The Indian Contract Act, 1872

Free Consent – Coercion, Undue

Influence, Fraud,
Misrepresentation & Mistakes

By – Kini Saxena
Faculty – Amity Law School,
Noida
 CONSENT (Section 13)
• Two or more persons are said to consent
when they agree upon the same thing in the
same sense.
• This means that there should be perfect
identity of mind (consensus ad idem)
regarding the subject matter of the contract.

FREE CONSENT (Section 14)

• A contract without free consent is voidable
contract.
 Case: Bala Debi vs Majumdar - A.I.R
(1956) Cal 575
• An illiterate women executed a deed of gift in
favour of her nephew under the impression
that she was executing a deed authorizing
her nephew to manage her lands. The
evidence showed that the woman never
intended to execute such a deed of gift, nor
was the deed ever read or explained to her.
• Held the deed was void and inoperative.
 FLAWS IN FREE CONSENT
1. Coercion – Defined under Section 15
2. Undue Influence – Defined under Section
16
3. Fraud – Defined under Section 17
4. Misrepresentation – Defined under Section
18
5. Mistake – Defined under Section 20
5.1 Mistake of Fact – Section 20
5.2 Mistake of Law – Section 21
 COERCION (Section 15)

• Coercion is 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, whatsoever with the
intention of causing any person to enter into
an agreement .
 Case: Muthta vs Muthu Karuppa -
(1927) 50 Mad 786
• An agent refused to hand over the account
books of a business to the new agent
unless the principal released him from all
liabilities. The principal had to release
deed as demanded.
• Held the release deed was given under
coercion and was at the option of the
principal.
 IS THREAT TO COMMIT SUICIDE
COERCION?
• Madras high court has held by a majority
judgment that even a threat to commit suicide
is coercion even though it is not punishable
under the Indian penal code .
• Example: A man by giving a threat to commit
suicide induces his wife and son to execute a
deed in favour of him in respect of certain
property and they execute. Held that the
consent of the wife and son has obtained
through coercion.
 EFFECT OF COERCION (Section 19)
• When the consent of a party to an
agreement is obtained by coercion, the
contract becomes voidable at the option of
the party ,whose consent is so obtained.
• The burden of proving that the consent was
obtained through coercion shall be upon the
party who wants to set aside the contract on
the plea of contract.
 EXAMPLE OF EFFECT OF COERCION
• Mr. X executes a transfer bond for the house
under fear of assault .It will be a contract
voidable at the option of Mr. X since his
consent was obtained by coercion.
• A railway company refuses to deliver certain
goods to the consignee, except upon the
payment of an illegal charge for carriage. The
consignee pays the sum charged in order to
obtain the goods. He is entitled to recover so
much of the charge as was illegally excessive.
 UNDUE INFLUENCE (Section 16)
• The term undue influence means the unfair use of one’s
superior power in order to obtain the consent of a person
who is in a weaker position.

• Sec.16(1) says ‘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 other, and uses that position to obtain
an unfair advantage over the other.

It contains the following elements:

1. The subsisting relations between the parties are such that
one of the parties is in a position to dominate the will of other.
2. The dominant party uses his superior position to
obtain an unfair advantage over the weaker party.
3. By the use of that dominant position, an unfair
advantage has been obtained

Following are the parties that can be affected by

undue influence:
• Doctor and patient
• Lawyer and client
• Guardian and ward
• Trustee and beneficiary
• Teacher and student
Case: In Karnal Distillery Co. ltd V. Ladli prasad
- 1963 S.C. 1279
The elder brother was shown to have
exercised undue influence over his younger
brother in respect of a compromise
arrangement, the transaction was held to be
voidable at the instance of the younger brother.
 EFFECTS OF UNDUE INFLUENCE
(Section 19 A)
• 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.
• Any such contract may be set aside either
absolutely or, if the party who was entitled to
avoid it has received any benefit thereunder,
upon such terms and conditions as the court
may seem just
 BURDEN OF PROOF
Once it is proved that
• The superior party was in a position to
dominate his will.
• The bargain appears to be unconscionable
in nature.
The burden of proof that such contract was
not induced by undue influence shall lie upon
the person who is in a position to dominate
the will of the other.
 DIFFERENCE BETWEEN COERCION & UNDUE
INFLUENCE
COERCION UNDUE INFLUENCE

The consent of the aggrieved party The consent of the aggrieved party
is taken by committing or is obtained by dominating the party
threatening to commit an act by taking an unfair advantage of his
forbidden by Indian penal code. position.
Physical force is exercised Moral force is used in undue
influence
Relationship between the promisor Some sort of relationship must exist
and the promisee is not necessary between the two parties to the
contract
It can be initiated/employed It must be exercised by a party
by/against even a stranger who is in the position to
dominate the will of other
 FRAUD (Section 17)
• It may be defined as an intentional, deliberate or
willful misstatement of facts, which are material for
the formation of a contract. Here intention to
deceive is most important.

• According to section 17 fraud means and includes

any of the following acts committed by a party to a
contract or by any one with his connivance or by his
agent with intent to deceive another party thereto or
his agent or to induce him to enter into contract.
A. A suggestion as to fact of that which is not true by one
who does not believe it to be true.
B. An active concealment of a fact by one having knowledge
or belief of the fact.
C. Any other act fitted to deceive.
D. A promise made without any intention of performing it.

BASIC ELEMENTS
1. False statement of fact:
a. there is a statement, which is false for obtaining
wrongful gains;
b. the statement relates to the facts;
c. the statement is made by a person who knows that it is
not true.
2. Active concealment of a fact:
a. there is a concealment of fact;
b. the concealment is active(efforts are made
to conceal the fact);
c. the concealment is made by a party who
has the knowledge of it.
3. A promise made without any intention of
performing it.
4. Any other act fitted to deceive.
5. Such act or omission as the law specially
declares to be fraudulent
 SILENCE AS A FRAUD
Mere silence without any legal Duty to speak will not
amount To fraud except where:

A. The circumstances of the case Are such that

regard being Had to them, it is the duty of the
person keeping silence to speak;
B. Silence in itself will be equivalent to speech;
C. Change of circumstances;
D. Duty to speak-where contracting Party responses
trust and confidence.
 EFFECTS OF FRAUD (Section 19)
• When consent to an agreement is caused by fraud, the
agreement is a contract voidable at the options of the party
whose consent was so caused.

EXAMPLES
• 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 in A.
• B is A's daughter and has just come of age. Here, the
relation between the parties would make it A's duty to tell B
if the horse, is unsound.
 EXCEPTIONS
• Where the silence amounts to fraud, the
contract is not voidable, if the other party had
the means of discovering the truth with
ordinary diligence. Thus a party cannot
complain of fraudulent silence if he had the
means of discovering the truth with ordinary
means.

• Where the fraud does not induce the other

party to enter into a contract, the contract is
not voidable. Thus if the consent is given
independently in spite of fraud, the contract is
not voidable.
 MISREPRESENTATION (Section 18)
• Misrepresentation is an innocent misstatement of facts
which are material for a contract.

Misrepresentation means and includes:

• The positive assertion, in a manner not warranted by the
information of person making it, of that which is not true,
though he believes it to be true;
• Any breach of duty which without an 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 anyone claiming under him.
• 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.
 ESSENTIAL ELEMENTS
• The misrepresentation must be of material facts
(difference between opinion and statement) - Smith
V. Land and Housing Corporation(1884).
• The misrepresentation must be false but the person
making it honestly believes it to be true.
• The misrepresentation must induce the other party
to enter into contract.
• The misrepresentation must have been addressed
by one party to the party misled.
• Change of circumstances, may amount to
misrepresentation.
 EFFECTS OF MISREPRESENTATION
(Section 19)

• When consent to an agreement is caused by

misrepresentation, the agreement is a
contract voidable at the option of the party
whose consent was so caused
 DIFFERENCE BETWEEN FRAUD &
MISREPRESENTATION
FRAUD MISREPRESENTATION

In fraud the false statement is There is no intention to

made deliberately with a clear deceive or to gain any undue
intention of deceiving the advantage
other party

In fraud the injured party It makes the other contract

besides avoiding the contract only voidable at the option of
may also claim the damages. the party whose consent has
been so caused
 MISTAKE (Section 20)
• Mistake may be defined as incorrect belief
about something which leads one party to
misunderstand the other.

TYPES OF MISTAKE
1. Mistake of Fact
a. Bilateral (Mutual) Mistake
b. Unilateral Mistake
2. Mistake of Law
 BILATERAL (MUTUAL)
• Section 20 states that were both the parties to an
agreement are under a mistake as to a matter of
fact, essential to the agreement shall be void. The
mistake shall be termed as bilateral mistake of
fact only when both of the following conditions are
satisfied.
(a) It should be committed by both the parties;
(b) It should relate to a matter of fact essential to the
agreement.
E.g.: A agrees to buy certain horse from B .It turns
out that the horse was dead at the time of the
agreement ,though neither party was aware about
this fact. The agreement is void.
 TYPES OF BILATERAL MISTAKE
A. Mistake About Subject Matter:
1. Mistake about the existence of the subject matter
2. Mistake about the title of the subject matter
3. Mistake about the substance of the subject matter
4. Mistake about the quality of the subject matter
5. Mistake about the quantity of the subject matter
6. Mistake about the price of the subject matter
7. Different subject matter in the minds of both the
parties
B. Mistake about possibility of performance (Sec.56)
1. An agreement to do an act impossible in itself is
void
2. It means an agreement for an impossible act is
void.

EFFECTS
• Where both the parties to an agreement are under a
mistake as to a matter of fact essential to the
agreement, the agreement is void
 UNILATERAL MISTAKE
• An unilateral mistake is that where one party to an
agreement is confused about the facts which are essential
to the agreement. Generally unilateral agreements do not
render an agreement void but there are certain mistakes
which renders an agreement void.

ESSENTIALS
• The mistake of fact must be about the essential fact of the
agreement. (Raja Singh V. Chaichoo Singh – AIR 1940 Patna
201)
• The mistake of fact must defeat the true consent of the
parties. (Slower V Potter, 1940)
 TYPES OF UNILATERAL MISTAKE

1. Mistake about the identity of the parties to

an agreement.
2. Mistake about the nature of the agreement.

EFFECTS
• A contract is not voidable merely because it
was caused by one of the parties to it under a
mistake as to the matter of fact. (Section 22)
 MISTAKE OF LAW (Section 21)
The mistake of law of the land(Indian Law)
• The concept is based on a maxim ‘ignorentia juris
non excusat’

• Sec.21 of India Contract Act, 1872 says A contract is

not voidable because it was caused by a mistake as
to any law in force in law

• Illustration : A and B make a contract grounded on

the erroneous belief that a particular debt is barred
by the Indian Law of Limitation; the contract is not
voidable.