CHAPTER 5

Free Consent
5.1 WHAT IS CONSENT?
Section
"Two13;or more persons are said to consent when they agree upon the same thing in the same
sense".
Consent involves a union of the wills and an accord in the minds of the parties. When the
partiesthing
same agreeinupon
thethe
same sense, they haveconsensus
If there
ad idem.
is no consent, there is no contract.
Salmond states it as error in consensus.

5.2 WHAT IS FREE CONSENT?

Section 14. lays down that consent is not free if it is caused by (1) coercion, 2) undue
misrepresentation, or (5)
influence, (3) fraud, (4) mistake.

5.3 WHAT IS COERCION?

Coercion is defined by section 15 of the Act as follows: Coercion is the
i) committing or threatening to commit, any act forbidden by the Indian Penal Code. or
ii) unlawful detaining, or threatening to detain, any property
iii) to the prejudice of any person whatever
iv) with the intention of causing any person to enter into an agreement.
Explanation - It is immaterial whether the Indian Penal code is or is not in force in the place
employed.
where the coercion is

Consequences A ofcontract
coercion:
brought about by coercion is voidable at the option of the party whose
consent was so caused. Sec. 19.
Whether threat to commit suicide amounts to coercion?
Refer Section 64 (Obligation of aggrieved party to restore benefit under a voidable contract)
and section of
(obligation 72a person to repay or return money or anything delivered under coercion.)
5.4 WHAT IS 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 willof the other and
(ii) he uses the position to obtain anunfair advantageover the other Sec. 16(1).

Section 16(2) provides that a person ispresumed to be in a position to dominate

of the
another
will where.
1. Where he holds areal or apparent over
authority
the other (For ex- master & servant, ITO & Assessee)
2. Whereparty
a) According
the
According
aggrieved
option ofhe
tothe stands
to
Section
has in 19
Section
aggrieved afiduciary
received 19A,
party,
of
any
any relationship
thebenefit
i.e.,
Contract
such
thethere twhose
owhen
contract
party
Act, the
under, other.
may
itconsent
amay
be
contract
set
beisset
aside
obtained
isaside
induced
byupon
by
theby
undue
such
Court
undue
terms
3. conditions
Effect
influence,
influence.
absolutely.
and
just
The in
Where
affected
following
the
of Undue
eyes
itHowever,
ais
byparty
voidable
relationships
as
of
reason
Influence
are
themakes
Court.
ifofatthe
age,
usually
a illness,
contract
raiseorawith
mental
presumption
a person
or bodily
of
whose
undue
distress.
mental
isinfluence
temporarily
capacity
, viz: or permanently
(i) Parent and child, (ii) guardian and ward, (iii) trustee and beneficiary, (iv)
doctor (vi)
client, and religious
patient, (v) solicitor
adviser and
and disciple. This list, however, is not exhaustive.
There is no presumption of existence of a power to dominate the will of
another
Landlordinandthetenant,
following cases :and
(b) Creditor (a)debtor, (c) Husband and wife. It has been
heldthese
all by judicial decisions
cases, the that in undue influence must prove that undue
party alleging
influence existed.
Burden of Proof
The burden of proving that the contract is not induced by undue influence lies who is in a position
on dominate
to the party the will. Thus,
of thein
other
case where undue influence is presumed the onus of proof lies on
parent, guardian, doctor, spiritual guru, lawyer, trustee. On the other hand, in
relationship where
is not presumed theundue
party influence
alleging undue influence must prove that it existed.
[Section 16(3)] of undue influence can be rebutted by showing that:
The presumption
(a) All material facts were disclosed to the party who is alleging exercise of undue
(b) influence.
The consideration was adequate.
(c) The party alleging exercise of the undue influence was in receipt of independent
advice and
exercise it. was free to

5.5 WHAT IS MISREPRESENTATION?

Misrepresentation arises when the representation made is untrue but the person
makingisitnobelieves
There it to
intention to be true.
deceive.
Section 18 of the Contract Act classifies cases of misrepresentation into three
groups as follows:When
1. Unwarranted Assertion.
a person makes a positive statement of material facts honestly believing
it it is false, such act amounts to misrepresentation.
to be true though
2. Breach of duty."Any breach of duty, without an intent to deceive, which brings an advantage to
committing it,theby
person
misleading another to his prejudice amounts to
3. misrepresentation".
Innocent Mistake.
If one of the party causes the other, however, innocently, to make a mistake as
to the of the agreement, it is considered misrepresentation.
nature or substance

Consequences of Misrepresentation .In case of misrepresentation the aggrieved party can:

i) avoid the agreement, or
ii) insist that the contract be performed and that he shall be put in the position in
which he would have
the representation made beenhadifbeen true.
But if the party whose consent was caused by misrepresentation had the
means
ordinaryofdiligence,
discovering he the
hastruth with
no remedy. Sec. 19Ordinary " " means diligence
such diligence as a reasonably
prudent man would consider necessary, having regard to the nature of the
transaction.
The Mere
means
Section
termto
17"Fraud"
"induce
non-disclosure
of the "The
Contract
includes
a man
"The
active
is
Act
all
to
suggestion
not
acts
concealment
states
believe
fraud
committed
that
as
that
where
"Fraud"
to aoffact,
thing
by athefact
ameans
ofperson
party
isthat
by
true
and
which
is
one
with
which
not
includes
having
is
aunder
view
not
is any
true
false".
knowledge
any
to of
byduty
one who
or belief
does not
of
5.6 WHAT IS FRAUD?
deceive
Fraud
concealment
the
i)
ii)
iii) following
False
true",
Active
to
concealment
Intentional
of goods
is
disclose
another
aA
Statement:
Concealment:
false
false
of
without
acts:
anon-performance
all
person.
the
is
material
statement
"A
statement
fraud.
facts.
fact."
promise
any
believe
"To
intention
fact
But
intentionally
or
deceive"
itmade
with
active
to
willful
: be
of
an
without
paying
intent
made any
to
foris
deceive
intention
them.
fraud. another
of performing
party. it". Example - purchase
iv) Deception:"Any other act fitted to deceive".
v) Fraudulent act "Any
or omission:
such act or omission as the law specially declares to be fraudulent". This
clause refers to provisions in certain Acts, which make it obligatory to
section
disclose55 of the Transfer
relevant of property
facts. Thus, under Act the seller of immovable property is
bound
all to disclose
material to Failure
defects. the buyer
to do so amounts to fraud.
Note: A deceit which does not deceive is no fraud. This means that if the promisee is
on thenot deceived or then
representation did not rely
there is no fraud. Fraud must have been made with
an intention
actually to deceive
deceive andparty.
the other must

Can Silence be Fraudulent?

"Mere silence as to facts likely to affect the willingness of a person to enter into
contract is not fraud,
a if the circumstances of the case are such that, regard being
had to them,
person it issilence
keeping the duty of the or unless his silence is, in itself equivalent to
to speak,
speech".
From theExplanation
above, followingto sec.17
rules can be deduced:
1. The general rule is that mere silence is not fraud.
2. Silence is fraudulent, "if the circumstances of the case are such that, regard
being
of the had to them,
person it is silence
keeping the dutyto speak". The duty to speak, i.e. disclose all
fiduciary relationship
facts exists where therebetween
is a the parties (father and son; guardian and ward,
etc). be
also Theanduty to disclose
obligation may by statute.
imposed
3. Silence is fraudulent where the circumstances are such that "Silence is in itself
equivalent to
Consequences of speech".
Fraud.
A party who has been induced to enter into an agreement by fraud has the
remedies open to him -following
Sec. 19.
1. He can avoid the performance of the contract.
2. He can insist that the contract shall be performed and that he shall be put in the
position
have inifwhich
been he would
the representation made had been true.
3. The aggrieved party can sue for damages

5.7 WHAT IS MISTAKE? WHAT IS THE EFFECT OF MISTAKE ON

CONTRACT?
Mistake may be defined as an erroneous belief concerning something. It may be
of
1) two kinds:of Law
Mistake
2) Mistake of Fact.
1) MISTAKE OF LAW Mistake of law may be of two types -
a) Mistake of general law
If aofmistake
country.
of law leads to a formation of contract, section 21 enacts that
"a
contract is not voidable because it was caused by a mistake as to any law in
force in India".
A person cannot get any relief on the ground that he had entered into a contract
in ignoranceAofand
Illustration: law.B make a contract grounded on the erroneous belief that a
particular
Indian lawdebts is barred the
of limitation; by the
contract is not voidable.
b) Mistake of Foreign Mistake
Law : of foreign law is treated as ‘mistake of fact'. Here the law relating to
mistakesvalue
Mistake
will"Where
of must
the
apply. -"factual
In
Thus
thing
both
relate
casethe
which
for
of
toparties
declaring
some
bilateral
formsfact
to the
anmistake
and
anagreement
subject-matter
agreement
not toofjudgement
essential
arevoid
under
of theab-initio
or
fact,
aagreement
opinion
mistake
the under
agreement
etc.
asisto
not
An
this
a matter
to section,
be
is void
of ab-
the
2) MISTAKE
a)
provides
agreement
conditions
i)
ii) Bilateral
Both
erroneous
adeemed
that
matter
must
ismistake
fact
the
void.
OFbe
aof
essential
parties
inito.
mistake
following
FACT:
opinion
fulfilled:
fact (Explanation
Section
must
to
Mistake
as the
three
to
bethe
under
20oftoFact
aSection
mistake.
may20)
be of two types:
iii) The fact must be essential to the agreement i.e., the fact must be such which
goesagreement.
the to the very root of
On the basis of judicial decisions, the mistakes which may be covered under
this condition
into mayheads:
the following broadly be put
Mistake as to the existence of the subject-matter of the contract.
Mistake as to the title of the subject-matter.
Mistake as to the quantity of the subject-matter.
Mistake as to the quality of the subject-matter.
b) Unilateral Mistake:
Where only one of the contracting parties is mistaken as to a matter of fact, the
mistake
a unilateral mistake. is
Regarding the effect of unilateral mistake, on the validity of
"A contractsec.22
a contract, is not provides
voidable that
merely because it was caused by one of the parties
to it being
matter under a mistake as to a
of fact".
Law regarding unilateral mistake
1) Contract Valid.
As a rule, a unilateral mistake is not allowed as a defence in avoiding a contract
effect on thei.e., it hasand
contract no the contract remains valid.
2) Contract voidable.
If the unilateral mistake is caused by fraud or misrepresentation etc., on the
contract is voidable
party, and
the can be avoided by the injured party.
3) Agreement void ab-initio
. In the following two cases, where the consent is given by a party under a
which is so fundamental
mistake as goes to the root of the agreement and has the
effect of will
contract nullifying consent,
arise even thoughnothere is a unilateral mistake only.
a) Mistake as to the identity of person contracted with, where such identity is
with B only, but
important. If Aenters into
intends tocontract
contractwith C believing him to be B, the contract
is void.
Further, "Mistake as to the identity" of a party is to be distinguished from
"mistake
other asMistake
party. to the attributes" of the for example, as to the solvency or social
as to attributes,
the consent.
status of thatItperson
can only vitiate
cannot consent. It therefore, makes the contract merely
negate
voidable for fraud.
Thus, where X enters into a contract with Y falsely representing himself to be
voidable at the
a rich man, the option
contractofisY. Again where the identity of the party
only
contracted
identity willwith is immaterial,
not avoid a contract.mistake
Thus, if as to
X enters a shop introduces himself as
Y andthe
cash, purchased
contractsome goods for
is valid.
b) Mistake as to the nature and character of a written document. The second
circumstance
unilateral mistakeinmay
which
makeeven an
a contract absolutely void is where the consent is
given
as by nature
to the a partyand
under a mistake
character of a written document. The rule of law is that
not
whereaccompany
the mind ofthethesignature;
signatory i.e.,
did he did not intend to sign; in
contemplation
contract to whichof his
law, he is
name never did sign
appended and the agreement is void ab-initio.

Effect of mistake on validity of a contract

Type
IndianofLaw
Bilateralmistake
Unilateral Effect
Mistake(Sec.
Mistake
(Sec.agreement
party.
21)
(Sec.
Contract
20)
But
22)is
Agreement
(i)
void.
Contract
is
if not
(ii)
unilateral
voidable
If
isisunilateral
not
void
Voidable
mistake
if- itifmistake
is(a)
caused
merely
prevents
both
is by
caused
the
because
the
aparties
mistake
formation
byit fraud,
was
are
as tocoercion
of consent
etc. then
Mistake
any
Foreign
under
caused ofunilateral
by
Law
in Law
lawmistake
force
(Sec.
the
(b)
in
the21)
India.
the
mistake
fact
Mistake
must
essential
agreement
of one
of
beforeign
toisthe
voidable.
law
agreement.
is treated as mistake of fact.