MEANING OF CONSENT

According to section 13 of the Contract Act two or more persons are said to consent when they agree upon the same thing in the same sense. This means that there should be perfect identity of mind. Consensus ad idem means agreeing upon the same thing in the same sense. If, for whatever reason there is no real consent and hence no valid contract. A contract without free consent is voidable contract.

FREE CONSENT To make a contract valid not only consent is

necessary but the consent should also be free. Section 14 says the consent is said to be free

when it is not caused by any of the following :(a) Coercion-sec 15(b) Undue influence –sec 16(c) Misrepresentation –sec 17,18(d) Fraud-sec17(e) Mistake –sec 20,21

SECTION 15 –“ Coercion is 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 whatsoever, with the intention of causing any person to enter into an agreement. ”

Example: A threatens to shoot B, if he does not let out his house to him. B agrees to let out his house to A. The consent of B has been induced by coercion.

Ranganayakamma vs Alwar Setti(1889).

1. Coercion

The act constituting coercion, may be directed at any person, and not necessarily at the party to the agreement. Likewise it may proceed even from a stranger to the contract.

It does not matter whether the Indian Penal Code is or is not in force in the place where the coercion is employed. If the suit is filed in India , Coercion will apply.

Threat to file suit- To threaten a criminal or civil prosecution does not constitute coercion because it not an act forbidden by the Indian Penal Code. But threat to file suit on false charges constitute coercion, for such an act is forbidden by the I.P.C.

Neither suicide nor threat to commit suicide is punishable under the Indian Penal Code .Only an attempt to commit suicide is punishable under it.

In Chikkam Ammiraju vs Chikkam Seshamma ,there arose a question as to whether “a threat to commit suicide” amounts to coercion, and their Lordships of the Madras High Court answered the question in the affirmative holding that this amounts to coercion. In that case a person, by a threat to commit suicide, induced his wife and son to execute a release deed in favour of his brother in respect of certain properties which they claimed as their own. The transaction was set aside on the grounds of coercion.

Threat to commit suicide

“A contract is said to be induced by undue influence where (1)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 (2)he uses the position to obtain an unfair advantage over the other.”

Section 16(2) mentions certain types of relationships which gives rise to presumptions of undue influence. A person is deemed to be in a position to dominate the will of another-

(a)Where he holds a real or apparent authority over the other. Eg.- the relationship between master and the servant, police officer and the accused.

2.UNDUE INFLUENCE-section16

(b)Where he stands in a fiduciary relation to the other Fiduciary relation means a relation of mutual trust and confidence. Such a relationship is supposed to exist in the following cases:

*Father and Son, *guardian and ward, *solicitor and client , *doctor and patient, *Guru,spiritual adviser and disciple, *trustee and beneficiary, *Fiance and Fiancee, etc.

(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. Eg- old illiterate persons.

There are cetain cases where no presumption of undueinfluence is taken-*Husband and wife,*Mother and daughter,*Grandson and grandfather,*Landlord and tenant,*Creditor and debtor

Presumption about undue influence is rebuttable by proving-1)Full disclosure of facts was made .2)The person complaining of undue influence had independent advice.3)There was no undue influence and adequate consideration was there.

Difference between coercion and undue influence

Coercion

1) In case of coercion ,contract is obtained by committng or threatening to commit an act punishable under Indian Penal Code.

2) Physical force is exercised..

3) Coercion may proceed from a stranger and may be directed against a stranger. Relationship between the promisor and the promisee is not necessary.

Undue Influence

1) In case of undue influence the consent is obtained by dominating the will of the others.

2) Moral force is used in undue influence.

3) It must proceed from the party to the contract. Some sort of relationship must exist between the two parties to the contract

Coercion

4)There is no presumptions as regards to coercion.

5) The offence may be committed in or outside India to render it coercion.

6) It affects provisions the provision of Indian Penal Code . The party exercising coercion exposes himself to criminal liability under Indian Penal Code.

7) The party avoiding a contract under the coercion has to restore any benefit he received under the contract to the other party.

Undue Influence

4) Law presumes undue Influence in certain circumstances.

5) Undue Influence must be exercised in India.

6)There is no criminal liability for undue influence.

7) The party avoiding the contract may or may not be directed by the court to do so.

3.FRAUD The term fraud includes all acts committed by a person with an

intention to deceive another person. According to 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 intent to deceive or to induce another party thereto or his agent, to enter into the contract:

I. The suggestion that a fact is true when it is not true by one who does not believe it to be true.

II. The active concealment of a fact by a person who has knowledge or belief of the fact

III. A promise made without any intention of performing it.IV. Any other act fitted to deceiveV. Any such act or omission as the law specially declares to be

fraudulent

CAN SILENCE BE FRAUDULENT?While active concealment of a material fact is fraud, silence is not

fraud except under two circumstances. There is no general duty cast upon a party to a contract to disclose to the other party material facts within his knowledge, but are unknown to the other party. This principle is known as ‘Caveat Emptor’ (let the buyer beware) in contracts of sale of goods.

However under the following circumstances silence would amount to fraud:

(a) Circumstances of the case cast a duty upon the person keeping silence to speak and

(b) Silence itself is equivalent to speech.Duty to speak arises when the parties to a contract are in a fiduciary

relationships, Such contracts are known as uberrimae fide contracts, the most common examples being insurance contracts.

EFFECT OF FRAUDA party who has been induced to enter into a contract by fraud,

has the following remedies open to him:I. He can rescind the contract i.e. , he can avoid the

performance of the contract; contract being voidable at his option(sec 19)

II. He can ask for restitution and 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(sec 19)

III. The aggrieved party can also sue for damages, if any. Fraud is a civil wrong hence compensation is payable.For instance if the party suffers injury because of unsound horse, which was not disclosed despite enquiry, compensation can be demanded.

4.MISREPRESENTATION

As two parties enter into a contract they make certain statements inducing the contract which are called “Representation”. Representations are statements of facts made by one party at the time of entering into a contract with the intensions of inducing the other party into the contract. If these representations are false or misleading it is known as “Misrepresentation”.Misrepresentations can be:Innocent: which is covered under sec. 18.Intentional (Fraud): which is covered under sec. 17.

Sec. 18 Misrepresentation means and includes1) Positive assertion of a fact: According to this if a party receives some

information from an untrustworthy source and asserts positively that the particular fact concerning the subject matter of the agreement is true, then it is said that they have misrepresented the fact. It is not necessary to make the false statement direct to the plaintiff, its sufficient to make it direct to the third party so that the plaintiff is aware of it. However ,if the misrepresentation has not been embodied in the contract it creates no contractual obligation unless it turns out to be fraudulent.

2) Breach of duty: A breach of duty may be committed by a party without the intensions of deceiving the other party thus gaining an unfair advantage over the other. Say if a party has the duty to disclose all the material facts concerning the subject matter of the contract, but does not do so, then they are guilty of misrepresentation. Representation may be true at the time of making it but later it becomes false. This should also be disclosed before the contract is entered.

3) Causing mistake about the subject matter: is one of the parties to an agreement induces the other to commit a mistake as to the nature or quality of the subject matter of the agreement that party is guilty of misrepresentation

Distinction between Misrepresentation and Fraud

The person making the statement honestly believes it to be true.

There is no intention to deceive the other party.

It renders the contract voidable at the option of the party whose consent was obtained by misrepresentation.

It is not an offence under Indian penal code hence not punishable.

The complaining cannot avoid the contract if it could discover the truth with ordinary diligence.

The person making the statement knows that the statement is false.

The very purpose is to deceive the other party.

In this the contract is voidable and gives rise to an independent action in tort for damages.

Fraud in certain cases is a punishable offence under penal code.

The party making the false statement cannot say that the other party had the means

5. MISTAKE Mistake may be defined as an erroneous belief concerning

something. Courts recognise only such mistakes which invalidate the contract.It may be of two kinds:

1. MISTAKE OF LAW: It is of two types:(a) Mistake of law of the country: Every one is deemed to be

conversant with the law of his country, and hence the maxim ignorance of law is no excuse. Section 21declares that “a contract is not voidable because it was caused by a mistake as to any law in force in India.” Accordingly no relief can be granted on the ground of mistake of law of the country.

(b) Mistake of foreign law

2 MISTAKE OF FACT: Sec. 20 “Where both parties to an agreement are under mistake as to a matter of fact essential to the agreement, the agreement is void. It may be of two types:

(a) Bilateral Mistake: Where the parties to an agreement misunderstood each other and are at cross purposes, there is a bilateral mistake. Here there is no real correspondence of offer and acceptance, i.e. The parties are not really in consensus-ad-idem. The following three conditions must be fulfilled:

i. Both the parties must be under a mistake.ii. Mistake must relate to some fact and not to judgement or

opinion etc.iii. The fact must be essential to the agreement.

Mistake as to the subject matter: This mistake arises when the parties to the contract assume at the time of making the contract, that a certain state of things exists, but in reality it does not exist. Such a mistake may relate to-

i. Existence of the subject matter. Eg: A agrees to buy from B 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.

ii. Identity of the subject matter: i.e. one party had one thing in mind and the other party had another.

iii. A mistake as to the quality of the subject matter. Eg. A contracts to sell B a particular horse which is believed by both the parties to be a race horse, but later on it turns out to be a cart horse. The agreement is void.

iv. Price of the subject matterv. Title of the subject matter

(b) Unilateral mistake: Where only one of the contracting parties is mistaken as a to a matter of fact, the mistake is a unilateral mistake. Section 22 provides that a contract is not voidable merely because it was caused by one of the parties to it being under a mistake.It is of two types:

i. Mistake as to identity: It is a rule of law that if a person intends to contract with A ,B cannot give himself any right under it. An offer can be accepted only by the person to whom it is offered. If it is accepted by some one else,there arises a unilateral mistake rendering the contract void.

ii. Mistake as to the character of a written document: The rule of law is that where the mind of the signer did not accompany the signature, i.e. he did not intend to sign ; in contemplation of law, he never did sign the contract and the agreement is void ab-initio.