free consent under contract
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This article is written by Avni Kaushik. Here she discusses “Concept of  Free Consent and Indian Contract Act”. 

Definition of Free Consent

In the Indian Contract Act, the definition of consent is given in Section 14, which states that “it is when two or more persons agree upon the same thing and in the same sense”. 

Example

‘A’ agrees to sell his house to ‘B’. ‘A’ owns three houses and wants to sell his house in Haridwar. ‘B’ thinks he is buying his Delhi house. Here ‘A’ and ‘B’ have not agreed upon the same thing in the same sense. Therefore, there is no consent and no contract afterwards.

In the case of Raffles v. Wichelhaus, two parties, ‘A’ and ‘B’, entered into a contract for the sale of 125 cotton bales by a ship named “peerless” from Bombay. There were two ships with the same name, and while Party ‘A’ was thinking of one ship, Party ‘B’ was thinking of the other ship. The court held that there was no meeting of minds by both parties. Hence the contract was invalid.

Vitiating factors and their effect

1. Coercion (Section 15)

Section 15 of the Indian Contract Act,1872 states that coercion is committing or threatening to commit, any act is forbidden by the Indian Penal Code (45 of 1860) 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. 

Coercion means forcing an individual to enter into a contract. When intimidation or threats are used under pressure to gain the party’s consent, i.e. it is not free consent.
Coercion may involve the actual infliction of physical and psychological harm in order to enhance the credibility of a threat. Then the threat of further harm can lead to the threatened person’s cooperation or obedience.

Example

‘A’ went out for a walk, ‘B’ approaches ‘A’ with a stranger, pulls out his gun and asks ‘A’ to give all his possessions. The consent of ‘A’ is obtained by coercion here.

Effect

Coercion has the effect of making the contract voidable. It implies that at the discretion of the party whose consent was not free, the contract is voidable. The aggravated party will, therefore, determine whether to enforce the contract or to cancel the contract.

Techniques for causing coercion

  • Threatening to commit any act which is prohibited by the Indian penal Code.
  • Detaining not as per law or even threatening to detain any property, with the sole intention of compelling a person to enter into a contract.

Acts forbidden by IPC            

The word act prohibited by the Indian penal code makes it necessary in a civil action for the court to decide whether the alleged act of coercion is amount to an offence. A threat of bringing a false charm with the object of making another do a thing amount to blackmail or coercion. In the case of Ranganayakamma v Alwar Sett, where the widow was prohibited from removing the corpse of her husband until she consented for the adoption. The court said that her consent was not free and it was coerced. It is clear that coercion is committing or threatening to commit any act which is contrary to law.

Unlawful Detention of property

Consent can be said to be caused by coercion if it is induced because of illegal confining of a property, or a danger to do as such. With a specific goal of acknowledging the child’s due fine, the legislature annexed the property both of him and his father having a place, the instalment made by the father at that stage bearing in mind the ultimate goal of saving the property from being sold was kept to be made under coercion. Refusal by the government to discharge a temporary worker’s instalment unless he surrenders his demand for additional rates adds up to intimidation under the land detention class.

Burden of proof 

The burden of proof lies with the party defending the coercion. The burden of proof is heavier on him. This is because pure probability or fear is not a threat. In order to create coercion, a person must show that there was a risk that was prohibited by law and that forced him to enter into a contract that he would not otherwise have.

Difference between Coercion and Duress

The term ‘duress’ corresponds to coercion in English law. However, Coercion under the Indian Contract law has a wider amplitude than duress under the English law.

Coercion

Duress

Coercion can be employed against any person

Duress can be employed only against the life or liability of the other party to the contract or members of his family.

Immediate violence subsequent to coercion is not an essential element.

Duress must cause immediate violence.

Unlawful detention of goods is a kind of coercion.

Unlawful detention is not duress under the English Law.

2. Undue Influence (Section 16)

According to Section 16 of the Indian Contract Act, 1872 an influence will be considered as Undue Influence when:

  • One party to the contract is in a position of trust and controls the other party wrongfully.
  • Such a person uses his dominant position to gain an unfair advantage over the other.

There are two key elements of undue influence-

  1. The relationship- trust, confidence, authority.
  2. Unfair persuasion- careful examination of the terms of the contract.

Where one party is in a fiduciary relation to the other party

Fiduciary relationship means a relationship of trust and confidence. When a person imposes faith and confidence on the other, he expects not to be betrayed. If the other party betrays the confidence and trust reposed in him and gains an undue influence.

Examples of fiduciary relationship includes:

  • Solicitor and client;
  • Trustee and trust ;
  • Spiritual adviser and devotee;
  • Medical attendant and patient;
  • Parent and child;
  • Husband and wife;
  • Master and servant;
  • Guardian and ward.

In other words, we can say that Undue influence occurs when the decision of another party to the transaction can be influenced by one party.

Example

‘A’ sold his gold ring to his teacher ‘B’ for Rs 200 after he had been offered good grades by his teacher. Here, A’s permission is not given freely, he was influenced by his teacher.

Effect

The effect of undue influence makes an agreement voidable at the option of the party whose consent was caused. Any such contract can be set aside. Only a party to the contract can avoid or rescind the contract. This right does not lie in the hands of the third party.

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Burden of Proof

If the plaintiff wants to bring an action to stop a contract entered into on the grounds of undue influence, two issues must be kept in mind. The law has been stated in the Indian Evidence Act, 1872 and Indian Contract Act, 1872. The law states that in order for a plaintiff to prove that he was under undue influence, two things must be established

  1. Not only must the defendant has a dominant position but,
  2. He must use it.

It states that it’s not enough for the plaintiff to show the possibility of undue influence that may have been exercised by the dominant party. It must be certain that a person used his position to influence the plaintiff. A possibility of the same is not enough for the plaintiff to avoid a contract.

Difference between Coercion and Undue Influence

Basic

Coercion

Undue Influence

Nature of Action

Through coercion, by committing an offence or threatening to commit an offence, consent is gained.

Under the undue influence, consent is gained by suppressing other party’s will.

Carried by

Coercion is typically physical in nature, in order to obtain consent, it requires a physical force of violent nature.

Undue influence is immoral in nature, using mental pressure to gain consent.

Criminal Action

Coercion includes a criminal act and is punishable under the IPC by a person who commits coercion.

Undue Influence requires unlawful act and is not punishable under the IPC by a person who has done undue influence

Relationship

Coercion does not involve a party’s relationship.

Undue influence can only be exerted if there is a relationship between two-party.

Agreement

When coercion induces consent to an agreement, the agreement is null and void at the option of the party whose consent is induced.

When consent to an agreement is caused by undue influence, it becomes null and void at the discretion of the individual whose consent has been so affected.

3.Fraud (Section 17)

According to Section 17 of Indian Contract Act, Fraud includes any of the following acts committed by a contracting party or its connivance or its agent in order to deceive or induce a party or its agent to enter into the contract:

  • The effective concealment of a fact by one who is aware of the fact;
  • a promise made without any intention to carry it out;
  • any other act fitted to deceive;
  • any such act or omission as the law considers to be fraudulent.

Mere silence as to facts likely to affect a person’s willingness to enter into a contract is not fraud unless the circumstances of the case are such that, having regard to them, it is the obligation of the silent person to speak or unless his or her silence is, in itself, equivalent to speech.

Example

‘A’ sells his horse to ‘B’ by auction, which ‘A’ knows to be unsound, ‘A’ tells ‘B’ nothing about the unsoundness of the horse. This is a fraud on the part of ‘A’.

Effect

  • The contract arising from fraud is a null contract.
  • The misled party has the right to withdraw from the contract.
  • Due to the fraudulent agreement, the party is responsible for recovering the damages.

Evidence and Burden of proof 

In a large majority of cases, fraud can not be proved by concrete and observable proof. It’s hidden in its movement by its definition. If the evidence given is such as lead to wrongdoing, it is, therefore, appropriate that fraud must have been committed. In most cases, the only tool for dealing with fraud issues is circumstantial evidence. If this were not allowed, the ends of justice would be constantly, if not invariably, defeated. Simultaneously, fraud involvement is only to be blamed on a deliberate wrongdoer. As a remedy for restitution, any real damages arising from fraud can be recovered, even if they could not have been reasonably foreseen subject to the defrauded party’s mitigation law. Due to contributory negligence, the penalties would not be diminished.

4. Misrepresentation (Section 18) 

As per Section 18 of the Indian Contract:

  • Misrepresentation means the truth is misrepresented.
  • Misrepresentation is the release of deceiving details resulting in the presumption that the other party will enter into a deal and then lose. Nevertheless, the information provided by the guilty party is the result of a genuine belief in the matter. Misrepresentation is said to be committed. 

Firstly, when the deceiving person declares that no justified data is misleading a person is some way.

Secondly, there is a breach of an obligation that has caused the bias of one or the other. Lastly,  a mistake was committed by a person because of the misrepresentation of the act or information.

Example

‘A’ told ‘B’ that his radio is in good condition, because of the confidence he had in ‘A’, ‘B’ bought the radio from him. The radio did not work properly after some time, ‘B’ thought he was misled by ‘A’, but ‘A’ believed his radio was in good condition and had no intention of deceiving him. So, here misrepresentation is in the part of ‘A’, because he did not know that the radio is not working properly.

Effect

If the party that has suffered as a result of the misrepresentation when entering into a contract may choose to terminate the contract, rescind the contract within a reasonable time under the Specific Relief Act 1963.

Kinds of Misrepresentation

There are two types of misrepresentation:

Negligent Misrepresentation

  • It is considered to be a negligent misrepresentation when the misrepresentation happens due to lack of any reasonable ground and carelessness;
  • Negligent misrepresentation is only known when the representative owed a duty to representee to handle carefully;
  • An individual would only be liable if, in particular, he had ignored the duty specified;
  • Even when there is no fiduciary relationship, responsibility exists between the two parties.

Innocent misrepresentation

  • If the portrayal is based on a good reason to believe and there is no error and malicious motive, then it is said to be an innocent misrepresentation.
  • When a person enters into a contract with an innocent misrepresentation, he or she has the right to withdraw from the contract but is not entitled to damages.
  • Unless there are reasonable grounds, a contract will not be void. It would be enough to prove innocence in misrepresentation to prove the fact.

Burden of Proof

The burden of proof is on the defendant to show that the misrepresentation was not rendered fraudulently by showing that “He had reasonable grounds to believe that the evidence portrayed were valid during the time when the contract was made.” The party making the misrepresentation carries a heavy burden of proof.

The distinction between fraud and misrepresentation 

          Basis

            Fraud

    Misrepresentation

          Meaning

A fraudulent act intentionally committed by one party to induce the other party to enter into the contract is referred to as fraud.

Misrepresentation is known as the representation of an innocent mistake, which persuades other parties to enter into the contract.

        Section

Section 17 of the Indian Contract Act, 1872.

Section 18 of the Indian Contract Act, 1872

In order to mislead the other party

      Yes

        No

Variation in extent of truth

In fraud, the party making the representation knows that the declaration is not true.

In misrepresentation, the party making the representation considers the statement made by him to be valid, which later turned out to be false.

      Claim

The aggrieved party is entitled to claim damages.

The aggrieved party has no right to sue for damages to the other party.

      Voidable

The contract is voidable even if in usual diligence the truth can be found.

If the truth can be found with reasonable diligence, then the contract is not voidable.

4. Mistake (Section 20)

There are two forms of  mistake under Indian Contract Law:

  1. The mistake of Fact,
  2. The Mistake of Law.

Mistake of Fact

  • A mistake of fact arises when one or both of the contracting parties have misunderstood a term that is essential to the meaning of the contract;
  • Such a mistake may be done due to confusion, negligence or omission, etc;
  • A mistake is never intentional, it is an innocent overlooking.
  • Such mistakes can be either unilateral or bilateral

Bilateral Mistake (Section 21)

When both the parties to a contract are under a mistake of fact, essential to the agreement, such a mistake is known as a bilateral mistake. Bilateral mistakes are also sometimes referred to as mutual or common mistakes. All the parties do not agree to the same thing and in the same way, which is the concept of consent. Since there is no consent, the contract is null and void.

Example

‘A’, agrees to buy a cow from ‘B’, but it turns out that the cow was dead at the time of the deal, although the fact was not known to any party. The arrangement is considered invalid.

Unilateral Mistake (Section 22)

A unilateral mistake occurs when only one party to the contract makes a mistake. The contract will not be void in such a case. It is specified in Section 22 of the Act that the contract will not be void just because one party made the mistake. So if only one party has made a mistake the contract remains a valid contract.

Example

‘A’ enters into an agreement with ‘B’ for the purchase of horse which he assumes to be a racing horse. ‘A’ do not confirm from ‘B’. In actual a horse is not a racing horse. ‘A’ cannot rescind the contract.

Mistake of law

The mistake may be related to the mistake of Indian laws, or it may be a mistake of foreign laws. If the mistake applies to Indian laws, the principle is that the  law’s ignorance is not a sufficiently good excuse. This means that either party cannot claim that it is not aware of the law.

The Contract Act states that, on the grounds of ignorance of Indian law, no party can claim any relief. This will also include an incorrect interpretation of any legal provisions.

However, similar treatment is not given to ignorance of foreign law. Ignorance of foreign law provides some leeway, the parties are not expected to know foreign law and its meaning. Therefore, under the Indian Contract Act, an error of foreign law is actually treated as a mistake of fact.

Conclusion

Free Consent is absolutely important to make an agreement with a valid contract. The importance of free consent cannot be stressed enough. The Party’s consent must be free and voluntarily. It is necessary to give consent to the contract without any pressure or delusions. It is essential that the parties consent is free, as this may affect the contract’s validity. If the consent has been obtained or caused by coercion, undue influence, fraud, misrepresentation or mistake, then the aggrieved person has the right to void the agreement.

References

  1. http://lawtimesjournal.in/coercion-undue-influence-difference-between-coercion-and-undue-influence/
  2. https://www.legalbites.in/effect-of-coercion-undue-influence/
  3. https://keydifferences.com/difference-between-coercion-and-undue-influence.html
  4. https://keydifferences.com/difference-between-fraud-and-misrepresentation.htm

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