Chapter 7
FREE CONSENT
An Agreement is valid only when it is the result of the
“free consent” of all the parties to it. Section 13 of the act defines the meaning of the term ‘consent’ and Section 14 specifies under what circumstances consent is ‘free’. So basically, a contract without free consent is voidable contract. To make a contract valid not only consent is necessary but the consent should also be free.
FREE CONSENT
SECTION 13 S AYS THE CONSENT IS S AID TO BE FREE WHEN IT IS NOT CAUSED BY ANY OF THE FOLLOWING:
Flaw in consent
Coercion Undue Influence Misrepresentatio Fraud n
Definition: Coercion is the committing or threating to commit, any act forbidden by the Indian Penal Code, or
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.
Features or Requisites:
1) Coercion means (i) committing or threating to commit an act forbidden by the Indian Penal Code, or (ii) the
unlawful detaining or threatening to detain any property 2) The act, constituting coercion, must be directed at any person and not necessarily at the other party to the
agreement
3) The act, constituting coercion, must have been or
threatened with the intention of causing any person to enter into an agreement.
4) It doesn’t matter whether the Indian Penal Code is or isn’t in force in the place where the coercion is employed.
COERCION
Example:
(i) P threatens to shoot Q if he doesn’t let out his house to P, and Q agrees to do so.
(ii) P threatens to shoot Q if R doesn’t let out his house to P and R agrees to do so.
COERCION
Prosecution: A threat to prosecute a man or to file a suit against him doesn’t constitute coercion because it is not forbidden by the Indian Penal Code.
High Prices and High Interest Rates: It isn’t coercion to charge high prices or high interest rates because such acts are not forbidden by the Indian Penal Code.
A Threat to Commit Suicide: Consent to an agreement may be obtained by threatening to commit suicide e.g., by a fast to death. Suicide is not punishable by the law; only the attempt to commit suicide is punishable. Therefore, suicide is not a crime and the threat to commit suicide is not coercion.
CONSEQUENCES OF COERCION
Definition: 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 other and (ii) he uses the position to obtain an unfair advantage over the other.
Presumptions:
1) Where one party holds a real or apparent 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: relationship
between father and son, guardian and ward, doctor and patient 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 or bodily distress.
UNDUE INFLUENCE
Examples:
(i) F 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 greater amount than the sum advanced. F employs undue influence.
UNDUE INFLUENCE
When suspected:
(i) Inadequacy of consideration
(ii) Fiduciary relationship between the parties
(iii) Inequality between the parties as regards age, intelligence, social status etc.
(iv) Absence of independent advisors for the weaker party.
(v) Unconscionable bargain
UNDUE INFLUENCE
High rates of interest: It is usual for moneylenders to charge high rates of interest from needy borrowers.
Mental Distress: A poor Hindu widow was badly in need of money for her maintenance. A money-lender availed of the opportunity of her predicament and persuaded her to make an agreement to pay 100% interest. The court
reduced the interest.
High Prices: As regards high prices the general opinion is that if a trader puts hi prices up during scarcity and buyer agrees to pay such high prices, it is a transaction in the ordinary course o business and is not a case of undue influence.
Pardanishin Woman: Women, who observe the custom of Prada, i.e., seclusion from contact with people outside her own family, are peculiarly susceptible t undue influence.
UNDUE INFLUENCE
Coercion Undue
1) Influence arises from
committing or threatening 1) Influence arises from domination
2) Use physical force 2) Use mental pressure
DIFFERENCE BETWEEN UNDUE INFLUENCE AND
COERCION
Definition: Representation is a statement or assertion, made by one party to the other, before or at the time of the contract, regarding some fact relating to it.
Misrepresentation arises when the representation made is inaccurate but the inaccuracy is not due to any desire to defraud the other party.
1) Unwarranted Assertion: “The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, through he believes it to be true.”
2) Breach of Duty: “Any breach of duty which, without an intent to deceive, gains an advantage to the persons committing it, or anyone claiming under him.”
3) Innocent Mistake: “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.”
MISREPRESENTATION
avoid the agreement, or
Insist that the contract be performed and that he shall be put in the position in which he would have been if the
representation made been true.
CONSEQUENCES OF MISREPRESENTATION
Definition: Intention to deceive another person is called fraud. “To deceive” means to “induce a man to believe that a thing is true which is false.”
1) False statement: Not saying exact statement
2) Active Concealment: Through acting when you are hiding something willingly. For example: When you are selling sick cow and won’t inform that to the buyer.
3) Intentional Non-Performance: “A promise made without any intention of performing it.” For example:
Purchase of goods without any intention of paying for them.
4) Deception: “Any other act fitted to deceive.”
5) Fraudulent Act or Omission: When you are aware of your problematic product, but without any acting you won’t tell the customer or buyer anything about this.
FRAUD
1) The general rule is that mere silence I not fraud.
2) Silence is fraudulent, “if the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak”.
3) “Silence is in itself equivalent to speech”.
Example: B says to A “if you do not deny it, I shall assume that the horse is sound”. A says nothing. Here A’s silence is equivalent to speech. If the horse is unsound A’s silence is fraudulent.
CAN SILENCE BE FRAUDULENT?
Point Fraud Misrepresentation 1) Different
Intention When it’s your
Intention to deceive others
Your Intention is not to deceive, but you are just giving wrong information
2) Different Belief In case of fraud, your
belief is dishonest In case of
misrepresentation, your belief is honest 3) Different Rights Can sue for the
damage Can’t sue for the
damage 4) Different
Defense Can sue against other
party If the other party
discovers the truth, the contract can’t be avoided
