The Contract Act-1872

Free consent

1. 

1. Meaning:

An agreement is valid only when it is the result of “free consent” of all the parties to it.

Section 13: “Two or more persons are said to be consent when they agreed upon the same thing in the same sense”.

Section 14: ‘ Consent is not free if it is caused by i) coercion ii) undue influence iii) fraud iv) misrepresentation ; or v) mistake. 

 

2. Coercion (to force somebody to do something by using threats):

Section 15: ‘coercion is the committing or threatening to commit, any act forbidden by the act.’

Consequences; A contract brought about by coercion is voidable at the option of the party whose consent was to caused.-Sec-19.

The aggrieved party can refuge to perform it and take the defense of coercion if the other party sought to enforce it; or may abide by the contract on its performance. 

 

P threatens to shoot Q if he does not let out his house to P, and Q agreed to do so. The agreement has been brought about by coercion.

Special cases:

i)(i) A threat to prosecute a man.

ii)(ii) High prices and high interest rates

iii)(iii) A threat to commit suicide 

 

3. Undue influence:

A contract is said to be induced by undue influence where

i)One of the parties is in a position to dominate the will of the others and

ii)He uses the position to obtain an unfamiliar advantage over the other.

The undue influence may be presumed to exists in the following cases:

1. Where one party holds a real authority over the other or where he stands in a fiduciary relationship to the other. 

Fiduciary relationship means a relationship of mutual trust and confidence. Such as father and son, guardian and ward, doctor and patient; trustee and beneficiary etc.

2. Where a party makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness or mental distress. 

 

F having advanced money to his son B during his minority, upon B’s coming of age obtained by misuse of parental influence, a bond from B for a greater amount than the sum advanced. F employs undue influence.

P, a man enfeebled by disease or age, is included by B’s influence over him as his medical attendant to agree to pay B an unreasonable sum for his professional services. B employs undue influence. 

 

Undue influence is suspected in the following cases:

i)(i) Inadequacy of consideration

ii)(ii) Fiduciary relationship between the parties

iii)(iii) Inequalities between the parties.

iv)(iv) Absence of independent ad-visors for the weaker party. 

 

4. Misrepresentation:

Misrepresentation is a statement , made by one party to the other, before or at the time of contract, regarding some fact relating to it.

Misrepresentation arises not to defraud or deceive the other party.

Sec-18: Misrepresentation is fall into three groups as follows:

i)(i) Unwarranted assertion

ii)(ii) Breach of duty

iii)(iii) Innocent mistake 

 

Unwarranted assertion- “ the positive assertion, in a manner not warranted by the information of the person making it, of that is not true, though he is believe it is true. 

A says to B who intends to purchase A’s land: “my land produces 12 maunds of rice per bigha”. A believes the statement to be true although he did not have sufficient grounds for the belief. Later on it transpires that the land does not produce 12 maunds of rice. This is misrepresentation. 

 

5. Fraud:

“Fraud” includes all acts committed by a person with a view to deceive another person. “To deceive” means to induce a man to believe that a thing is true which is a false.

Sec-17, states that fraud means any of the following acts:

i)False statement.

ii)(i) Active concealment.

iii)(ii) Intentional non-performance.

iv)(iii) Fraudulent act or omission.

v)(iv) Deception. 

 

B, having discovered a vein of ore on the estate of A, adopts means to conceal, and does conceal, the existence of the ore from A. Through A’s ignorance B is enable to buy the estate at an under value, the contract is voidable at the option of A. 

 

A sells by auction to B a horse which A knows to be unsound, A says nothing to B about the horses unsoundness. This is not a fraud because A is under no duty to disclose the fact to B.

But if there is a fiduciary relationship between A and B there arises the duty to disclose and non-disclosure amounts to fraud.

The general rules is that mere silent is not fraud. 

 

6. Mistake:

Mistake may be defined as an erroneous belief concerning something. Mistake may be of i) laws ii) fact iii) opinion iv) unilateral.

M agreed to buy from N a certain horse. It turns out that the horse was dead at the time of bargain though neither party was aware of the fact. The agreement is void.