contract
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This article has been written by Ansari Qamar Zarfishan, pursuing the Diploma Programme in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.

Introduction

All agreements are contracts if it is made by the free consent of the parties competent to enter into a contract for a lawful consideration and object. In this article, we will discuss the free consent and the elements that vitiate the free consent in a contract.

What Is a free consent?

Section 14 of the Indian Contract Act, 1872 defines “Free Consent”- In a contract, consent is said to be free when it is not caused by one of the following elements:

  1. Coercion;
  2. Undue Influence;
  3. Fraud;
  4. Misrepresentation; or
  5. Mistake.

So, if consent is backed by any of the above factors, then the contract is said to be voidable.

Now, let us discuss these elements in detail.

Coercion (Section 15)

A consent is caused by coercion, if it is caused by exerting pressure by using any of the following technique: 

  • Committing or threatening to commit any act forbidden by the Indian Penal Code; or
  • Unlawfully detaining or threatening to detain any person.

For example; ‘A’ threatens to commit suicide (which is forbidden under IPC) if ‘B’ refuses to enter into a contract. Then such a contract is voidable.

Effect of Coercion

Where a contract is entered as a result of coercion, then the contract can be cancelled and the parties would be released from the obligation to perform their duties under the contract.

Undue Influence (Section 16)

Where relation between the parties is such that one of the parties to the contract is in a position to dominate or influence the will of another person and uses that position to obtain an unfair advantage over the other person, then the contract is said to be influenced by ‘undue influence’.

Now, who can dominate the will of another person?

  1. a person who holds the real or apparent authority or stands in a fiduciary relation (relationship of trust and confidence eg. Doctor and patient; advocate and client; etc.).
  2. where the mental capacity of one of the parties is affected due to age, illness or mental/bodily distress.

Effect of Undue Influence

Where an agreement is caused as a result of undue influence, the contract is void at the option of the party whose consent was so obtained.

In such a case, the burden of proof is on the person in a dominant position to prove that the contract was not influenced by undue influence.

For example; ‘A’, a man infected with disease is influenced by ‘B’ a medical practitioner to pay him an exorbitant amount for his service. Here ‘B’ employs undue influence on ‘A’. 

Fraud (Section 17)

Any act which is done by a person (or by an agent on his behalf) with the intent to deceive another person or induce that person to enter into a contract is called ‘fraud’. The following acts constitute fraud:

  1. The suggestion of a fact to be true by a person who does not believe it to be true. For eg. ‘A’ sells imitation jewellery to ‘B’ stating that its polish will last for ten years, though he does not believe it to be true.
  2. Where a person having knowledge or belief of a fact, actively conceals the fact. For eg., ‘X’ sells his bike to ‘Y’ stating that it is in a good condition, though he knows that the bike is not in a good or working condition.
  3. Where a promise is made by a person without any intention to fulfil. In Delhi Development Authority v. Skipper Construction Co. Pvt. Ltd. (2000) 10 SCC 130, in this case, a builder entered bookings from more than three times the available unit of accommodation and collected money from them. The court held the builder liable for committing fraud as he was aware that he would not be able to perform the contract.
  4. Where a person does any other act fitted to deceive. For eg., ‘A’ induces his wife to sign a document to mortgage two of her lands to cure his indebtedness, but in fact, he mortgaged four lands of her.
  5. Any act or omission which is specifically declared by law as fraudulent. (eg, Insolvency Act, Companies Act declares certain kinds of transfer as fraudulent.)

Effect of Fraud

A contract which is entered into as a result of fraud is voidable. The party so deceived has the right to revoke the same and recover the damages from the other party. 

However, if a person is silent regarding the fact which could affect the person’s willingness to enter into a contract, is not fraud unless the situation is such that:

  1. it is the duty of the person keeping silence to speak; or
  2. where the silence of a person is equivalent to speech; eg, ‘X’ says to ‘Y’, “if you agree, then I will assume that the car is in good condition”. “Y” says nothing. Here, ‘Y’ silence is equivalent to speech.

Misrepresentation (Section 18)

Misrepresentation includes three aspects namely:

  1. where any positive assertion or declaration is made by a person, which is not warranted by any information made by the person making such declaration, of that which is not true, though he believes it to be true. For eg., ‘A’ wanted to sell his bike, made a statement that his bike gives a mileage of 50km/l. As a matter of fact, ‘A’ never used his bike and was unaware that it gives mileage of 80km/l.
  2. any breach of duty which brings an advantage to the person committing it by misleading the other person to this prejudice. For eg., ‘A’ signed a deed without reading it as he had no time to go through the deed, ‘B’ gave an impression that the deed contains only formal matter which was already settled between them. However, the deed contained a release in favour of ‘B’.
  3. causing another person to make a mistake, however innocently, regarding the subject matter of the contract.

However, if a person has the means of discovering the truth with ordinary due diligence, then he cannot claim misrepresentation.

Effect of Misrepresentation

Where the consent has been obtained as a result of misrepresentation, the person affected can claim for damages and file a suit for restoration of the party to the original position.

Mistake (Section 20)

Where both the parties to the contract are in mistake as to the subject matter of fact which is essential to the contract, then such a contract is void. 

However, a mere erroneous or incorrect opinion as to the value of the thing which is the part of the subject matter of the contract is not considered as a mistake.

If ‘A’ buys a bike thinking that it is of Rs. 1 Lakh and pays the same amount for it, however, it was only worth Rs. 70 thousand, the contract remains valid. ‘A’ cannot avoid the contract on the ground of mistake due to his own ignorance.

Following are the types of mistakes:

  1. Mistake as to the subject matter of agreement. If at the time of the agreement, the parties were unaware that the subject matter ceases to exist, then such agreement is said to be void. For eg., ‘A’ agrees to buy ‘B’s house. As to the matter of fact, the house collapsed at the time of purchasing it and both the parties were unaware of it. The agreement is said to be void.
  2. Mistake as to title or rights. Where the person is already the owner of the subject matter which the other party wishes to sell.
  3. Mistake as to the different subject matters in mind of the parties. Where one party has one thing in mind and the other party has another thing, the agreement is void for want of true consent. For eg., In Tarsem Singh v Sukhminder Singh, (1998) 3 SCC 471 the buyer thought that the land was sold at per bigha rate and the seller thought that per kanal rate was applicable. The court had held that the agreement is not enforceable.
  4. Mistake as to the subject matter which may relate to its substance, nature or quality. For eg., ‘A’ sells his farm stating that it yields 40 tonnes of crops, however, it turned out it yields only 20 tonnes. Such a contract is void.
  5. Mistake as to the possibility of the contract. It could be a physical impossibility of legal impossibility. 
  6. Physical impossibility: Where an agreement is made between the parties and it is found that the subject matter of the dispute is no longer available, or ceases to exist, then in such a case, it is considered that the agreement is physically impossible to perform and becomes void.
  7. Legal impossibility: Where an agreement is made between the parties residing in different countries and eventually war arises between the said countries, which makes it impossible to perform the agreement.

Conclusion

Consent is the most critical part of the contract and must be handled with utmost care. A contract is voidable if it is made in the absence of a free will. So, in order to constitute a free consent, it should be kept in mind that the consent is not backed by coercion, undue influence, fraud, misrepresentation or mistake.

References


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