FREE

CONSENT
 FREE CONSENT
• Meaning of “Consent” [Sec.13] Consent means
acquiescence or an act of assenting to an offer. “Two
or more persons are said to consent when they agree
upon the same thing in the same sense”.

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.
 FREE CONSENT
To make a contract valid not only consent is
necessary but the consent should also be free.

Section 13 says the consent is said to be free

when it is not caused by any of the following :
(a) Coercion - sec 15
(b) Undue influence - sec 16
(c) Fraud
(d)Misrepresentation - sec 17,18(
(e) Mistake –sec 20,21
 COERCION
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 .
Example cases:
1)A threatens to shoot B if he (B) does not release him (A) from a
debt which A owes to B. B releases A under the threat. The
release has been brought about by Coercion.

2) X threaten to kidnap Y’s son if he does not lend Rs. 50,000 to Z.

Y agrees to lend the amount to Z. Though the coercion proceeds
from X against Y’s son, yet the agreement is entered under
coercion.

3) Muthta vs Muthu Karuppa,(1927)

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.
Case: Ranganayakamma Vs. Alwar Settey
A Hindu girl of 13 years, who had just
lost her husband , was forced to adopt a
boy of their choice by her relatives who
refuses to remove the dead body of her
husband unless she consented to the
adoption. It was held that the adoption
was not binding on her since her consent
was obtained by coercion. Any person
who obstructed the dead body from being
removed would be guilty of an offence
under section 297 of IPC.
CONSEQUENCES OR EFFECT OF COERCION

The contract is voidable at the

option of party whose consent was
obtained by coercion.
Any benefit has to restored back.
If the aggrieved party does not opt
to set aside the contract, it works as a
valid contract.
 Does threat to commit suicide
amount to coercion – Yes /No
Chikham Amiraju vs. Seshamma (1917) Madras HC.
In this case, a person held out a threat of
committing 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 son
executed the release deed under the threat. Held, “
the threat of suicide amounted to coercion within
Sec.15 and the release deed was, there fore,
voidable”.
Coercion in India is called as “ Duress” in England.
UNDUE INFLUENCE
 UNDUE INFLUENCE-DEFINITION

Section 16 “ A contract is said to be

induced by undue – influence where :
(a) The relation subsisting between the
parties are such that one of the parties is in
a position to dominate the will of the other.
(b) He uses the position to obtain an unfair
advantage over the other.”
 UNDUE INFLUENCE
Person is deemed to be in position to dominate the will of
another…
1)Where a person holds a real or apparent authority over the other:-
Master & servant ,Moneylender & borrower, Police officer &
accused
Ex: A spiritual guru induced his devotee to gift to him the whole of
his property in return of a promise of salvation of the devotee. Held,
the consent of the devotee was given under undue influence [Mannu
Singh [Link] Pandey (1890)]
2)Where he stands in a fiduciary relation. [Relation of trust and
confidence] to the other. E.g., father and son, solicitor and client,
trustee and beneficiary, and promoter and company.
Ex:An illiterate elderly woman made a deed of gift of practically the whole of her
property to her nephew who managed her [Link], the gift should be set aside
 UNDUE INFLUENCE
Person is deemed to be in position to dominate the will of
another…
3)Where he makes a contract with person whose mental capacity is
temporarily or permanently affected by reason of age, illness or bodily
distress.
Ex: A poor Hindu widow who was in need of money was forced by a
money lender to agree to pay 100%rate of interest. It was held to be a
case of exerting undue influence upon a person in mental distress .The
court reduced the rate of interest to 24%
(Ranee Annapurni [Link])
 UNDUE INFLUENCE
CONSEQUENCES OF UNDUE INFLUENCE
The agreement becomes voidable at the
option of the aggrieved party.
Aggrieved party may refund the
benefit.
If the aggrieved party does not opt to
set aside the contract, it works as a valid
contract.
 DIFFERENCES BETWEEN COERCION &
UNDUE INFLUENCE
COERCION UNDUE INFLUENCE
• The act of threatening a person • The act of persuading the
in order to induce him to enter free will of another
into an agreement is known as individual, by taking
coercion.
advantage of position over
• Coercion involves physical
the weaker party, is known
force
• Undue Influence involves
• The parties under coercion mental pressure.
need not be in any relationship • The parties must be in a
with each other. fiduciary relationship with
each other.
 MISREPRESENTATION
The word ‘representation’ means a statement. A
representation which is false or misleading is known as
misrepresentation. It may be innocent or intentional .
According to Sec 18
Misrepresentation is a false representation made
innocently without any intention of deceiving the other
party .It may include two things:
(a) wrong statement of a material fact not known to be
false
(b) Non-disclosure of facts where there is a legal duty to
disclose without intention to deceive
 MISREPRESENTATION
Ex: A intends to sell his horse to B & says ,”My horse is
perfectly sound”. A genuinely believes the horse to be
sound, he does not know that the horse has fallen ill
yesterday thereupon buys the horse. There is
misrepresentation on the part of A.
Derry vs .Peek (1889)]
A company’s prospectus contained a representation that it had
statutory powers to run it’s tramways by steam provided the
consent of a Government authority was obtained.
• The directors issued a prospectus stating there in that the
permission for the use of steam power would be granted. The
permission was refused. The company was then wound up.
• Held, the directors were guilty of misrepresentation and not of
fraud.
 ESSENTIALS
1) There should be a representation
2) It must be relate to a matter of fact which has
become untrue
3) It was made before the finalization of
transaction
4) It must actually have been acted upon the
party.
5) It must have been made either by the party
himself or by his authorised agent.
CONSEQUENCES OF
MIS- REPRESENTATION
•The contract is voidable at the
option of aggrieved party.
•Can rescind
•He may rely upon the
misrepresentation ,as a defence to an
action on the contarct.
 FRAUD
FRAUD” means and includes any of the
acts committed by a party to a
contract, or by his agent, with intent to
deceive another party thereto or his
agent, or to induce him to enter into
the contract.
Fraud is the willful representation made by
a party to a contract with the intent to
deceive the other party.
According to Sec 17,Fraud includes any of the following acts:
1) A false suggestion as to fact of that which is not true by
one who does not believe it to be true: Made recklessly
without inquiring whether it is true or false
Peek vs Gurney(1873) :The prospectus of a company did not
refer to the existence of a document disclosing liabilities. This
gave the impression that the company was prosperous. If the
existence of the document had been disclosed the impression
would have been quite different. Held, non disclosure
amounted to fraud and anyone who purchased shares on the
faith of this prospectus could avoid the contract.
2) An active concealment of a fact by one having
knowledge or belief of the fact: If a person conceals a fact
which is material to the contract & it is his duty to disclose
it.
Ex: Tom is a horse dealer sold a mare to Jerry. Tom knew
that the mare has a cracked hoof.
3)A promise made without any intention of performing it
The initial intention not to perform the promise that is
being made is a necessary element to constitute fraud.
Ex:A person orders & possession of goods with the
intention of not paying for them, he commits fraud
4) Any act fitted to deceive
5) Any such act or omission as the law specially declares to
be fraudulent
 Essential elements of Fraud
 Fraud must have been committed by a party to the contract or by
his agent.
 The representation must relate to a material fact which exists now
or existed in the past.
 The representation must have been made before the conclusion of
the contract
 The representation must have been made with a knowledge of it’s
falsity or without belief in it’s truth or recklessly, not caring
whether it is true or false
 The other party must have relied upon the representation and
must have been deceived.
 The other party, have subsequently suffered some loss.
 Mere Silence is not Fraud
A party to contract is under
no obligation to disclose the
Whole truth to other party.
There is no duty in such cases &
Silence does not amount to fraud.
“Caveat Emptor”-Let the buyer beware
is the rule applicable to
Contracts.
Case: Word vs Hobhs
(Pig) In Ward v. Hobbes (1878) 4 AC 13, those pigs were sold by auction “with all faults” the
pigs were suffering from typhoid fever and one of them were died that the seller was not
obliged to reveal that the pigs were unhealthy. The House of Lords held that a seller cannot
be allowed to use artifice or mask to hide the defects in the product sold, as this amount to
be fraud on the vendee; so far the doctrine of caveat emptor does not inflict duty on vendor
to disclose each and every defect in the product. The caveat emptor inflicts such
announcement on customer to use care and skill while purchasing such product.
 SILENCE IS FRAUD
Exceptional cases
 Where there is a duty to speak : “uberraimae
fidei”(contracts of utmost good faith)
a. Fiduciary Relationship
b. Contracts of Insurance
c. Contracts of Marriage
d. Contracts of Family Settlement
 Where the silence is equivalent to speech
 Half truth
 Change of circumstances(circumstantial changes in
contractual clauses)
 Effect of Fraud
The party whose consent to the contract is
obtained by fraud can exercised any of the
following rights:
 He may avoid the contract
 ask for the damages suffered because of the
non fulfillment of the contract
 He may insist for the performance of the
contract .
 MISTAKE
A mistake is an erroneous belief that is
innocent in nature. It leads to a
misunderstanding between the two
parties. Now when talking about a
mistake, the law identifies two types of
mistakes, namely
• A Mistake of Law
• A Mistake of Fact
 Mistake of Law
This mistake may relate to the mistake of the
Indian laws, or it can be a mistake of foreign laws.
If the mistake is regarding Indian laws, the rule is
that the ignorance of the law is not a good enough
excuse. This means either party cannot simply claim
it was unaware of the law.
Ignorance of a foreign law is not given a similar
treatment. Ignorance of the foreign law is given some
leeway, the parties are not expected to know foreign
legal provisions and their meaning. So a mistake of
foreign law is in fact treated as a mistake of fact
under the Indian Contract Act.
 Mistake of Fact
This is when both the parties
misunderstand . Such a mistake can be
because of an error in understanding, or
ignorance or omission etc.

But a mistake is never intentional, it is

an innocent overlooking. These mistakes
can either be unilateral or bilateral.
Bilateral Mistake
When both parties of a contract are under a mistake of
fact essential to the agreement, such a mistake is what we
call a bilateral mistake.
Both the parties have not consented to the same thing in
the same sense, which is the definition of consent. Since
there is an absence of consent altogether the agreement is
void.
Case:Tarsem Singh vs. Subhminder Singh(land measurement)
1)Mistake as to the subject –matter:
a)Existence
b)Identity
c)Title
d)Price
e)Quantity f) Quality
2) Mistake as to the impossibility of Performance

•Physical Impossibility
•Legal Impossibility

Unilateral Mistake
A unilateral mistake is when only one party to the
contract is under a mistake. In such a case the
contract will not be void.
Section 22 of the Act states that just because one
party was under a mistake of fact the contract
will not be void or voidable. So if only one party
has made a mistake of fact the contract remains a
valid contract.
However, there are some exceptions to this. In certain
conditions, even a unilateral mistake of fact can lead to a void
or voidable agreement

When Unilateral Mistake is as to the Nature of the Contract: In

such a case the contract can be held as void.
Ex:Dularia Devi v. Janardan Singh

An illiterate woman put her thumb impression on two

documents thinking they were the same. She thought
the document was to gift some property to her
daughters. But the other document was a Sale deed to
defraud the women out of more of her property. This
contract was held void by the courts
Mistake of the Identity of the Person contracted
with:
When A wants to enter into a contract with B
but mistakenly enters into a contract with C
believing him to be B.
Ex: Cundy [Link](Blenkarn-Fraudulent
person)
Boulton [Link]
Lake v Simmons-represented herself as wife of
well known millionaire
Cundy vs. Lindsay
A fraudulent person named Blenkarn by imitating the
signature of ‘Blenk & Co’ which is a well respected business
sent an order for goods ,which were duly delivered by
Lindsay, but that fraud never paid for them and instead sold
them to Cundy( defendant)
It was held that Cundy must return the goods to Lindsay,
though he was an innocent purchaser, he had no title to
them, the contract between Lindsay & Blenkarn being void.
Boulton [Link]
Jones used to have business deal with Brocklehurst.
Jones sent an order to BrockleHurst.
By the time order reached Brockle sold his business to
Boulton.
Boulton executed the order without notifying the change of
ownership .
It was held that Jones was not liable to pay for the goods as
the contract was void