Coercion

Section15
 Definition Section 15
‘Coercion is committing or threatening to
commit, any act forbidden by the IPC, 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
Renganayakamma v. Alwar Chetty (1889).
Amiraju v. Seshamma (1917).
Under English law the concept of Duress is
there which is narrower than Coercion in
Indian law.
It is immaterial whether the IPC is or is not
in force in the place where the coercion is
employed.
 Coercion and Duress
Coercion need not Duress must proceed
proceed from a party from the party to the
to contract or be contract in the nature
immediately directed of immediate violence
against person against against the life or
whom the coercion is liberty of the other
to be exercised. party or his family
Coercion can be members.
against the property Detaining property
also. will not be Duress.
 Modern Trends
Inequality of bargaining power is
considered to be valid ground for avoiding a
contract on proof that the terms were very
harsh and unreasonable.
Economic Duress is a ground to avoid a
contract.
D & C Builders Ltd. v. Rees (1966).
Pao On v. Lau Yiu Long (1980).
Undue Influence
Section 16
 Undue Influence, S. 16
Moral coercion.
Also known as ‘Equitable Fraud’.
Presumption of undue influence applies
where two parties are in a fiduciary
relationship.
In such a relationship the influence is
acquired and abused by one of the parties
therein.
Presumption of Undue Influence
Presumption of undue influence in fiduciary
relationship can be rebutted by the party by
proving that the act of entering into contract was
the act of free and independent mind.
Where no fiduciary relationship exist the party
shall prove that one of the parties acquired an
influence over the will of the other and produced a
contract which otherwise would not have made.
 Section 16
Allcard v. Skinner (1887).
Wajid Khan v. Ewaz Ali (1891).
Sub section (1) essentials –
One party in a position to dominate the will
of another, and
He uses that position to obtain an unfair
advantage over the other.
S.16, Sub-sec.(2) Presumption of
Undue Influence
A person is deemed to be in a position to dominate
the will of another if –
He holds real or apparent authority over the other,
or where he stands in a fiduciary relationship with
that other, or
Where he enters into a contract with a person
whose mental capacity is temporarily or
permanently affected by reason of age, illness, or
mental or bodily distress.
 Burden of Proof
S. 16, Sub-Sec. (3), talks about the burden of
proof.
If a person is in a position to dominate the will of
another, and
If the transaction appears, on the face of to or on
the evidence adduced to be unconscionable,
Burden of proving that there was no undue
influence exercised while entering into contract.
Subhas Chandra v. Ganga Prasad (1967).
 Raghunath Prasad V. Sarju
Prasad (1924)
Three things are determined by the Court before
deciding a case of undue influence.
Relation between the parties is such that one party
is in a position to dominate the will of other,
That undue influence was exercised by such a
party, and
Burden of proof shifts on the person in the
dominating position.
 Pardanashin Lady
Presumption of undue influence on the
person supporting the deed.
Following things must be proved.
That the transaction or deed was explained
to her,
That she understood it, and
That she deliberately and of her own free
will entered into the transaction.
 Unconscionable Bargains
Where in the circumstances of a case, it is shown
that though there was no fiduciary relationship
existing between two parties yet one of them was
stronger enough to dominate the will of another,
court may, in its discretion, declare the contract as
void.
Ill. (c) S. 16, a contract of a creditor with already
indebted debtor is on the face of it is
unconscionable and so may be declared to be void.
Misrepresentation
Section 18
 Nature of Representation
Innocent or intentional.
Representations made may be intended to
be a term in the contract or not a term in the
contract.
This term may be a Condition or Warranty
if embodied in the contract.
 Misrepresentation
Misrepresentation is a ground to avoid the
contract and is not actionable for damages.
It must be made without any intention to
deceive another party.
Misrepresentation is innocent when it is
made by a person in relation to matter of
fact believing it to be true.
 Misrepresentation
In order to avoid a contract on ground of
misrepresentation 3 things must be proved.
There should be a representation or
assertion.
Such misrepresentation must relate to a
matter of fact which has become untrue.
Such misrepresentation must have been
material in influencing the contract.
 S. 18, C. (1)
There must be a representation or positive
assertion,
Assertion in a manner not warranted by the
information of person making it, and
Information which is not true, though
person making it believes it to be true.
 Representation or Assertion
It may be express, by words spoken or written, or
implied, by acts or conduct.
As a general rule silence does not amount to
misrepresentation unless,
Contract is one of uberreimae fidei,
Where fiduciary relationship exists between two
parties,
Where silence as to some fact distorts a positive
representation.
S. 18 Cl. (2).
 Representation As to a Fact
Every person is presumed to know the Law of the
land and so misrepresentation as to a matter of law is
not an excuse
Fact and Promise – Misrepresentation, to entitle a
person to avoid a contract, must be of an existing
fact and not a mere promise in future, unless it is
shown that, the promise formed the basis or part of
the contract so as to induce a contract. e.g. a contract
entered into on the basis that a certain person ‘A’ is
going to be the director of a company.
 Representation As to a Fact
Fact and opinion. – a statement of opinion
is not actionable. But if such opinion is
deliberately made a statement of fact, it will
be a considered to be a statement of fact.
Fact and puffery – mere statement of puff is
not considered to be a misrepresentation.
Representation to Be False and
Untrue
Representation should have become untrue.
If true when made and the becomes false,
before the other party could act upon it, the
duty is casted upon the person who made
the representation to communicate the
change of circumstances to other party.
With v. O’Flanagan (1936).
Representation to Be False and
Untrue
A statement even though literally true may
be a misrepresentation if it implies the
additional facts which are themselves false.
Curtis v. Chemical Cleaning and Dyeing
Co. Ltd. (1951).
Misrepresentation Material in
Influencing Contract
Where a representation is not a term in
contract but has induced the party to enter
into a contract the contract is voidable at the
option of the influenced party.
Bannerman v. White (1861).
Redgrave v. Hurd (1885).
Bellotti v. Chequers Developments (1936).
 Exceptions
Misrepresentation cannot influence or
induce a transaction where the plaintiff –
Never knew of its existence.
Did not allow it to affect his judgment.
Was aware of the falsity.
 Fraud
Section 17
 Fraud S. 17
Derry v. Peek (1887).
Fraud is proved when it is shown that a
false representation is been made –
Knowingly, or
Without belief in its truth, or
Recklessly careless whether it be rue or
false.
 Taylor v. Ashton (1843)
Five essential elements are laid down –
There must be a representation,
It must be of a fact,
It must be made with the knowledge that it is
false or without belief in its truth,
It must be to induce another to act upon
assertion,
The person acting must be damnified.
 Suppression of Facts
To constitute a fraud thee must be an
assertion of something false within the
knowledge of the party asserting it or the
suppression of that which is true and which
it was his duty to disclose.
Peek v. Gurney (1873).
 Active Concealment
‘Industrious concealment’ or ‘aggressive
concealment’.
As a general rule seller is not bound to disclose
the defects in the goods to the purchaser.
But if he does something which has a effect of
concealing the facts the contract can be avoided.
There is a duty imposed on the seller that he shall
inform about the latent defects in the goods which
he is aware of.
 Essentials of Fraud
The representation must be of a fact as seen
in misrepresentation.
The element of knowledge of falsehood or
want of belief distinguishes fraud from
misrepresentation.
The mental state of a person when making a
representation may be one of the following
five kinds. (discussed in the next slide.)
Mental State to Determine Fraud
Representation made with a belief in its
truth based on proper and sufficient
grounds.
Representation made with an honest belief
in its truth, but not based on proper and
sufficient grounds.
Derry v. Peek (1887). ‘Legal Fraud’ or
‘Fraud in law’.
Mental State to Determine Fraud
Representation made recklessly or carelessly
without any regard whether it be true or false.
United Motor Finance v. Romer Dan (1937).
S. 17 (3) a promise made without any intention of
performing it.
Representation made knowing it to be false, but
without any intention to deceive.
Polhill v. Walter (1832). Motive is immaterial.
Representation made knowing it to be false, and
with an intent to deceive.
 Inducing the Act
Representation must be such as to induce
another person to enter into the transaction.
It requires –
There must be an inducement in fact.
The representation must be material and
important in inducing the other party to
enter the transaction.
 Inducing the Act
If a party wants to assert that the plaintiff
was not induced by the misrepresentation,
he must prove that the other party in fact
had a knowledge of the truth.
 Means of Discovery
If means of discovering of truth are made
available to the representee but if he does not avail
them then the knowledge should be imputed to
him.
But the party cannot take a defense that the other
party might have discovered the truth by
reasonable diligence instead of relying on the
representation made.
‘There is no fraud without damage’.
 Misrepresentation and Fraud
In representing, no In representing there is
intention to deceive is
there. an intention to
Not a tort. deceive.
Generally no damages are Fraud in itself is a tort.
awarded.
The fact that the Damages are always
representee had the means recoverable in fraud.
of discovering the truth by
ordinary diligence would It is not the same in
preclude him from avoiding case of fraud.
contract.
 Remedies for Mistake,
Misrepresentation, Fraud
If consent of one of the parties is caused by
any of above means then,
The party can successfully defend an action
of damages for breach of contract.
The party can successfully defend an action
for specific performance of contract.
The party can rescind the contract.
Cancellation and Rectification
In case of a mistake the contract is void and
nullity.
The court only declares such a contract as nullity
and thereby cancellation of the contract.
S. 31 –33 of Specific Relief Act.
Court may order rectification of the instrument if
it is drawn up differently from what was been
contracted by the parties.
S. 26 of Specific Relief Act.
 S. 31 of Specific Relief Act
S. 31 of the Act gives a power to the Court to
declare a contract as void at the request of the
party who has a right to declare it void.
It also lays down that the court shall, if the
instrument is registered under Indian Registration
Act, send a copy of its decree to the officer in
whose office it is registered and he shall note
down the fact of cancellation of the instrument in
his register.
S. 32 & 33 of Specific Relief
Act
It gives a power to the court of law to declare a
contract partially void and may enforce the rest of
it.
If any instrument is so declared to be void by the
court, at the request of one of the parties, then
court may order the plaintiff or the defendant to
restore the benefit which he has derived under
such a contract.
The principle is also extended to the minors.
 S. 33 of Specific Relief Act
Relief provided under S. 33 is based on the
principle of protective or preventive justice.
Conditions precedent for availing relief –
Contract void or voidable against plaintiff,
There is a reasonable apprehension of serious
injury, (determined from circumstances of case)
Case is fit for exercise of Court’s discretion to
grant the prayer.
 Limitations S. 31 and S. 32
Relief is not as a matter of right.
When parties are in pari delicto, and fraud is
alleged as a ground for cancellation, court may
refuse the relief.
S. 32 is applicable only when the rights and
obligations contained under the instrument are
separable and distinct.
Limitation period prescribed under Indian
Limitation Act, 1953, is three years from the date
when the fact entitling plaintiff to cancel the
instrument.
 S. 26 of Specific Relief Act
If any ‘instrument’ either by fraud or mutual
mistake, does not disclose the true intention of the
parties, court may order the rectification of
instrument.
‘Instrument’ is defined in S. 2(14) of Indian Stamp
Act, (II of 1899), as every document by which any
right or liability is or purports to be created,
transferred, limited, extended, extinguished, or
recorded.
 S. 26 of Specific Relief Act
Rectification can be granted only if it is
specifically claimed by the party.
Granting rectification is purely a
discretionary power of the court.
Essentials to be proved –
Existence of mutual mistake or fraud, and
That the instrument on that account did not
truly express the intention of the parties.
 S. 26 of Specific Relief Act
A separate suit may be instituted for
rectification of contract or it may be done in
the course of a suit in which any right
arising under the instrument is in issue.
The rectification shall be granted by the
court, as far as possible, without prejudice
to any third party rights acquired
bonafidely.
 Contents of S. 26
Either party or his representative in interest may
institute a suit to have the instrument rectified, or
Plaintiff may, in any suit in which any right
arising under the instrument is in issue, claim in
his pleading that the instrument shall be rectified,
or
A defendant in any such case may plead for such
rectification.
 Rescission S. 27 & S. 28 of
Specific Relief Act
Section 27
The relief of rescission can be given to a
person on whom the burden of the contract
is imposed by means of fraud or illegality
or something equivalent which makes the
contract void or voidable.
He may ask the court to declare the contract
as not binding on him.
 S. 27 of Specific Relief Act
Rescission may be allowed where –
Contract is voidable or terminable by the
plaintiff, or
Contract is unlawful for causes not apparent
on its face and the defendant is more to be
blamed for it.
The relief is available is subject to important
limits laid down in Sub Section 2.
 When Rescission Cannot Be
Granted
Affirmation of contract by the plaintiff.
Where rescission is not possible because the
position of parties is so changed that restoration of
status quo is impossible, e.g. consumption of
goods or reselling.
Intervention of third party rights.
If plaintiff wants to rescind only one of the terms
in contract and it is not severable from the rest of
the contract.
 S. 28 of Specific Relief Act
Where in a suit the remedy of specific
performance is given to the purchaser or lessee,
fails to pay the money within the time prescribed
by the court in such a decree, seller or lessor may
ask the court to declare the contract as void by
rescinding it.
If such rescission is granted by the court, court
may ask the purchaser or lessee to restore the
possession and even the profit which he has got in
the mean time.
 S. 28 of Specific Relief Act
The court may also ask the seller of lessor to pay
back any earnest money if is been paid by the
other party.
But if the purchaser or lessee pays the ordered
amount within time, then the court may grant a
remedy to them like preparing a proper deed of
sale or lease.
The relief under this section can be granted only in
the suit for a specific performance of the contract.
 Damages for Fraud
For misrepresentation there are no damages
awarded by the court. But after the decision of
Derry v. Peek the legislature laid down two
exceptions for this.
Liability of the directors of company for
misrepresentation.
Liability of an agent for the acts done by him
outside the scope of authority.
Liability, however, based on principle of breach of
warranty.