Quiz 2

FREE CONSENT

NAME: REHAN YOUSAF

ENROLLMENT NUMBER: 01-220191-029

CLASS: MBA 3.5

SUBMITTED TO: DR. MAHMOOD SHEIKH

DATED: 13TH APRIL 2020

The parties to a contract must agree upon the terms of the contract. The consent obtained must be
free from any pressure. Free consent is one of the essential elements of a valid contract.

According to section 14:

“Consent is said to be free when it is not obtained by coercion, undue influence, fraud,
misrepresentation or mistake.”

1. COERCION:
Coercion is the threat or harm used by one party against another to compel him to enter
into an agreement. It may be in form of physical harm or loss.
Section 15 defines,
“Coercion is the committing or threatening to commit, any act forbidden by the Pakistan
Penal Code, or the 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.”
Essential of Coercion:
 Commit or Threat to Commit:
If a person commits or threatens to commit an act which is forbidden by the
Pakistan Penal code to compel someone to enter into a contract, it is a contract
made under coercion.
 Detain or Threat to Detain Property:
If a person unlawfully detains or threatens to detain the property of another person
to compel him enter into an agreement, the agreement is voidable at the option of
aggrieved party.
 Threat to Third Party:
An act of coercion may be used against a party to the contract. It can also be used
by his family members or relatives etc. Similarly, coercion may be used directly
by a party to the contract or indirectly through any person related to him.
 Enforcement of Pakistan Penal Code:
It does not matter whether Pakistan Penal code 1860 is in force or not at the place
where the coercion is employed. If suit is filed in Pakistan, the provision of PPC
will apply.
 ILLUSTRATIONS:
 W threatens to shoot M, if he does not give his house on rent. M agrees. The
consent of M is obtained by coercion.
 A threatened to seize the property of B to recover fine due from his sons. B paid
the fine. It was held that the fine was recovered by coercion.
 X threatens to kidnap F’s son if he does not give him 3 lacs. F agrees. The
agreement is made by coercion.
2. UNDUE INFLUENCE
The term undue influence means the unfair use of one’s superior position to obtain the
consent of a person who is in weak position.
Section 16 defines:
“A contract is said to be induced by undue influence where the relation subsisting
between the parties are such that one of the parties is in a position to dominate the will of
other and uses that position to obtain an unfair advantage over the other”
Section 16(2) defines:
A person is deemed to be in a position to dominate the will of other in the following
cases:
 Where he holds a real or apparent authority over the other.
 Where he stands in a fiduciary relation to the other.
 Where he makes a contract with a person whose mental capacity is
temporarily or permanently affected by reason of age, illness, mental or
bodily distress, etc.

Essentials of Undue Influence:

 Position to Dominate:
In order to prove the undue influence, the relations subsisting between the parties
must be such that one of them must be in a position to dominate the will of other
party.
 Real or Apparent Authority:
A person who has the authority over other can dominate the will of that person.
The authority may be real or apparent.
  Fiduciary relation:
It is the relationship of mutual trust and confidence. One person is in a dominant
position because the other person keeps the faith on him. It exists between father
and son, guardian and minor, advocate and client, doctor and patient, etc.
 Mental Capacity:
A person may lack mental capacity permanently or temporarily due to old age,
mental or physical illness, etc.
 Unfair Advantage:
In order to prove undue influence, it is necessary that the party who is in
a dominating position must have used his position to obtain an unfair advantage
from the other party.
ILLUSTRATIONS:
 U, a spiritual adviser, induced his follower M to gift him his property to secure
benefits in the next world. It was held that gift was obtained by undue influence as
U was in a position to dominate.
 C lent his money to his son B and obtained a promissory note for amount greater
than the sum lent by misuse of parental influence. C obtains unfair advantage.
3. FRAUD:
Fraud is an act or course of deception, an intentional concealment, omission, or
perversion of truth, to gain an unlawful or unfair advantage, inducing another to part with
some valuable item or surrender a legal right, or inflict injury in some manner. A false
statement of facts made knowingly is called fraud and vitiates the contract and such a
contract is voidable at the option of the aggrieved party.
Section 17 defines:
Fraud means and includes any of the following acts committed by a party to contract
with intent to deceive another party or to induce him to enter into the contract:
(1) The suggestion, as to fact, of that which is not true, by one who does not to believe it
to be true.
(2)  The active concealment of a fact by one having knowledge or belief of the fact.
(3) A promise made without any intention of performing it.
(4) Any other act fitted to deceive.
 (5) Any such act or commission as the law specially declares to be fraudulent.
Essential of Fraud:
 There must be a false representation of facts. To constitute of fraud there must be a false
statement of facts.
 The representation must be made with the knowledge that it is false or with reckless
disregard about its truth or false hood. If the person making the statement honestly
believes it to be true, he is not guilty of fraud.
 The representation must have been made by the party to the contract or with his
knowledge or by his agent. If a statement is made by a stranger, it does not affect the
contract. A fraud will make a contract voidable only if it is committed by a party to a
contract or his agent.
 The representation must have been made with an intention to deceive the other party.
 The representation must have induced the other party to act upon it. An attempt to
deceive which does not deceive is no fraud. The fraud must have in fact affected the
willingness of the other party to enter into a contract.
ILLUSTRATION:
 A, knowing it to be false, tells B that his factory produces 500 pounds of butter per day.
B agrees to buy. A is guilty of fraud.
 A sell his house to B. the house has cracked walls. A fill it up to conceal the defect. B can
not find the defect. A is guilty of fraud.
4. MISREPRESENTATION:
The term mis representation means false representation of facts made innocently or non-
disclosure of material fact of contracts without any intention to deceive the other party.
Section 18 defines:
(1) 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.
(2) 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 anyone claiming under him.
(3) 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.
 ESSENTIALS OF MISREPRESENTATION:
 Positive Assertion:
The positive assertion means can absolute and clear statement of a fact. When a
person makes a positive statement of facts about the contract without any
trustworthy source of information, believing it to be true though it is not, there is
misrepresentation.
 Breach of Duty:
When a person commits breach of duty and as a result gains an advantage while
the other party is misled and suffers a loss, there is misrepresentation. The breach
of duty is considered misrepresentation if it is committed without intention to
deceive the other party. It includes all the cases where one party is under legal
obligation to disclose all material facts to the other party.
 Inducing Mistake:
If one party induces the other party, though innocently, to commit a mistake
regarding the nature or quality of subject matter of the agreement, there is
misrepresentation.
ILLUSTRATIONS:
 A tells B that his land produces 4000 kg of wheat per acre. A believes it to be
true. B buys it. Later it appears that the land produces only 1000 kg. It is
misrepresentation.
 A, the seller told B, the buyer that motorcycle was free from defects. But there
was an inbuilt defect. B purchased it. There is misrepresentation.
5. MISTAKE:

Mistake of fact is a ground of avoidance in the Law of Contract. It should however be

added that the distinction between mistakes of fact and mistakes of law has never been
clearly defined by the courts.

Section 20 of Contract Act, 1872 defines this as follows:

 “Where both the parties to an agreement are under a mistake as to a matter of fact,
essential to the agreement, the agreement is void.”

ILLUSTRATIONS:

 A agrees to sell to B a specific cargo of goods supposed to be on its way from

England to Bombay. It turns out that, before the day of the bargain the ship
conveying the cargo had been cast away and the goods lost. Neither party was
aware of these facts. The agreement is void.

 A agrees to buy from B a certain horse. It turns out that the horse was dead at the
time of the bargain, though neither party was aware of the fact. The agreement is
void.

 A, being entitled to an estate for the life of B, agrees to sell it to C, B was dead at
the time of agreement, but both parties were ignorant of the fact. The agreement is
void.