Free Consent (Section -13 to 22)

 Consent
 Free Consent
 Elements Vitiating Free Consent
 Coercion
 Undue Influence
 Fraud
 Misrepresentation
 Mistake
Consent
 Section 13 of the Indian Contract Act defines the term
'Consent' as Two or more persons are said to consent when they
agree
upon the same thing in the same sense. (consensus-ad-idem)
Free Consent
 Free Consent - For a contract to be valid it is not enough that the
parties have given their consent. The consent should also be free i.e.,
it has been given by the free will of the parties involving no pressure
or use of force.
FREE CONSENT
Definition of ‘Free Consent’ (Section 14)
Consent is said to be free when it is not caused by:
1. Coercion, as defined in Section 15; or
2. Undue Influence, as defined in Section 16; or
3. Fraud, as defined in Section 17; or
4. Misrepresentation, as defined in Section 18 or
5. Mistake, subject to the provisions of Sections 20, 21, and 22.
ELEMENTS VITIATING FREE CONSENT
1. Coercion (Section 15)
“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 of any person whatever, with the intention of causing any person
to enter into an agreement.”
Example: Where husband obtained a release deed from his wife and son under a threat
of committing suicide, the transaction was set aside on the ground of coercion, suicide
being forbidden by the Indian Penal Code. The threat of suicide amounts to coercion
within Section 15.
forcibly compelling a person to enter into a contract
Coercion may involve the actual infliction of physical pain/injury
or psychological harm in order to enhance the credibility of a
threat.
1) Committing any act forbidden by the Indian Penal Code.
(Committing a murder, kidnapping, causing hurt, rape, defamation,
theft etc.)
2) Threatening to commit any act forbidden by the Indian Penal dode.
3) Unlawful detaining of any property
4) Threatening to detain any property Unlawfully
5) Intention of causing any person to enter into an agreement
It is not necessary that the threat should come from a party to the contract,
it may come from a stranger also.
Effects of Coercion
Effects of coercion under section 19 of Indian Contract Act, 1872
(i) Contract induced by coercion is voidable at the option of the party
whose consent was so obtained.
(ii) The aggrieved party may opt to rescind the contract. If the
aggrieved party seeks to rescind the contract he must restore the benefit so
obtained under the contract from other party.
(iii) A person to whom money has been paid or anything delivered
under coercion must repay or return it. (Section 71)
2. Undue influence (Section 16)

 According to section 16 of the Indian Contract Act, 1872, “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 the
other and uses that position to obtain an unfair advantage over the other”.

A person is deemed to be in position to dominate the will of another:

(a) Where he holds a real or apparent authority over the other; or
(b) Where he stands in a fiduciary relationship to the other; or
(c) Where he makes a contract with a person whose mental capacity is temporarily
or permanently affected by reason of age, illness or mental or bodily distress for
example, an old illiterate person.
Two essentials of undue influence
1. The relations subsisting between the parties should be such that one of
them is in a position to dominate the will of the other(Trust,
Confidence, Authority), and
2. The dominant party should have used that position to obtain an unfair
advantage over the other.(Unfair Persuasion)

Both the characteristics must be present simultaneously.

undue influence is a kind of mental pressure and not a physical coercion.

Presumption of Domination of Will
Undue influence is involved only when one party is in a position to dominate
the will of the other.
According to Section 16(2) of the Act. A person is deemed to be in a position to
dominate the will of another where
1. He holds a real or apparent authority over the other (master and the servant,
parent and child, income tax officer and assessee).
2. He stands in a fiduciary relation (relationship of trust and confidence) to
the other.
3. He makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness, or mental or bodily distress.
Example 1:
 A having advanced money to his son, B, during his minority, upon B’s coming of

age obtains, by misuse of parental influence, a bond from B for a greater amount
than the sum due in respect of the advance. A employs undue influence.

When a contract is avoided on the ground of undue influence, the court has the
discretion to ask the aggrieved party for refunding the benefit either in full or in
part of set aside the contract without any direction to the aggrieved party to
refund the benefit.
3.Fraud (Section 17)
 Definition of Fraud under Section 17: ‘Fraud’ means and includes any of the following
acts committed by a party to a contract, or with his connivance, or by his agent, with
an intent to deceive another party thereto or his agent, or to induce him to enter into
the contract:
(1) the suggestion, as to a fact, of that which is not true, by one who does not believe it to be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.

The active concealment of a fact by one having knowledge or belief of the fact.
Explanation to Section 17
 Mere silence as to facts likely to affect the willingness of a person to enter into a
contract is not fraud, unless the circumstances of the case are such that, regard being
had to them, it is the duty of the person keeping silence to speak, or unless his
silence is, in itself, equivalent to speech.

Example 1:
A sells, by auction, to B, a horse which A knows to be unsound, A says nothing to B
about the unsoundness of the horse. This is not fraud by A.
Mere silence is not fraud
 A party to the contract is under no obligation to disclose the whole truth to the other
party. ‘Caveat Emptor’ i.e. let the purchaser beware is the rule applicable to
contracts. There is no duty to speak in such cases and silence does not amount to
fraud. Similarly there is no duty to disclose facts which are within the knowledge of
both the parties.
 Example: H sold to W some pigs which were to his knowledge suffering from fever.
The pigs were sold ‘with all faults’ and H did not disclose the fact of fever to W.
Held there was no fraud. [Word vs. Hobbs. (1878)].
However, there are two exceptions to this rule in which silence
also amounts to fraud. These are as follows.

1. It is the duty of the person keeping silence to speak

(i) Fiduciary relationship
(ii) Contracts of absolute good faith

2. Where the silence is, in itself, equivalent to speech.

Consequences of Fraud
 the contract is voidable at the option of the party whose consent was
so caused.
 the aggrieved party usually has the following remedies:
 He can rescind (cancel) the contract, but it must be done within a reasonable
time.
 If the party whose consent was not free thinks it proper to accept the

contract, he may do so and insist upon its performance.

 The aggrieved party can also sue for damages. Fraud is a civil wrong.

Hence, compensation can be claimed.

4. Misrepresentation (Section 18)
Misrepresentation means and includes -
(1) 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;
(2) 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; (Constructive
Fraud)
(3) Inducing mistake about subject matter - 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.
representation, when wrongly made, either innocently or intentionally, is called 'misrepresentation'.
Analysis of Section 18
According to Section 18, there is misrepresentation:
(1) statement of fact, which of false, would constitute misrepresentation if the maker
believes it to be true but which is not justified by the information he possesses;
(2) When there is a breach of duty by a person without any intention to deceive which
brings an advantage to him;
(3) When a party causes, even though done innocently, the other party to the
agreement to make a mistake as to the subject matter.
Example:
A makes a positive statement to B that C will be made the director of a company. A
makes the statement on information derived, not directly from C but from M. B
applies for shares on the faith of the statement which turns out to be false. The
statement amounts to misrepresentation, because the information received second-
hand did not warrant A to make the positive statement to B.
Legal effects of agreements without free consent
(Section 19)
 When consent to an agreement is caused by coercion, fraud or misrepresentation, the
agreement is a contract voidable at the option of the party whose consent was so
caused.
 A party to contract, whose consent was so caused by fraud or misrepresentation may,
if he thinks fit, insist that the contract shall be performed, and that he shall be put in
the position in which he would have been if the representation made had been true.
 Exception - If such consent was caused by misrepresentation or by silence,
fraudulent within the meaning of section 17, the contract is not voidable, if the party
whose consent was so caused had the means of discovering the truth with ordinary
diligence.
Explanation to Section 19
 A fraud or misrepresentation which did not cause the consent to a contract of the
party on whom such fraud was practiced, or to whom such misrepresentation was
made, does not render a contract voidable.
 Example: A, intending to deceive B, falsely represents that 500 maunds of indigo are
made annually at A’s factory, and thereby induces B to buy the factory. The contract
is voidable at the option of B. This is because when consent to an agreement is
caused by coercion, fraud or misrepresentation, the agreement is a contract voidable
at the option of the party whose consent was so caused.
5. Mistake (Section 20,21 & 22)
 Mistake means an erroneous belief about something. It has not been
defined in the Indian Contract Act.
 Mistakes may be either bilateral or unilateral
 Bilateral mistake is when both the parties to a contract are under a
mistake.
 Unilateral mistake is when only one party to the contract is under a
mistake.
 MISTAKE

Mistake may be defined as innocent or erroneous belief which

leads the party to misunderstand the others.

Mistakes may be either bilateral or unilateral

•Bilateral mistake is when both the parties to a contract are

under a mistake.
•Unilateral mistake is when only one party to the contract is

under a mistake.
The Indian Contract Act,1872 states two kinds of mistakes

1) Mistake of Law(Section 21)

Under section 21 of the Indian Contract Act, 1872, a contract cannot be said to be
voidable due to the mistake of the parties in understanding any laws that are in
force in India. Hence the parties to the contract cannot claim relief on the grounds
that they were unaware of the Indian law.
For Example, A man was caught by a ticket conductor for traveling on a train
without a ticket. The man cannot claim that he was not aware that a ticket is
required while traveling and shall be punished under Section 138 of The Indian
Railways Act, 1989.

'ignorance of law is no excuse' cannot be applied to foreign law.

2) Mistake of Fact(Section 20 &22)
Under Section 20 of the Indian Contract Act, 1872, a contract is said to be void when
both the parties to the agreement are under a mistake as to a matter of fact .

Types of bilateral mistake

1) Mistake regarding the existence of the subject matter:
Sometimes the existence of the subject matter of the contract ceases to exist before the
agreement was made and the parties to the contract may not be aware of this fact. If the
subject matter on which the contract exists is not present, it is considered that the
contract has perished and hence the agreement would be considered void.
2) Mistake regarding the quality of the subject matter:
If the parties to the contract are not mistaken regarding the subject matter of the
contract but regarding its quality, the contract would be said to be valid.
3) Mistake regarding the quantity of the subject matter:
If both the parties to the contract are under a mistake as to the quantity of the subject
matter, the agreement is said to be void.
4) Mistake regarding the title of the subject matter:
Sometimes the buyer of said property or good may already be the owner of what the
seller wishes to sell. Both the parties here might be under a mutual mistake as to the
title of the said good or property. Since in such a case there is nothing that the seller
can transfer, there is no contract which subsequently becomes void. This can be
explained in the case of Cooper v Phibbs(1867).
5) Mistake as to the possibility of performance
(i) Physical Impossibility
(ii) Legal Impossibility
Unilateral Mistake
 The term 'unilateral mistake' means where only one party to the
agreement is under a mistake.
 Generally, a unilateral mistake does not make the agreement void.
 Exceptions to a Unilateral Mistake

1. Mistake by one party as to the nature of the contract:

When a mistake is made by one of the parties regarding the very nature of
the contract being entered into and such a mistake is known to the other
party, such a contract is said to be void.
This may happen because while executing a contract, a party may not
understand the nature of the contract he is entering into either due to fraud or
misrepresentation by the other party or due to the old age or ill health of the
person consenting to such a contract.
2. Mistake by one party regarding the identity of the parties to the
agreement:
Generally, the identity of the parties entering into an agreement is not
essential to a contract. But in certain cases, when a unilateral mistake is
made regarding the identity of the parties to the agreement due to
misrepresentation by one party who claims himself to be someone who
he really is not, In such cases the agreement is said to be void
Effect of Mistake
1) 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.
2) In most cases of unilateral mistake, the contract is not void. But, where
unilateral mistake defeats the true consent of the parties, the agreement is
treated as void.
3) Any person who has received any advantage under such agreement, he is
bound to restore it, or to make compensation for it, to the person from whom
he had received it.
4) A person to whom money has been paid or anything delivered by mistake
must repay or return it.