BUSINESS LAW

ASSIGNMENT

FREE CONSENT

SUBMITTED BY:

CONTENT

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SR.NO TOPIC PAGE NO
1 INTRODUCTION 3-4
2 FREE CONSENT 5-13
3 CONCLUSION 14
4 BIBLIOGRAPHY 15
5 END NOTE 16

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 LAW
Is a system of rules, usually enforced through a set of institutions. It shapes
politics, economics and society in numerous ways and serves as a primary
social mediator of relations between people.

Law is a system of rules, usually enforced through a set of institutions. It shapes

politics, economics and society in numerous ways and serves as a primary
social mediator of relations between people. Contract law regulates everything
from buying a bus ticket to trading on derivatives markets. Property law defines
rights and obligations related to the transfer and title of personal (often referred
to as chattel) and real property. Trust law applies to assets held for investment
and financial security, while tort law allows claims for compensation if a
person's rights or property are harmed. If the harm is criminalized in a statute,
criminal law offers means by which the state can prosecute the perpetrator.
Constitutional law provides a framework for the creation of law, the protection
of human rights and the election of political representatives. Administrative law
is used to review the decisions of government agencies, while international law
governs affairs between sovereign nation states in activities ranging from trade
to environmental regulation or military action. Writing in 350 BC, the Greek
philosopher Aristotle declared, "The rule of law is better than the rule of any
individual."

Legal systems elaborate rights and responsibilities in a variety of ways. A

general distinction can be made between civil law jurisdictions, which codify
their laws, and common law systems, where judge made law is not
consolidated. In some countries, religion informs the law. Law provides a rich
source of scholarly inquiry, into legal history, philosophy, economic analysis or
sociology. Law also raises important and complex issues concerning equality,
fairness and justice. In a typical democracy, the central institutions for
interpreting and creating law are the three main branches of government,
namely an impartial judiciary, a democratic legislature, and an accountable
executive. To implement and enforce the law and provide services to the public,
a government's bureaucracy, the military and police are vital. While all these
organs of the state are creatures created and bound by law, an independent legal
profession and a vibrant civil society inform and support their progress.

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Business law (commercial law, merchantile law)

It deals with the rights and obligations of commercial persons and

organizations emerging from commercial transactions in respect of commercial
property.

Every business organization whether a proprietary concern or a partnership

firm or a company has to work in a legal environment. It is subject to the
business laws in force.

Eg: Contract Act, Partnership Act, Sale of goods Act, Companies Act, Negotiable
Instruments Act, Competition Act, FEMA, Patents, Designs, Trade Marks,
Copyright Laws, Tax Laws, etc

Commercial law (sometimes known as business law) is the body of law that
governs business and commercial transactions. It is often considered to be a
branch of civil law and deals with issues of both private law and public law.

Commercial law includes within its compass such titles as agreements,

contracts, principal and agent; carriage by land and sea; merchant shipping;
guarantee; marine, fire, life, and accident insurance; bills of exchange and
partnership. It can also be understood to regulate corporate contracts, hiring
practices, and the manufacture and sales of consumer goods. Many countries
have adopted civil codes that contain comprehensive statements of their
commercial law.

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 FREE COSENT

Consent means to agree to something. Free consent means to agree without

coercion without being forced or threatened. It is essential to the creation of a
contract that both parties agree to the same thing in the same sense. When two
or more persons agree upon same thing , they are said to consent.

Example:-
1) A agrees to sell his Fiat car 1983 model for rupees 80000. B agrees to buy
the same .there is a valid contract since A and B have consented to the
same subject matter.
2) A, who owns three Fiat cars, offers to sell one, say “car x”, to B for
rupees 90000 . B agrees to buy the car for price thinking that A is selling
“car Y”. There is no consent and hence no contract . A and B have agreed
not to the same thing but to different things.

WHEN IS CONSENT SAID TO BE FREE?

For consent to be free, you must be old enough to consent. The age of consent
varies according to country, state, and type of contract. Second, in order for
consent to be free, you must not be coerced, or forced. And you must not be
drunk or drugged or otherwise in a state of body or mind which affects your
decision-making ability.

According to INDIAN CONTRACT ACT, free consent is said to be free when

it is not caused by

1) Coercion, as defined in section 15

2) Undue influence, as defined in section 16
3) Fraud , as defined in section 17
4) Misrepresentation, as defined in section 18
5) Mistake, subject to provisions of section 20, 21, 22

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 Coercion(Section 15)

Coercion is

i) The commiting or threatening to commit any act forbidden by Indian

Penal Code
ii) 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

Example:-

1) A hindu widow is forced to adopt X under threat that her husband‟s

corpse(dead body) would not be allowed to be removed unless she adopts
X.The adoption is voidable as having been induced by coercion.

2) A threatens to kill B if he doesn‟t transfer his house in A‟s favour for a

very low price. The agreement is voidable for being the result of
coercion.

NOTE- it is not necessary that coercion must have been excercised agains
the promisor only, it may be directed at any person.

Example:-
1. A threatens to kill B(c‟s son)if C doesnot let out of his house to A. the
agreement is caused by coercion.

Threat to commit suicide-is it coercion-

The doubt arises because suicide though forbidden by Indian Penal

Code is for obvious reasons not punishable.A dead person cannot be
punished. But, since the section 15 declares that commiting or
threatening to commit any act is forbidden by Indian Penal Code is
coercion.

CONSEQUENCES OF COERCION(SECTION 19)

When cosent of an agreement is caused by coercion, the agreement is

a contract voidable at the option of the party whose consent was so
obtained. In other words the aggrieved party can have the contract set
aside or if he so desires to insist on its performance by other party.

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Examples of effect of coercion

1. Anuj executes a transfer bond for the house under fear of assault .it will
be a contract voidable at the option of Anuj since his consent was
obtained by coercion.
2. A railway company refuses to deliver up certain goods to the consignee,
except upon the payment of an illegal charge for carriage. The consignee
pays the sum charged in order to obtain the goods. He is entitled to
recover so much of the charge as was illegally excessive.

Undue Influence(Section 16)

Undue influence is the improper use of any power possessed over the mind of
the contracting party. According to section 16 a contract is said to be affected
by undue influence when:

The relations 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.

Following are the parties that can be affected by undue influence

a) Doctor and patient

b) Lawyer and client
c) Guardian and ward
d) Trustee and beneficiary
e) Teacher and student

Example:-

1) A having advanced money to his son B during his minority, upon B

coming of age ,obtains, by misuse of parental influence,a bonds from B
for greater amount than the sum due in respect of the advance A employs
undue influence.

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 2) A man enfeebled by disease or age is induced by B‟s influence over him
as his medical attendant to agree to pay B an unreasonable sum for his
professional service.B employs undue influence.

CONSEQUENCES OF UNDUE INFLUENCE(section 19-A)

An agreement caused by undue influence is a contract voidable at the

option of the party whose consent was obtained by undue influence.
However, any such contract may be set aside either absolutely or if the
party who was entitled to avoid it has received any benefit there under
upon such terms and conditions as the court deems fit.

Example:-
A, a money lender advances Rs 100 to B, an agriculturist, and by undue
influence, induces B to execute a bond for Rs 200 with interest at 6%/
month. The court may set the bond aside, ordering B to reply Rs 100 with
such interest as may seem just.

Fraud(Section 17)

Misrepresentation of facts may be intentional or innocent. Intentional

misrepresentation has been termed as Fraud and innocent misrepresentation has
been termed simply as „misrepresentation‟ in the contract act.

Definition under law section 17

According to section 17 fraud means and includes any of the following acts,
Committed by a party to a contract or by any one with his connivance or by his
agent with intent to deceive another party thereto or his agent or to induce him
to enter into contract:

(a) A suggestion as to fact of that which is not true by one who does not believe
it to be true

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(b) An active concealment of a fact by one having knowledge or belief of the
fact.

(c) Any other act fitted to deceive

(d) A promise made without any intention of performing it

Essentials of fraud

1. There must be a representation and it must be false.

(Peek vs Gurney(1873) L.R 6 H .L 377)
2. The representation must relate to material fact
(Bisset vs Wilkinson (1972) A.C 177)
3. The representation must have been made before the conclusion of the
contract with the intention of inducing the other party to act upon it.
4. The other party must have been induced to act upon the representation
5. The other party must have relied upon the representation and must have
been deceived.
(Horsefull vs thomas , (1862) 1 H & C 90)

There must be false representation Peek vs Gurney (1873) L.R 6 H .L 377

The prospectus of a company did not refer to the existence of a document

disclosing liabilities. This gave the impression that the company was
prosperous. If the existence of the document had been disclosed the impression
would have been quite different. Held, non-disclosure amounted to fraud and
anyone who purchased shares on the faith of this prospectus could avoid the
contract.

The representation must relate to material fact Bisset vs Wilkinson (1972)

A.C 177

The vendor of a piece of land told a prospective purchaser that, in his opinion
the land would carry 2000 sheep. In fact the land could carry only a number less
than this. Held there was no misrepresentation as the statement was one of
opinion which was honestly held

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Examples :-

1. Manoj was induced to buy shares in a company on account of a false

statement made by a stranger. It was held that he could not get out of the
bargains because false statement was not made by the company or its
agent.

2. Manoj says to deepika his coat is made of pure wool, though he knows
that it is untrue .Deepika purchases the coat believing Manoj‟s statement
to be true, It is a fraud by Manoj and therefore contract is voidable at
deepika‟s option.

Decided case on silence is not a fraud

Hands vs. Simpson, fawcett & co ltd (1928) 44T LR 295

H a commercial traveller, obtained an employment with S. S regarded driving

as an essential part of H‟s duties but he did not specifically ask H if he is
qualified to drive a car. H kept quiet about his disqualification to drive a car. S
contended that H‟s silence is misrepresentation. But it was held that H was
under no duty to volunteer the information and there was no misrepresentation.

Essentials of fraud

1. The act must have been committed by a party to the contract or with his
connivance or by agent .It should not have been committed by a stranger
2. The act must have been committed with the intention of inducing the
deceived party to act upon it-It implies that the assertion should be such
that it would necessarily influence and induce other party to act
3. Plaintiff must have suffered

Effect of Fraud

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The party whose consent to the contract is obtained by fraud can exercised any
of the following rights:

1. He may avoid the contract and may (i) ask for the damages suffered
because of the non-fulfilment of the contract
2. He may insist for the performance of the contract.

Misrepresentation(Section 18)

Misrepresentation is a false representation made innocently without any

intention of deceiving the other party .It may include two things:

(a) wrong statement of a material fact not known to be false

(b) Non-disclosure of facts where there is a legal duty to disclose without

intention to deceive.

Example:-
1)X entered into contract with C for the sale of hops.X told Y that no sulphur
has been used in their growth.Y agees to buy only if no sulphur has been used
for their growth.As a matter of fact, sulphur has been used in 5 out of 100 acres
which fact was evidently forgotten by X when represented that no sulphur was
used.

CONSEQUENCES OF MISREPRESENTATION:-

In the cases of misrepresentation the party aggrieved or wronged can be-

a) Avoid the agreement

b) Insist that the contract be performed and that he be put in the position in
which he would have been if the representation made had been true.

Unlike fraud, misrepresentation by a party does not entitle the other to

claim damages. This, however is subject to certain exceptions, ie, in

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 certain cases the right to claim damages arises even in case of
misrepresentation. These are-

a)breach of warranty of authority of an agent-

where an agent believes that he has the authority to represent his
principal while in fact he has no such authority, the agent is liable in
damages, even though he is guilty of innocent misrepresentation.
b)negligent representation-
made by one person to another between whom a confidential relationship
exist, eg- solicitor and client.

However, if the party whose consent was caused by misrepresentation had the
means of discovering the truth with ordinary diligence, he has no remedy.

Mistake
The term mistake is used in contract law to describe a situation in which one or
both parties to an agreement acted under an untrue belief about the existence or
nonexistence of a material fact.”

Essentials

The following conditions must be fulfilled;

1. There must be a mistake as to the formation of the contract.

2. It must be mistake of fact.
3. It must be about a fact essential to the agreement.

Kinds Of Mistake Of Fact

Mistake cases are classed as mutual or unilateral, depending on whether both or

only one of the parties were acting under a mistaken belief.

Bilateral Mistake:

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Section 20 states that were both the parties to an agreement are under a mistake
as to a matter of fact, essential to the agreement shall be void. The mistake shall
be termed as bilateral mistake of fact only when both of the following
conditions are satisfied

(a) it should be committed by both the parties

(b) it should relate to a matter of fact essential to the agreement.

Example:

“A contracts B to sell his car. Both the parties thank it is in A‟s garage.
Actually the car was stolen before the agreement. The agreement is void.”

Unilateral Mistake:

When in a contract only one party is at mistake regarding the terms of the
agreement.

Example: “A wants to contract only with B, but makes a contract with C;

believing him to be B.”

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 CONCLUSION
All the agreements are contracts if they are made by free consent of the
parties.Without the consent of the parties contract cannot take place. Where the
parties have different things in mind or understand the same thing in different
ways is not real consent.

Effect of Absence of free consent:

When there is consent but it is not free (i.e. when it is caused by coercion or
undue influence or fraud or misrepresentation), the contract is usually voidable
at the option of the party whose consent was so caused.

BIBLIOGRAPHY

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1. Business law by S S GULSHAN and G.K KAPOOR
2. www.google.com
3. www.wikipedia.com
4. Elements of mercantile law by N.D.Kapoor.

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 END NOTE

1) Section 15, 17, 18, 19, 19 A, 20, 21, 22- INDIAN CONTRACT ACT
1872.
2) Examples- Business law including company law by S.S Gulshan and
G.K Kapoor
3) Elements of mercantile law by N.D.Kapoor.

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