restitution of the benefit there
under or upon such condition as the court may deem just.
(section 19 (A)).
Pardanashin Ladies-A paranashin women is one who lives in
seclusion having no communication except from behind the
pardah with any male person except a few privileged relations.
Law provides special protection to them on the ground of their
being ignorant so far as the worldly knowledge goes. A
contract with them is presumed to have been induced by
undue influence unless the other party show that it was her
intelligent and voluntary act.
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Undue Influence is suspected


when:
Inequality between the parties

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Difference between coercion and


undue influence
Basis

Coercion

Undue influence

Obtaining the
consent

By committing
or threatening
to commit an
offence
Physical
Not presumed
by court, party
have prove it.

By dominating
the other party

Type of force
Presumption

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Nature of
liability
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Mental or moral
It can be
presumed as
other party is in
dominating
position
Criminal liability Not criminal
liability

FRAUD
Section 17 of Indian Contract Act, 1872 defines Fraud'.
"Fraud" means and 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 of his agent, or to induce him to enter into the contract:(1) the suggestion, as a fact, of that which is not true, by one who does not
believe it to be true ;
(2) the active concealment of a fact by one having knowledge or belief of the
fact ;
(3) a promise made without any intention of performing it
(4) any other act fitted to deceive ;
(5) any such act or omission as the law specially declares to be fraudulent.
Mere silence as to facts likely to affect the willingness of a person to enter into
a contract is not fraud, unless the circumstances of the case are such that,
regard being had to them, it is the duty of the person keeping silence to speak,
or unless his silence is, in itself, equivalent to speech.
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1.The suggestion, as a fact, of that which is not true, by one


who does not believe it to be true. The leading case: Peek V.
Gurney.
The prospectus of a company did not refer to the existence of
a document disclosing liabilities. This created an impression
that the company was prosperous. It was held that there was
suppression of truth and suggestion of false statement
amounting to fraud.
2. The active concealment of a fact by one having knowledge or
belief of the fact-If a person conceals a fat which is material
to the contract will be a case of fraud. Mere non disclosure is
not fraud, where there is no duty to disclose.Caveat Emptor
or Buyer Beware is the rule, but in contracts of absolute
faith mere silence about material facts will be taken as fraud.
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E.g. A, horse dealer sold a mare to B.A knew that the mare

had a cracked hoof, which he filled up in such a way as to


defy detection. The defect was subsequently discovered by
B. It was held that the agreement could be avoided by B as
his consent was obtained by fraud.
A promise made without any intention of performing it is
fraud.
Any other act fitted to deceive. E.g. Where a party, who by
false impersonation induces another to enter into a contract
with him under the belief that he is somebody else,
commits fraud.
Any such act or omission as the law specially declares to
be fraudulent.
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Mere silence is not fraud.


A party to the contract is under no obligation to

disclose the whole truth to the other party. Caveat


Emptor i.e. let the buyer beware is the rule
applicable to contracts. There is no duty to speak
in such cases and silence does not amount to
fraud.
Silence is treated as Fraud in:
Fiduciary relationship
Contract of insurance
Contract of marriage
Contract of Family settlement
Share allotment contracts.
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Effect of fraud
When the consent to an agreement is

caused by fraud, the agreement is a


voidable contract at the option of the party
whose consent was so caused.
A party whose consent to an agreement is
so obtained has two remedies, namely:
He may rescind the contract or
He may insist that the contract shall be
performed and that he shall be put in the
position in which he would have been, if the
representation made had been true.
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Misrepresentation
The term Misrepresentation means a false representation

of fact made innocently or non-disclosure of a material fact


without any intention to deceive the other party.
According to Section 18 the term misrepresentation means:
1. 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.
E.g. A on the strength of hearsay information positively
asserted to B that certain third party is going to be the
Director of the co. to be incorporated, bought the shares
on faith of such a statement. This is case of
misrepresentation by A.(Mohanlal V Shri Ganga Ji Cotton
Mills co.)
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Contd
2.Any breach of duty, which ,without an intention
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 anyone claiming under him. This is
known as Constructive fraud".
3.It also covers those cases where a statement
when made was true but subsequently before it
was acted upon, it became false to the
knowledge of the person making it .In such a
case , the person making the statement comes
under an obligation to inform the other party of
the true facts.
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Essentials Of Misrepresentation
There should be a representation or assertion.
Such representation must relate to a matter of fact

which has become untrue ; and It was made before the


finalization of transaction with a view to induce the other
party to enter into a contract.
It must actually have been acted upon by the party.
It must have been made either by the party himself or
by his duly authorized agent.
Consequences of Misrepresentation- The aggrieved
party may avoid the contract, or May affirm the contract
and insist on the misrepresentation being made good.
When consent is induced by misrepresentation &
aggrieved party has the means of discovering the truth
with ordinary diligence, the contract cannot be set aside.
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MISTAKE
Mistake may be defined as an erroneous
belief concerning something. It means that
Mistake of Law
parties intending to do one thing have by
intentional error done something else.

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Mistake Law
Mistake of Indian Law: The contract is binding

because everybody is supposed to know the


law of the country. A contract is not voidable
because it was caused by a mistake as to any
law in force in India(section 21).
Mistake of Foreign Law and Mistake of Private
rights of Parties are treated as mistake of facts.
Mistake
of facts:
Bilateral Mistake

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Bilateral Mistake
Mistake as to subject matter. It falls into six heads namely

1.Existence 2.Identity 3. Title 4. Price 5. Quantity 6.Quality

When both the parties to an agreement are under a


mistake as to a matter of fact, which are essential to
the agreement, and this agreement shall be Void.
Thus this mistake shall be termed as bilateral mistake
of facts.
It should be committed by both the parties
It should be related to a matter of fact which are

essential to the agreement.


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Unilateral Mistake
Section 22 provides that if one party
alone is under mistake of fact. Unilateral
mistakes do not affect the validity of
contract unless they concern some
fundamental fact and the other party is
aware of the mistake.

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1.Mistake as to identity of the person or


party: Mistake as to the identity of a person
may also avoid a contract. Where A
intends to contract only with B, but enters
into a contract with C believing him to be B,
the
contract is vitiated.
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Sharma

Case ; Foster V. Mackinnon.


A an illiterate old man, was made to put

his signature on a document which was a


pronote .A thought the document to be a
will where his signature was required as a
witness. Under this presumption hr signed
the document which was in fact a pronote.
Subsequently B endorsed the pronote to C
who paid value for it in good faith. C sued A
on the pronote. It was held that A was not
bound by it.
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