Free Consent

• Essential ingredient of a valid agreement

• Involves two elements
1.There must be a Consent.
– Sec 13, ‟two or more persons are said to consent when they
agree upon the same thing in the same sense‟.
– Involves identity of minds or consensus ad idem
– No consensus ad idem among parties, no real consent and
hence not a valid contract.
 Contd...
2.Consent to the terms of the agreement should be Free.
• Sec 14,Consent is free when it is not caused by:
– Coercion (section 15)
– Undue Influence (section 16)
– Misrepresentation (section 18)
– Fraud (section 17)
– Mistake(section 20,21,22)
• Absence of a free consent, contract may turn void
depending upon the nature of flaw
• consent is caused by any of the 5 elements, no free consent
and voidable at the option of the parties.
• Caused by bilateral mistake, agreement is void
and no consent at all.
 Coercion (Section 15)
Section 15 of the Contract Act defines „Coercion‟ as
follows:
“ Coercion is the 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 If any person whatever, with
the intention of causing any person to enter into an
agreement.”
 Threat to file a suit

• To threaten a criminal or civil prosecution does

not constitute coercion Because it is not an act
forbidden by the Indian Penal Code. But a threat
to file a suit on a false charge constitutes
coercion, for such an act is forbidden by the I.P.C.
Threat to commit suicide

• Neither „suicide‟ nor „threat to commit suicide‟ is

punishable under the Indian Penal Code; only „an
attempt to commit suicide‟ is punishable under it.„a
threat to commit suicide‟ was not punishable under the
Indian Penal Code, it must be deemed to be forbidden
by that Code, as „an attempt to commit suicide‟ was
punishable under Section 309 of that Code.
 Duress

• The act or threat must be aimed at the life or

liberty of the other party to the contract or the
members of his family. A threat to destroy or
detain property will not amount to ‘duress.’
 Effect of Coercion

• A contract brought about by coercion is voidable

at the option of the party whose consent was so
caused.

• This means that the aggrieved party may either

exercise the option to affirm the transaction and
hold the other party bound by it, or repudiate the
transaction by exercising a right of rescission.
 Contd..

• As per Section 64, if the aggrieved party opts to

rescind a voidable contract, he must restore any
benefit received by him under the contract to
the other party from whom received.

• The burden of proof that coercion was used lies

on the party who wants to set aside the contract
on the plea of coercion.
 Case Law
GOBARDHAN DAS VS. JAI KISHEN DAS (1900)

• Dealings between the appellant Gobardhan Das and one Gopal

Das, the son of the plaintiff-respondent Jai Kishen Das.
• The appellant got Gopal Das to execute a deed of sale of Gopal
Das' share in certain ancestral property.
• There were two deeds, one was taken in the name of Gobind Das,
a relative of the appellant, and after that there was a further deed
executed by Govind Das in the appellant's favour.
• On the 26th November 1896, a complaint was filed before a
Magistrate by Gopal Das against Gobardhan Das.
• Gopal Das charged the appellants with offences of criminal breach
of trust and cheating under the Indian Penal Code in connection
with the execution of the deeds.
 Contd..
• On 27th, the Court directed that the case should be sent to the police
for investigation.
• It was still under investigation the submission now in question was
executed on the 4th December 1896.
• The submission is signed by Jai Kishen Das and the appellant
Gobardhan Das.
• The only ground, upon which the validity of the submission was
questioned, was that of coercion, or undue influence.
• . It was clear that there was no coercion; and on the evidence it
cannot be held that there was undue influence within the meaning of
Section 16 of the Contract Act.
• The evidence showed that it embodied the result of a settlement
come to by the parties to which both of them consented.
• They signed the award as indicating their acceptance of it, and it
had not been proved that the appellant's consent to the settlement
was procured by undue influence.
Undue Influence (Section 16(1))
 “A contract is said to be induced by undue influence where:
i. 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
ii. he uses the position to obtain an unfair advantage over
the other.”
 Thus, an undue influence may be presumed in the cases of
the following relationships:
 Doctor and patient
 Parent and child
 Guardian and ward
 Lawyer and client
 Spiritual Guru and disciple
 Trustee and beneficiary, and similar other relationships
 Presumption of Undue
Influence
 Undue influence is presumed to exist under the
circumstances mentioned above.
 In other words, there is no presumption of undue
influence in the following circumstances:
 Husband and wife
 Master and servant
 Landlord and tenant
Creditor and debtor
Onus (burden) of proof [Section 16 (3)]
 In cases where there is a presumption of undue
influence the burden of proving that there was no
undue influence will lie upon the person who was
in a position to dominate the will of the other.
 Effect of undue influence
[Section 19 A]
 Voidable at the option of aggrieved party and has
following two options available to him:
i. He can prefer to have the contract set aside, or
else,
ii. He can choose to insist on the performance of
the contract by the other party
 if a contract procured by undue influence is set
aside, the Court has discretion to direct the
aggrieved party for refunding the benefit whether
in whole or in part or set aside the contract
without any direction for refund of benefit.
 Case Law
 Due to the death of Sanjay Gandhi, the appellant, the respondent and
13 other candidates contested the election.
 Rajiv Gandhi (respondent) was declared elected.
 The appellant filed an election petition under Section 80 of the
Representation of the People Act 1951.
 questioning the validity of the election of the respondent on a
number of grounds, including the allegations of corrupt practice
of undue influence like hiring and procuring of vehicles for carrying
voters and obtaining the assistance of Government servants.
 The court observed that there was no instance of undue influence
 It was declared as “Declaration of public policy or a promise of
public action or promise to develop the constituency in general do
not interfere with free exercise of electoral rights as the same do not
constitute bribery or undue influence”
 Fraud (Section 17)

• In criminal law, fraud is intentional

deception made for personal gain or to
damage another individual.
• Fraud is a crime and a civil law violation,
though the specific criminal law definition
varies by legal jurisdiction.
 Contd..

Five involvement in fraud:

a false statement of a material fact
knowledge on the part of the defendant
that the statement is untrue,
 intent on the part of the defendant to
deceive the alleged victim,
 justifiable reliance by the alleged victim
on the statement, and
 injury to the alleged victim as a result.
Examples of company Fraud

• Asset misappropriation
• Skimming
• Disbursement
• Expense reimbursement fraud
• Payroll fraud
• Financial statement fraud
• Information misrepresentation
 Cases
• Citi bank fraud
 Key person:Mr. Shivraj Puri relationships manger
with Gurgaon branch of Citibank.
 He lured investors into a fake scheme with the help
of forged circulars from Securities and Exchange
Board of India (SEBI) with a hope to cash on very
high interest rates.
 Cases Contd..

• Ipl scam
 Key persons: Lalit Modi , IPL Commissioner
Sunanda Pushkar.
 Started whe Lalit Modi revealed that Sunanda
Pushkar had equity stakes in Rendezvous Sports
World (RSW), heading the consortium that owns the
Kochi team. It was later disclosed that Pushkar got
sweat equity of the value of Rs 70 crore.
 Income Tax investigation report into match-fixing
angle in the IPL revealed Lalit Modi has interests in
three teams.
 Misrepresentation (Section 18)

 “Where a person asserts something which is not true,

though he believes it to be true, his assertion amounts to
misrepresentation.”
 According to Section 18 „Misrepresentation‟ means and
includes 3 ways:

 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.
 Contd…

 Ex: A tells B, C will join a XYZ company as MD. induces B to

purchase shares B purchase shares C didn‟t join company A got
this information as hearsayIt’s a misrepresentation by A though he
believed that the information was true

 Any breach of duty which, without an intent to deceive, gains an

advantage to the person committing it, or any one claiming
under him, by misleading another to his prejudice or to the
prejudice of any one claiming under him.
 Ex: A, before signing a contract B  states that the monthly sales of
50,000Negotiation lasted 5 months sales dwindled 5000 per
monthA unintentionally keeps quite
 Case Law
 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.

 Case Law

 [Bonnerman vs White (1861) 142 E. R. 658]

 Johnson agrees to buy hops from Blanchard

 On condition of not using sulphur while growing them.
 Blanchard tells him no sulphur was used
 Blanchard had used sulphur 5 out of 300acres
 B forget that while telling A that no sulphur was used
Mistake (section 20,21,22)
• An erroneous belief
• Types of mistake
Mistake

Mistake of Mistake of
law fact

Mistake of Mistake
law of the Bilateral Unilateral
of foreign
country law
 Types of Mistake
• Mistake of law
• „Ignorantia juris non exusat‟, not applicable in the cases of
foreign law.
• Mistake of fact
 Bilateral mistake.
• Parties misunderstand each other and are at cross purposes
• When mistake is of essential fact, the agreement is void ab-
initio
 Unilateral Mistake
• Only one of the contracting parties is mistaken as to a matter
of fact
• If mistake is caused by misrepresentation or fraud, contract is
voidable
 Case laws
Bilateral Mistake: Raffles v Wichelhaus
• Contract to sell 125 bales of Surat cotton to
Wichelhaus by ship “ Peerless”.
• The defendant(W) thought that it was the October
sailing and the claimant(R) believed it was the
December sailing which had been agreed.
• Contract declared void.
• Unilateral Mistake: Hartog v Colin & Shields
• Defendants mistakenly offered a large quantity of
hare skins at a certain price per pound whereas they
meant to offer them at that price per piece.
• Price was roughly one third of what it should have
been.
• The judge found in Colin & Shields‟ favour ,and
rendered the contract void.
 Other Information

• EU: WP29: Free and informed consent at the

crux of lawful app data collection.
• Due to lack of transparency in applications on
smart devices.
• Disregard of the purpose limitation principle.
• Are the key data protection risk identified to
the end users.
• 2011 GSMA survey result – 92% are
concerned when applications collect personal
data without their consent.
 Contd..

• Mere silence without any legal duty to speak will

not amount to fraud except where:
• The circumstances of the case are such that regard
being had to them, it is the duty of the person
keeping silence to speak.
• Silence in itself will be equivalent to speech.
• Change of circumstance.
• Duty to speak where contracting party responses
trust and confidence.
• Peek v/s gurney case – Mis-representation
 Conclusion
• One of the essential ingredients of a valid agreement is 'Free
Consent'.
• Consent is said to be 'free' when it is not caused by:
Coercion (section 15)
Undue Influence (section 16)
Misrepresentation (section 18)
Fraud (section 17)
Mistake(section 20,21,22)
• Various case laws describing the same have been brought to light.
• There are exceptions to some of these elements as well.
• Depending on the severity of the crime, the punishment for coercion,
fraudulency, undue influence etc. may include a liability for a fine
and/ or a jail term.