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Free Consent

Essential ingredient of a valid agreement Involves two elements 1.There must be a Consent. Sec 13, two or more persons are said to consent when they agree upon the same thing in the same sense. Involves identity of minds or consensus ad idem No consensus ad idem among parties, no real consent and hence not a valid contract.

Contd...
2.Consent to the terms of the agreement should be Free. Sec 14,Consent is free when it is not caused by: Coercion (section 15) Undue Influence (section 16) Misrepresentation (section 18) Fraud (section 17) Mistake(section 20,21,22) Absence of a free consent, contract may turn void depending upon the nature of flaw consent is caused by any of the 5 elements, no free consent and voidable at the option of the parties. Caused by bilateral mistake, agreement is void and no consent at all.

Coercion (Section 15)


Section 15 of the Contract Act defines Coercion as follows: 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 If any person whatever, with

the intention of causing any person to enter into an


agreement.

Threat to file a suit


To threaten a criminal or civil prosecution does not constitute coercion Because it is not an act forbidden by the Indian Penal Code. But a threat

to file a suit on a false charge constitutes


coercion, for such an act is forbidden by the I.P.C.

Threat to commit suicide


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

threat to commit suicide was not punishable under the


Indian Penal Code, it must be deemed to be forbidden by that Code, as an attempt to commit suicide was punishable under Section 309 of that Code.

Duress
The act or threat must be aimed at the life or
liberty of the other party to the contract or the members of his family. A threat to destroy or detain property will not amount to duress.

Effect of Coercion
A contract brought about by coercion is voidable at the option of the party whose consent was so caused.

This means that the aggrieved party may either


exercise the option to affirm the transaction and

hold the other party bound by it, or repudiate the


transaction by exercising a right of rescission.

Contd..
As per Section 64, if the aggrieved party opts to rescind a voidable contract, he must restore any benefit received by him under the contract to

the other party from whom received.


The burden of proof that coercion was used lies on the party who wants to set aside the contract on the plea of coercion.

Case Law
GOBARDHAN DAS VS. JAI KISHEN DAS (1900) Dealings between the appellant Gobardhan Das and one Gopal Das, the son of the plaintiff-respondent Jai Kishen Das. The appellant got Gopal Das to execute a deed of sale of Gopal Das' share in certain ancestral property. There were two deeds, one was taken in the name of Gobind Das, a relative of the appellant, and after that there was a further deed executed by Govind Das in the appellant's favour. On the 26th November 1896, a complaint was filed before a Magistrate by Gopal Das against Gobardhan Das. Gopal Das charged the appellants with offences of criminal breach of trust and cheating under the Indian Penal Code in connection with the execution of the deeds.

Contd..
On 27th, the Court directed that the case should be sent to the police for investigation. It was still under investigation the submission now in question was executed on the 4th December 1896. The submission is signed by Jai Kishen Das and the appellant Gobardhan Das. The only ground, upon which the validity of the submission was questioned, was that of coercion, or undue influence. . It was clear that there was no coercion; and on the evidence it cannot be held that there was undue influence within the meaning of Section 16 of the Contract Act. The evidence showed that it embodied the result of a settlement come to by the parties to which both of them consented. They signed the award as indicating their acceptance of it, and it had not been proved that the appellant's consent to the settlement was procured by undue influence.

Undue Influence (Section 16(1))


A contract is said to be induced by undue influence where: i. 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 ii. he uses the position to obtain an unfair advantage over the other. Thus, an undue influence may be presumed in the cases of the following relationships: Doctor and patient Parent and child Guardian and ward Lawyer and client Spiritual Guru and disciple Trustee and beneficiary, and similar other relationships

Presumption of Undue Influence


Undue influence is presumed to exist under the circumstances mentioned above. In other words, there is no presumption of undue influence in the following circumstances: Husband and wife Master and servant Landlord and tenant Creditor and debtor Onus (burden) of proof [Section 16 (3)] In cases where there is a presumption of undue influence the burden of proving that there was no undue influence will lie upon the person who was in a position to dominate the will of the other.

Effect of undue influence [Section 19 A]


Voidable at the option of aggrieved party and has following two options available to him: i. He can prefer to have the contract set aside, or else, ii. He can choose to insist on the performance of the contract by the other party if a contract procured by undue influence is set aside, the Court has discretion to direct the aggrieved party for refunding the benefit whether in whole or in part or set aside the contract without any direction for refund of benefit.

Case Law
Due to the death of Sanjay Gandhi, the appellant, the respondent and 13 other candidates contested the election. Rajiv Gandhi (respondent) was declared elected. The appellant filed an election petition under Section 80 of the Representation of the People Act 1951. questioning the validity of the election of the respondent on a number of grounds, including the allegations of corrupt practice of undue influence like hiring and procuring of vehicles for carrying voters and obtaining the assistance of Government servants. The court observed that there was no instance of undue influence It was declared as Declaration of public policy or a promise of public action or promise to develop the constituency in general do not interfere with free exercise of electoral rights as the same do not constitute bribery or undue influence

Fraud (Section 17)


In criminal law, fraud is intentional deception made for personal gain or to damage another individual. Fraud is a crime and a civil law violation, though the specific criminal law definition varies by legal jurisdiction.

Contd..
Five involvement in fraud: a false statement of a material fact knowledge on the part of the defendant that the statement is untrue, intent on the part of the defendant to deceive the alleged victim, justifiable reliance by the alleged victim on the statement, and injury to the alleged victim as a result.

Examples of company Fraud


Asset misappropriation Skimming Disbursement Expense reimbursement fraud Payroll fraud Financial statement fraud Information misrepresentation

Cases
Citi bank fraud Key person:Mr. Shivraj Puri relationships manger with Gurgaon branch of Citibank. He lured investors into a fake scheme with the help of forged circulars from Securities and Exchange Board of India (SEBI) with a hope to cash on very high interest rates.

Cases Contd..
Ipl scam Key persons: Lalit Modi , IPL Commissioner Sunanda Pushkar. Started whe Lalit Modi revealed that Sunanda Pushkar had equity stakes in Rendezvous Sports World (RSW), heading the consortium that owns the Kochi team. It was later disclosed that Pushkar got sweat equity of the value of Rs 70 crore. Income Tax investigation report into match-fixing angle in the IPL revealed Lalit Modi has interests in three teams.

Misrepresentation (Section 18)


Where a person asserts something which is not true,
though he believes it to be true, his assertion amounts to
misrepresentation. According to Section 18 Misrepresentation means and includes 3 ways: 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.

Contd
Ex: A tells B, C will join a XYZ company as MD. induces B to purchase shares B purchase shares C didnt join company A got this information as hearsayIts a misrepresentation by A though he believed that the information was true

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.
Ex: A, before signing a contract B states that the monthly sales of 50,000Negotiation lasted 5 months sales dwindled 5000 per monthA unintentionally keeps quite

Case Law
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. Case Law [Bonnerman vs White (1861) 142 E. R. 658] Johnson agrees to buy hops from Blanchard

On condition of not using sulphur while growing them. Blanchard tells him no sulphur was used Blanchard had used sulphur 5 out of 300acres B forget that while telling A that no sulphur was used

Mistake (section 20,21,22)


An erroneous belief Types of mistake
Mistake

Mistake of law

Mistake of fact

Mistake of law of the country

Mistake of foreign law

Bilateral

Unilateral

Types of Mistake
Mistake of law Ignorantia juris non exusat, not applicable in the cases of foreign law. Mistake of fact Bilateral mistake. Parties misunderstand each other and are at cross purposes When mistake is of essential fact, the agreement is void abinitio Unilateral Mistake Only one of the contracting parties is mistaken as to a matter of fact If mistake is caused by misrepresentation or fraud, contract is voidable

Case laws
Bilateral Mistake: Raffles v Wichelhaus Contract to sell 125 bales of Surat cotton to Wichelhaus by ship Peerless. The defendant(W) thought that it was the October sailing and the claimant(R) believed it was the December sailing which had been agreed. Contract declared void. Unilateral Mistake: Hartog v Colin & Shields Defendants mistakenly offered a large quantity of hare skins at a certain price per pound whereas they meant to offer them at that price per piece. Price was roughly one third of what it should have been. The judge found in Colin & Shields favour ,and rendered the contract void.

Other Information
EU: WP29: Free and informed consent at the crux of lawful app data collection. Due to lack of transparency in applications on smart devices. Disregard of the purpose limitation principle. Are the key data protection risk identified to the end users. 2011 GSMA survey result 92% are concerned when applications collect personal data without their consent.

Contd..
Mere silence without any legal duty to speak will not amount to fraud except where: The circumstances of the case are such that regard being had to them, it is the duty of the person keeping silence to speak. Silence in itself will be equivalent to speech. Change of circumstance. Duty to speak where contracting party responses trust and confidence. Peek v/s gurney case Mis-representation

Conclusion
One of the essential ingredients of a valid agreement is 'Free Consent'. Consent is said to be 'free' when it is not caused by: Coercion (section 15) Undue Influence (section 16) Misrepresentation (section 18) Fraud (section 17) Mistake(section 20,21,22) Various case laws describing the same have been brought to light. There are exceptions to some of these elements as well. Depending on the severity of the crime, the punishment for coercion, fraudulency, undue influence etc. may include a liability for a fine and/ or a jail term.