ASSIGNMENT-01

BUSINESS AND INDUSTRIAL LAW

NAME : TEHSEEN GHAFOOR

ID : 7788
CLASS : BBA-6
SUBMITTED TO : SIR AMEER HAMZA
FLAWS IN CONSENT:
Consent is said to be so caused when it would not have been given but for the existence of such
coercion, undue influence, misrepresentation, fraud or mistake” (Sec. 14). This means that in
order to bring a case within this Section, the party, who alleges that his consent has been
caused by any of the above elements which vitiate consent, must show that, but for the
vitiating circumstance the agreement would not have been entered into. To put it differently, in
order to prove that his consent is ‘not free’, the complainant must prove that if he had known
the truth, or had not been forced to agree, must prove that if he had known the truth, or had
not been forced to agree, he would not have entered into the contract.

There are five types of Flaws in consent which are following,

1. Coercion

2. Fraud

3. Mistake

4. Miss Representation

5. Undue-influence

1. Coercion:
Coercion generally means to impose ones will on another by means of force or threats.
Coercion may be accomplished through physical or psychological means. Coercion is the
practice of forcing another party to act in an involuntary manner by use of intimidation or
threats or some other form of pressure or force. It involves a set of various types of forceful
actions that violate the free will of an individual to induce a desired response, usually having a
strict choice or option against a person in such a way a victim cannot escape.

For Example: A contractor is stopped from submitting his bid at the bid opening. Persons
connected to a competitor block the contractor from entering the building where the bid
opening is taking place, and tell him that “if he cares for his family, he should not submit a bid.”
Another bidder who comes to submit a bid is also stopped by these same persons who tells the
bidder that “it is not his turn to win this contract.” The two bidders leave the bid opening and
do not submit a bid out of fear.

2. Fraud
A false representation of a matter of fact—whether by words or by conduct, by false or
misleading allegations, or by concealment of what should have been disclosed—that deceives
and is intended to deceive another so that the individual will act upon it to her or his legal
injury.

Fraud is commonly understood as dishonesty calculated for advantage. A person who is

dishonest may be called a fraud. In the U.S. legal system, fraud is a specific offense with certain
features.

Fraud is most common in the buying or selling of property, including real estate, Personal
Property, and intangible property, such as stocks, bonds, and copyrights. State and federal
statutes criminalize fraud, but not all cases rise to the level of criminality. Prosecutors have
discretion in determining which cases to pursue. Victims may also seek redress in civil court.

For Example: The telephone is used by criminals to make calls pretending to be a bank
investigator, examiner or an employee of a bank or credit card company. Now, with advances in
telephone technology, it is possible for these criminals to make fraudulent calls and have the
call display show the legitimate bank or credit card companies name and telephone number.

3. Mistake
Erroneous belief about something or having wrong opinion about something is called mistake.
While entering into Contract parties think that a particular thing with regard to their Contract is
in a particular way. But that particular thing will not be in that way as they think.

A mistake of fact is unilateral when only one party is mistaken. A bilateral mistake of fact occurs
when both parties to the contract are operating under a mistaken reality. Bilateral mistakes are
also known as mutual mistakes or common mistakes.

A mistake of fact that is unilateral in nature is not normally a reason to set aside a contract or a
reason that will allow a plaintiff in a civil trial to seek damages. A unilateral mistake of fact will
result in an enforceable voidable contract.

For Example: A contract would be voidable at Luke's discretion if Ben took advantage of
Luke's unilateral mistake regarding the purchase of a painting Luke thought was genuine. If Ben
did not know that Luke thought he was buying the genuine painting, then Luke's unilateral
mistake would not prevent the contract from being enforceable.

A bilateral mistake would result in a contract that could be voided by both individuals in the
event that Luke and Ben both believed the forgery was a genuine work by Dali. If Ben believed
Luke intended to buy an artificial Dali painting, and Luke believed Ben was selling a genuine
work by Dali, a mutual mistake has again been made because there was no intention to defraud
and both parties made a mistake of fact.
Mistakes of fact should not be confused with mistakes of value. A mistake of value would occur
if Jim sold Jack a random painting that he believed had only a slight value for $50. If Jim later
learns that the painting was in fact done by a famous artist and worth $500, he cannot sue Jack
to make up the $450. This sort of mistake is not permitted because the value of an object is not
a fact. It can change. In order for a mistake to provide the basis to overturn a contract, the
mistake must be of a fixed and provable nature.

4. Miss Representation
A miss representation is a false statement of fact or law which induces the representee to enter
a contract. Where a statement made during the course of negotiations is classed as a
representation rather than a term an action for misrepresentation may be available where the
statement turns out to be untrue. A brief definition of Miss representation could be "A
misrepresentation is a positive statement of fact, which is made or adopted by a party to a
contract and is untrue. "It may be made fraudulently, carelessly or innocently.

For Example: The plaintiff put up his hotel for sale stating that it was let to a 'most desirable
tenant'. The defendants agreed to buy the hotel. The tenant was bankrupt. As a result, the
defendants refused to complete the contract and were sued by the plaintiff for specific
performance. The Court of Appeal held that the plaintiff's statement was not mere opinion, but
was one of fact.

5. Undue-influence
The unconscientious use by one person of his/her power over another in order to induce the
other to compromise a property right. It is a situation in which an individual is able to persuade
another's decisions due to the relationship between the two parties. In exerting undue
influence, the influencing individual is able to gain an advantage. In contract law, a party
claiming to be victim of undue influence may be able to void the terms of the agreement.

For Example: Let's say John Doe for whatever reason lands in jail for a night. He calls his
girlfriend, Jane Smith, to bail him out. She does so only on the condition that John signs a
contract agreeing to purchase 40% of her pizza parlor business for $100,000.

John, wanting to get out of jail and not lose Jane Smith's affections, signs the contract. He does
not do so with reasonable care because he is being pressured by the other party, which
happens to have the upper hand over John.

Undue influence is often claimed in estate disputes; disappointed heirs often argue that the
deceased wrote a will or created a trust under undue influence from a beneficiary of the will or
trust.