INDIAN CONTRACT ACT

1872 (PART III)

BY PROF. VERRSHA
TOLLASARIYA
WHAT IS

FREE

CONSENT?
 WHAT IS FREE CONSENT?

WHEN 2 OR MORE PERSON AGREE ON THE SAME THING IN

THE SAME SENSE IT IS FREE CONSENT.

U/S 14 THE CONSENT IS SAID TO BE FREE WHEN IT IS NOT

CAUSED BY:

1. COERCION U/S 15
2. UNDUE INFLUENCE U/S 16
3. FRAUD U/S 17
4. MISREPRESENTATION U/S 18
5. MISTAKE U/S 20, 21 & 22

© Prof. Verrsha Tollasariya

LETS UNDERSTAND THEM
IN DETAIL
 WHAT IS COERCION?

WHEN A PERSON IS FORCED TO ENTER INTO A CONTRACT WITH A

PARTY BY USE OF FORCE OR BY THREAT OR BOTH, COERCION IS
SAID TO BE USED

U/S 15 COERCION IS SAID TO BE CAUSED WHEN CONSENT IS

OBTAINED BY:

1. COMMITTING OR THREATENING TO COMMIT AN ACT NOT

ALLOWED BY IPC (INDIAN PENAL CODE)
2. UNLAWFUL DETAINING OR A THREAT TO DETAIN PROPERTY TO
HARM ANY PERSON
3. WITH INTENTION TO CAUSE A PERSON TO ENTER INTO A
CONTRACT
4. WHETHER OR NOT IPC IS IN FORCE AT A PLACE WHERE
COERCION WAS USED
© Prof. Verrsha Tollasariya
 EFFECTS OF COERCION

1. CONTRACT IS VOIDABLE AT THE OPTION OF PARTY

2. IF THE OTHER PARTY HAS RECEIVED ANY BENEFIT BY

ENFORECING COERCION, THEN HE MUST RESTORE THE BENEFIT
TO THE PERSON HE HAS RECEIVED FROM.

3. A PERSON TO WHOM MONEY HAS BEEN PAID UNDER COERCION

MUST REPAY OR RETURN IT.

FOR EXAMPLE – IF A HUSBAND FORCES HIS WIFE TO GIVE

SIGNATURE ON SOME PAPERS THREATENING TO COMMIT SUICIDE,
THIS TRANSACTION IS SAID TO BE UNDER COERCION, SUICIDE
WHICH IS FORBIDDEN BY IPC.

© Prof. Verrsha Tollasariya

 WHAT IS UNDUE INFLUENCE?

WHEN A PERSON USES DOMINATION OVER THE OTHER TO TAKE

UNDUE ADVANTAGE OF THE OTHER.

U/S 16 UNDUE INFLUENCE IS SAID TO BE CAUSED WHEN CONSENT

IS OBTAINED BY:

1. WHERE THE DOMINATING PARTY HOLDS AUTHORITY OVER THE

OTHER,

2. WHERE THE DOMINATING PARTY STANDS IN FIDUCIARY

RELATIONSHIP,

3. WHERE THE DOMINATING PARTY MAKES CONTRACT WITH A

PERSON WHOSE MENTAL CAPACITY IS AFFECTED.

© Prof. Verrsha Tollasariya

 EXAMPLES OF UNDUE INFLUENCE?

1. A GAVE MONEY TO HIS SON B DURING (BEFORE TURNING 18),

WHEN B TURNED 18, A MADE B SIGN A BOND DEMANDING MORE
MONEY THAN WAS GIVEN TO HIM BY MISUSING PARENTAL
INFLUENCE.

2. A IS ILL AND IS FORCED BY B TO PAY AN UNREASONABLE AMOUNT OF

MONEY FOR HIS SERVICE,

3. A IS IN DEBT OF B (MONEY LENDER OF VILLAGE) GIVES A FRESH LOAN

ON UNREASONABLE TERMS. IT LIES ON B TO PROVE THAT THE
CONTRACT WAS NOT INDUCED BY UNDUE INFLUENCE.

4. A APPLIES FOR A LOAN IN THE BANK WHEN THERE IS STRINGENCY IN

THE MARKET, THE BANK ACCEPTS THE LOAN APPLICATION ON THE
CONDITION OF UNUSUALLY HIGH INTEREST RATE.
© Prof. Verrsha Tollasariya
 WHAT IS FRAUD?

WHEN A PERSON, HIS AGENT OR ANYONE ON HIS BEHALF USES

THE FOLLOWING ACTS ON ANOTHER PARTY IS SAID TO BE FRAUD

U/S 17 FRAUD HAPPENS WHEN THE FOLLOWING OR ANYONE OF

THE FOLLOWING IS USED TO ENTER INTO A CONTRACT:

1. WHEN FACTS ARE MANIPULATED TO DECIEVE ANOTHER PARTY,

2. WHEN FACTS ARE CONCEALED AND NOT GIVEN TO ANOTHER

PARTY,

3. WHEN ANY ACT IS FIT TO BE CALLED TO DECIEVE,

4. WHEN ANY ACT IS CONSIDERED TO BE FRAUD ACCORDING TO

THE LAW
© Prof. Verrsha Tollasariya
 EXAMPLES OF FRAUD?
1. A SELLS A HORSE TO B BY AUCTION, KNOWING THAT THE HORSE IS
UNSOUND. THIS IS FRAUD BY A

2. A AND B ARE TRADERS, ENTER INTO CONTRACT. A KNOWS

CONFIDENTIAL INFORMATION THAT WOULD AFFECT B’S PURCHASE
DECISION, WHICH A DID NOT CONVEY TO B. THIS IS NOT BOUND BY
A, HENCE NOT A FRAUD.

EFFECTS OF FRAUD?
1. THE PARTY CAN CANCEL THE CONTRACT,
2. THE AGGREIVED PARTY CAN SUE / CLAIM FOR DAMAGES,
3. HE CAN PUT CONDITIONS FOR HIS PERFORMANCE OF THE
CONTRACT.

MERE SILENCE IS NOT FRAUD UNLESS IT WAS HIS DUTY TO SPEAK &
WHERE IT IS CONSIDERED TO BE SPEECH.
© Prof. Verrsha Tollasariya
 WHAT IS MISREPRESENTATION?
WHEN A PERSON MAKES A FALSE STATEMENT (UNKNOWINGLY)
CONVINCING THE PARTY TO BELIEVE IT. IT INCLUDES NON
DISCLOSURE OF MATERIAL FACT.

U/S 18 MISREPRESENTATION IS SAID TO BE CAUSED WHEN

CONSENT IS OBTAINED BY:

1. CONCEALING THE MATERIAL FACT,

2. WHEN THE PARTY IS INDUCING THE OTHER PARTY TO ENTER

INTO CONTRACT,

3. WHEN THE PARTY IS GIVING WRONG FACT HONESTLY BELIEVING

IT TO BE TRUE

4. IT IS MADE WITHOUT ANY INTENTION TO DECIEVE THE PARTY.

© Prof. Verrsha Tollasariya
 MISTAKE

MISTAKE OF MISTAKE OF
LAW FACT

MISTAKE OF
MISTAKE OF
FOREIGN BILATERAL UNILATERAL
INDIAN LAW
LAW
 WHAT IS MISTAKE?

IT IS A WRONG BELIEF ABOUT SOMETHING.

1. MISTAKE OF LAW -
a. MISTAKE OF INDIAN LAW – IGNORANCE OF THE LAW OF
LAND IS NOT AN EXCUSE.
b. MISTAKE OF FOREIGN LAW – FOEIGNERS ARE HERE GIVEN
SOME LENIENCY AND THEY ARE CONSIDERED UNDER
MISTAKE OF FACT

2. MISTAKE OF FACT
a. BILATERAL – BOTH PARTIES ARE UNDER MISTAKE OF FACT.
NO CONSENSUS AD IDEM
b. UNILATERAL – WHEN ONE PARTY IS UNDER MISTAKE. THE
CONTRACT WILL BE VALID.

© Prof. Verrsha Tollasariya

INDIAN CONTRACT
ACT 1872 (PART – IV)

BY PROF. VERRSHA
TOLLASARIYA
 WHAT IS

DISCHARGE OF

CONTRACT?
 DISCHARGE OF CONTRACTS

THE CASES IN WHICH A CONTRACT IS DISCHARGED MAY BE

CLASSIFIED AS FOLLOWS:

A. BY PERFORMANCE OR TENDER.

B. BY MUTUAL CONSENT.

C. BY IMPOSSIBILITY OF PERFORMANCE.

D. BY OPERATION OF LAW.

E. BY LAPSE OF TIME

F. BY BREACH OF CONTRACT

© PROF. VERRSHA TOLLASARIYA

LETS UNDERSTAND THEM
IN DETAIL
 BY PERFORMANCE OR TENDER:

ACTUAL PERFORMANCE:
WHEN BOTH THE PARTIES PERFORM THEIR
PROMISES.

ATTEMPTED PERFORMANCE OR TENDER:

ONLY AN OFFER TO PERFORM THE OBLIGATION
UNDER THE CONTRACT.

© PROF. VERRSHA TOLLASARIYA

 DISCHARGE BY MUTUAL CONSENT OR AGREEMENT:

THE TERMINATION OF CONTRACT BY FURTHER AGREEMENT OR

CONSENT.
WAYS TO DO SO:

1. NOVATION

2. RESCISSION

3. ALTERATION

4. REMISSION

5. WAIVER

6. MERGER
© PROF. VERRSHA TOLLASARIYA
 DISCHARGE BY MUTUAL CONSENT OR AGREEMENT

NOVATION

WHEN A NEW CONTRACT IS SUBSTITUTED FOR AN

EXISTING ONE BETWEEN THE SAME PARTIES.

WHEN A NEW CONTRACT IS SUBSTITUTED FOR AN

EXISTING ONE BETWEEN ONE OF THE PARTIES AND A
THIRD PARTY.

NOVATION SHOULD TAKE PLACE BEFORE THE EXPIRY

OF THE TIME OF THE PERFORMANCE OF THE
CONTRACT.

© PROF. VERRSHA TOLLASARIYA

 DISCHARGE BY MUTUAL CONSENT OR AGREEMENT:

RESCISSION

TAKES PLACE WHEN ALL OR SOME OF THE TERMS

OF THE CONTRACT ARE CANCELLED.

COULD BE DONE BY A)MUTUAL CONSENT OR B)

WHEN ONE PARTY FAILS IN THE PERFORMANCE OF
CONTRACT, THE OTHER PARTY COULD RESCIND THE
CONTRACT WITHOUT FEAR OF CLAIM OF
COMPENSATION.

© PROF. VERRSHA TOLLASARIYA

 DISCHARGE BY MUTUAL CONSENT OR AGREEMENT:

ALTERATION
MODIFICATION OF ONE OR MORE TERMS OF THE CONTRACT BY THE
MUTUAL CONSENT OF THE PARTIES.

REMISSION
IT IS ACCEPTANCE OF LESSER FULFILLMENT OF THE PROMISE MADE

WAIVER
WHEN PARTIES TO THE CONTRACT AGREE THAT THEY SHALL NO
LONGER BE BOUND TO THE CONTRACT

MERGER
WHEN INFERIOR RIGHT ACCRUING TO A PARTY UNDER CONTRACT
MERGES INTO A SUPERIOR RIGHT ACCRUING TO THE SAME PARTY.

© PROF. VERRSHA TOLLASARIYA

 BY IMPOSSIBILITY OF PERFORMANCE

(A)INHERENT IMPOSSIBILITY
(I)KNOWN TO THE PARTIES

(II)UNKNOWN TO THE PARTIES

(B) SUBSEQUENT IMPOSSIBILITY

(I)DESTRUCTION OF SUBJECT MATTER OF CONTRACT
(II)NON-EXISTENCE OR NON-OCCURRENCE OF A PARTICULAR
STATE OF THINGS
(III) BY THE DEATH OR DISABLEMENT OF THE PARTIES
(IV) SUBSEQUENT ILLEGALITY
(V) DECLARATION OF WAR

© PROF. VERRSHA TOLLASARIYA

 BY OPERATION OF LAW
1. BY DEATH

2. BY INSOLVENCY

3. BY MERGER

4. BY THE UNAUTHORIZED ALTERATION OF TERMS OF A

WRITTEN DOCUMENT

© PROF. VERRSHA TOLLASARIYA

BY LAPSE OF TIME

BY BREACH OF CONTRACT
(I) ACTUAL BREACH OF CONTRACT
(II) ANTICIPATORY BREACH OF CONTRACT

© PROF. VERRSHA TOLLASARIYA