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GROUP MEMBER

No. Roll No. Name

1. MBAI-5 HNIN YU YU AUNG

2. MBAI-13 HNIN EI HLAING

3. MBAI-25 MYAT THIT KHIN

4. MBAI-40 SHWE YEE MON

5. MBAI-45 EI THU ZAR MYO

6. MBAI-64 NAN THAN SU SU

7. MBAI-79 MAY MYAT THU

8. MBAI-96 KHIN HNIN YU

9 MBAI-97 YAMIN ANTT ZAW

10. MBAI-98 HAY THI THUN ZAW

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TABLE OF CONTENTS

1. Introduction……………………………………………………………………….4

2. Free Consent………………………………………………………………………4

2.1. Coercion…………………………………………………………………4

2.2. Undue Influence…………………………………………………………5

2.3. Fraud…………………………………………………………………….5

2.4. Misrepresentation……………………………………………………….6

2.5. Mistake………………………………………………………………….7

3. Effects on the contract…………………………………………………………….8

4. Coercion vs. Undue Influence…………………………………………………….8

5. Fraud vs. Misrepresentation………………………………………………………8

6. Conclusion………………………………………………………………………...9

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1. Introduction

In our daily lives, we come across contracts so many times without even realizing it. Be it buying
goods from a shop, availing cable services or installing an app on our phone, contracts are
everywhere. Contracts are an indispensable part of the business. Every transaction in some way
or the other uses contracts, whether written or verbal.

A contract is said to be legal when participating parties do a fair exchange of a certain object that
is within the legal boundaries with free consent. The said contract should also not be one that is
voidable. The following will discuss the role of ‘free consent’, that is mandatory while preparing
a contract.

2. Free Consent

The parties to the contract must have the same understanding in regards to the subject matter of
the contract. In the Indian Contract Act, the definition of Consent is given in Section 13, which
states that “it is when two or more persons agree upon the same thing and in the same sense”. So
the two people must agree to something in the same sense as well.

Let’s say for example A agrees to sell his car to B. A owns three cars and wants to sell the
Maruti. B thinks he is buying his Honda. Here A and B have not agreed upon the same thing in
the same sense. Hence there is no consent and subsequently no contract.

Free Consent has been defined in Section 14 of the Act. The section says that consent is
considered free consent when it is not caused or affected by the following:

• Coercion
• Undue Influence
• Fraud
• Misrepresentation
• Mistake

2.1. Coercion

Coercion means using force to compel a person to enter into a contract. So force or threats are
used to obtain the consent of the party under coercion, i.e. it is not free consent. Section 15 of the
Act describes coercion as

• committing or threatening to commit any act forbidden by the law in the IPC
• unlawfully detaining or threatening to detain any property with the intention of causing
any person to enter into a contract

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For example, A threatens to hurt B if he does not sell his house to A for 5 lakh rupees. Here even
if B sells the house to A, it will not be a valid contract since B’s consent was obtained by
coercion.

Now the effect of coercion is that it makes the contract voidable. This means the contract is
voidable at the option of the party whose consent was not free. So the aggravated party will
decide whether to perform the contract or to void the contract. So in the above example, if B still
wishes, the contract can go ahead.

Also, if any monies have been paid or goods delivered under coercion must be repaid or returned
once the contract is void. And the burden of proof proving coercion will be on the party who
wants to avoid the contract. So the aggravated party will have to prove the coercion, i.e. prove
that his consent was not freely given.

2.2.Undue Influence

When the parties to the contract are in relationships in such a way that one party can dominate
the will of the other and uses the unfair advantage so gained to obtain the consent of the other
party, then the consent is said to have been obtained by undue influence. The Contract Act 1872
provides instances where a person can dominate the will of another. These instances are:

• Where a person has a real or apparent authority over the other.

• Where a person has a fiduciary relationship with the other.
• Where a person enters into a contract with another whose mental capacity is affected,
either temporarily or permanently.

When a party who in a position to dominate the will of the other, enter into a contract and the
contract prima facie appears to unconscionable, then it is the burden of the party who in a
position to dominate, to prove that consent has not been obtained by undue influence.

When the consent of the party to the contract has been obtained through undue influence, then
the contract becomes voidable at the option of the party whose consent has been so obtained.

Say for example A sold his gold watch for only Rs 500/- to his teacher B after his teacher
promised him good grades. Here the consent of A (adult) is not freely given, he was under the
influence of his teacher.

2.3.Fraud

Consent is not said to be free when it has been obtained by means of fraud. In such cases, the
contract becomes voidable at the option of the party whose consent was obtained by means of
fraud. Moreover, fraud is also a tort where action for damages can lie. The Indian Contract Act,
1872 gives the definition of the term ‘Fraud’. The law provides five acts which when committed

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either by the party or with his assistance or by his agent, with the intention to deceive the other
party, amounts to fraud. Those acts are as follows:

• A suggestion, as to a fact which is false, by a party who believes it to be false.

• An active concealment of a fact by a party
• A promise made without any intention of fulfilling it.
• Any other act which can deceive.
• Any act or omission which the law specifically provides to be fraudulent.

Mere silence about facts which can affect the willingness of a person to enter into a contract does
not amount to fraud, but if there is a duty to speak upon the person who is keeping silent, then it
becomes a fraud.

For example, A bought a horse from B. B claims the horse can be used on the farm. Turn out the
horse is lame and A cannot use him on his farm. Here B knowingly deceived A and this will
amount to fraud.

One factor to consider is that the aggravated party should suffer from some actual loss due to the
fraud. There is no fraud without damages. Also, the false statement must be a fact, not an
opinion. In the above example if B had said his horse is better than C’s this would be an opinion,
not a fact. And it would not amount to fraud.

The burden of proof in cases of fraud lies on the party who alleges it. The party has to prove the
circumstances which can lead to the existence of fraud. Merely making a mention of fraud in the
pleadings is not enough. If the party, whose consent has been obtained through fraud, had the
opportunity or means to discover the truth with ordinary diligence, then the contract will not be
void.

2.4.Misrepresentation

The term ‘misrepresentation’ means a false representation of a fact made innocently or non-
disclosure of a material fact by the party without any intention to mislead the other party.
Misrepresentation can be of three types:

• The first type is when a statement is made by a person, about a fact which is not true,
though he believes it to be true.
• Second is the type when there is a breach of duty by a person who is making the false
statement and he gains some kind of advantage even though it wasn’t his intention to
deceive the other party.
• The third is the type where if one party acting innocently, causes the other party to make
any mistake with regards to the subject matter of the agreement.

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For example, A offers to sell his horse to B telling him that the horse is sound. A genuinely
believes the horse to be sound though he has no sufficient ground for the belief. Later, B finds
the horse to be unsound. The statement made by A is misrepresentation.

The burden lies on the party claiming misrepresentation to avoid the contract to prove that
misrepresentation was used to obtain the consent. When consent was obtained through
misrepresentation, it becomes voidable at the option of the party whose consent was so obtained.

2.5.Mistake

When one of the parties has given its consent to the contract under some kind of
misunderstanding then the consent is said to be have been given by mistake. If it was not for the
misunderstanding the party would not have entered into the agreement. Under contract law, a
mistake can of two kinds: Mistake of Law and Mistake of Fact.

1) Mistake of Law

When the party has any misunderstanding with regards to the legal provisions, it is called
Mistake of Law. Now, the party can be confused regarding the law of the Homeland or law of a
foreign land. If it is a mistake regarding the law of the homeland, the contract cannot be avoided.
The party cannot take the plea of having no knowledge of laws of his homeland. But if it is a
mistake regarding the law of a foreign country, he can be excused.

2) Mistake of Fact

When the parties have any misunderstanding regarding the subject matter or terms of the
contract, it is said to be a Mistake of fact. The misunderstanding can be on the part of one party
or both of them. Such a mistake can be because of an error in understanding, or ignorance or
omission etc. But a mistake is never intentional, it is an innocent overlooking. These mistakes
can either be unilateral or bilateral.

Bilateral Mistake – When both the parties are under any misunderstanding/mistake relating to a
matter of fact essential to the agreement, the agreement becomes void.

For example, A agrees to sell to B his buffalo. But at the time of the agreement, the buffalo had
already died. Neither A nor B was aware of this. And so there is no contract at all, i.e. the
contract is void due to a mistake of fact.

Unilateral Mistake – When the misunderstanding/mistake is on the part of one party to the
contract, the agreement remains valid. Only when the party is mistaken about the parties to
agreement or nature of the transaction, the agreement becomes void.

For example, A agreed to buy certain wheat from B believing that they were old. In fact, wheat
offered was new. It was held that A could not avoid the contract on the ground that he had a
mistaken impression as to the oldness of wheat
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When the Mistake is regarding the Quality of the Promise: There was an auction being held by A
to sell hemp and tow. B thinking the auction was only for hemp, mistakenly bid for a tow. The
amount bid was on par for hemp but very high for a tow. Hence the contract was held as
voidable.

3. Effects on the contract

Coercion Voidable
Undue influence Voidable
Fraud Voidable
Misrepresentation Voidable
Mistake of law (penal code) Not voidable
Mistake of foreign law Voidable
Mistake of fact (bilateral) Void
Mistake of fact (unilateral) Voidable

4. Coercion vs. Undue influence

Coercion Undue influence

Relationship between the parties is not
necessary
Consent is given under the threat of an offence
It involves physical force or threat
It may move from even a stranger and may be
against the promisor himself or a person in
whose welfare the promisor is interested
When the contract is avoided, any benefit
received has to be restored or refunded
Some sort of relationship must exist between
parties
Consent is obtained by dominating the will, no
offence is committed
It involves moral pressure
It is employed by the party to the contract
When the contract is avoided, it is at the
discretion of the court to direct the aggrieved
party to restore or refund the benefit received

5. Fraud vs. Misrepresentation

Fraud
Wrong statement is made intentionally
The person making the wrong statement does
not believe it to be true
There is an intention to deceive
Besides rescinding the contract, the aggrieved
party can also claim damages
Except where the silence amounts to fraud, the
contract is voidable even if the party defrauded
had the means of discovering the truth with
ordinary diligence
Misrepresentation
Wrong statement is made innocently
The person making the wrong statement
believes it to be true
There is no intention to deceive
The aggrieved party can rescind the contract
but cannot claim damages
The aggrieved party cannot avoid the contract
if he had the means of discovering the truth
with ordinary diligence

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6. Conclusion

Free Consent is absolutely essential to make an agreement a valid contract. The importance of
free consent cannot be stressed enough. Consent of the parties to the contract must be free and
voluntarily. Consent to the contract has to be given without any kind of pressure or delusions. It
is important that the consent given by the parties is free as this can affect the validity of the
contract. If the consent to the agreement was obtained or induced by coercion, undue influence,
fraud, misrepresentation or mistake, then it has the potential to make the agreement void.