Dr.

Ram Manohar Lohiya National Law University, Lucknow

(session 2021-2022)

Law of Contracts
Project
CONTRACT AND CONSENT

SUBMITTED TO: SUBMITTED BY:

Ms. PRIYA ANURAGINI MAITREY CHAUDHARY

ASSISTANT PROFESSOR ENROLLMENT NO.: 210101082

(LAW) B.A.LL.B. (HONS.)

DR. RAM MANOHAR LOHIYA 2nd SEMESTER

NATIONAL LAW UNIVERSITY

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 Table of Contents

Acknowledgement ..................................................................................................................... 3

Declaration ................................................................................................................................. 4

Table of Cases ............................................................................................................................ 5

Elements Vitiating Free Consent ............................................................................................... 7

Consequences or effects of coercion...................................................................................... 8

2] Undue Influence (Section 16) ............................................................................................ 8

Consequences of Undue Influence......................................................................................... 9

3] Fraud (Section 17) ............................................................................................................. 9

Consequences of Fraud ........................................................................................................ 10

4] Misrepresentation (Section 18) ........................................................................................ 10

Consequences of Misrepresentation .................................................................................... 11

Bisset v Wilkinson [1927] AC 177 ....................................................................................... 11

5] Mistake (Section 20, 21 & 22)......................................................................................... 11

Mistake of Law .................................................................................................................... 12

Mistake of Fact .................................................................................................................... 12

Effects of Mistake ................................................................................................................ 12

Conclusion ........................................................................................................................... 13

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 Acknowledgement

Date: 2/04/2022

I would like to express my sincere thanks to Ms. PRIYA ANURAGINI, ASSISTANT

PROFESSOR (LAW), for her valuable guidance and support in completing my
project.

I would also like to express my gratitude towards Dr. Ram Manohar Lohiya National
Law University for giving me this great opportunity to do a project CONTRACT
AND CONSENT.

Without their support and guidance, this project would not have been completed.

MAITREY CHAUDHARY

ENROLLMENT NO.: 210101082

B.A.LL.B. (Hons.)

2 nd semester

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 Declaration

I hereby declare that the CONTRACT AND CONSENT submitted by me to Dr.

Ram Manohar Lohiya National Law University, Lucknow, Uttar Pradesh in partial
fulfilment requirement for the award of the degree of B.A. LL.B.(Hons.) is a record
of bonafide project work carried out by me under the guidance of Ms. PRIYA
ANURAGINI, ASSISTANT PROFESSOR (LAW). I further declare that the work
reported in this project has not been submitted, and will not be submitted either in
part or in fill, for the award of any other degree or diploma in this institute or any
other university.

MAITREY CHAUDHARY

ENROLLMENT NO.: 210101082

B.A.LL.B. (Hons.)

2 nd semester

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 Table of Cases

1. Ranganayakamma v. Alwar Setti

2. Sher Singh v. Prithi Singh

3. Peek vs. Gurney (1873) L.R 6 H.L 377

4. Bisset v Wilkinson [1927] AC 177

5. Lake vs. Simmons

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 Introduction

You have learnt that there are some essentials of a valid contract and one of them is that the
consent of the contracting parties must be free. If the consent is not free, the contract shall be
treated as void or voidable depending upon the factor which affected the consent. In this topic
you will learn about the meaning of consent and the various factors that affect the consent
viz., coercion, undue influence, fraud, misrepresentation, and mistake. You will also learn
how far the

validity of an agreement is affected by each of these factors.

Free Consent

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.

Now 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,

1. Coercion

2. Undue Influence

3. Fraud

4. Misrepresentation

5. Mistake

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 Elements Vitiating Free Consent

Let us take a look at these elements individually that impair the free consent of either party.

1] Coercion (Section 15)

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

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.

In the case of Ranganayakamma v. Alwar Setti, A Hindu Widow of 13, was forced to
adopt a boy under threat that her husband’s dead body would not be allowed to be removed
unless she adopts the boy. The widow adopted the boy and subsequently applied for
cancellation of the adoption. It was held that the adoption was voidable at her option as her
consent was obtained by coercion because preventing the dead body from being removed for
cremation is an offence under Section 297 of the Indian Penal Code.

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Consequences or effects of coercion

• The contract is voidable at the option of the party whose consent was obtained by
coercion.

• Any benefit has to restored back.

• If the aggrieved party does not opt to set aside the contract, it works as a valid
contract.

• the burden of proof proving coercion will be on the party who wants to avoid the
contract.

2] Undue Influence (Section 16)

Section 16 of the Act contains the definition of undue influence. It states that when the
relations between the two parties are such that one party is in a position to dominate the other
party, and uses such influence to obtain an unfair advantage of the other party it will be undue
influence.

The section also further describes how the person can abuse his authority in the following
two ways,

• When a person holds real or even apparent authority over the other person. Or if he is
in a fiduciary relationship with the other person

• He makes a contract with a person whose mental capacity is affected by age, illness or
distress. The unsoundness of mind can be temporary or permanent

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.

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Consequences of Undue Influence

• The agreement become voidable at the option of aggrieved party.

• The aggrieved party may refund the benefit.

• If the aggrieved party does not opt to set aside the contract, it works as a valid
contract.

For example, A, an illiterate old man of about 90 years, physically in firm and mentally in
distress, executed a gift deed of his properties in favor of B, his nearest relative who was
looking after his daily needs and managing his cultivation. The court held that B was in a
position to dominate the will of A (Sher Singh v. Prithi Singh).

3] Fraud (Section 17)

Fraud means deceit by one of the parties, i.e. when one of the parties deliberately makes false
statements. So, the misrepresentation is done with full knowledge that it is not true, or
recklessly without checking for the trueness, this is said to be fraudulent. It absolutely impairs
free consent.

So according to Section 17, a fraud is when a party convinces another to enter into an
agreement by making statements that are

• suggesting a fact that is not true, and he does not believe it to be true

• the active concealment of facts

• a promise made without any intention of performing it

• any other such act fitted to deceive

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Explanation – Mere silence as to facts likely to affect the willingness of a person to enter into
a contract is not fraud, unless the circumstances of the case are such that, regard being had
to them, it is the duty of the person keeping silence to speak, or unless his silence, is, in itself,
equivalent to speech.

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

Consequences of Fraud

• Voidable

• Can insist on performance if put in same position

• May claim damages

In the case 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.

4] Misrepresentation (Section 18)

Misrepresentation is also when a party makes a representation that is false, inaccurate,

incorrect, etc. The difference here is the misrepresentation is innocent, i.e. not intentional.
The party making the statement believes it to be true. Misrepresentation can be of three types

• A person makes a positive assertion believing it to be true

• Any breach of duty gives the person committing it an advantage by misleading

another. But the breach of duty is without any intent to deceive

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 • when one party causes the other party to make a mistake as to the subject matter of
the contract. But this is done innocently and not intentionally.

For example, X says to Y who intends to purchase his land that it produces 50 quintals of
wheat per acre. X believes the statement to be true, although he did not have sufficient
grounds for the belief. Later on, it was found that land produces only 30 quintals of wheat per
acre.

Consequences of Misrepresentation

• The contract is voidable at the option of aggrieved party.

• Can rescind

Bisset v Wilkinson [1927] AC 177

The plaintiff purchased from the defendant two blocks of land for the purpose of sheep
farming. During negotiations the defendant said that if the place was worked properly, it
would carry 2,000 sheep. The plaintiff bought the place believing that it would carry 2,000
sheep. Both parties were aware that the defendant had not carried on sheep-farming on the
land.

5] Mistake (Section 20, 21 & 22)

A mistake is an erroneous belief that is innocent in nature. It leads to a misunderstanding

between the two parties. Now when talking about a mistake, the law identifies two types of
mistakes, namely

i. A Mistake of Law

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 ii. A Mistake of Fact

Mistake of Law

This mistake may relate to the mistake of the Indian laws, or it can be a mistake of foreign
laws. If the mistake is regarding Indian laws, the rule is that the ignorance of the law is not a
good enough excuse. This means either party cannot simply claim it was unaware of the law.

However, ignorance of a foreign law is not given a similar treatment. Ignorance of the foreign
law is given some leeway; the parties are not expected to know foreign legal provisions and
their meaning. So a mistake of foreign law is in fact treated as a mistake of fact under
the Indian Contract Act.

Mistake of Fact

Then there is the other type of mistake, a mistake of fact. This is when both the parties
misunderstand each other leaving them at a crossroads. 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.

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.

Effects of Mistake

• 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.

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 • In most cases of unilateral mistake, the contract is not void. But, where unilateral
mistake defeats the true consent of the parties, the agreement is treated as void.

• Any person who has received any advantage under such agreement, he is bound to
restore it, or to make compensation for it, to the person from whom he had received it.

• A person to whom money has been paid or anything delivered by mistake must repay
or return it.

In the case of Lake v. Simmons, a woman, by falsely misrepresenting her to be the wife of a
well-known Baron (a millionaire) obtained two pearl necklaces from a firm of jewelers on the
pretext of showing them to her husband before buying. She pledged them with a broker, who
in good faith, paid her Rs. 10,000. It was held that there was no contract between the jeweler
and the woman and pen an innocent buyer or a broker did not get a good title. The broker
must return the necklaces to the jeweler. Here the jeweler intended to deal not with her but
with quite a different person, i.e., the wife of a Baron.

Conclusion

Overall, there are certain factors that will render a contract void or voidable based upon the
particular circumstances of the case. If a contract is void then it cannot be enforced by either
of the parties, whereas if a contract is rendered voidable then although it is a valid contract, it
can, in fact, be cancelled. Essentially, whilst a void contract cannot be performed, a voidable
contract can be until either of the parties decides to cancel it. If there has been a
misrepresentation or a mistake the contract may be rendered void and therefore be rescinded.
If duress or undue influence has occurred, then the contract may be rendered voidable and
thereby capable of being cancelled.

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 Bibliography

➢ https://www.toppr.com/guides/business-laws/indian-contract-act-1872-part-
ii/free-consent/

➢ https://www.slideshare.net/GurjitSingh2/free-consent-15658071

➢ https://writepass.com/journal/2014/04/the-impact-of-misrepresentation-mistake-
duress-and-undue-influence-on-the-validity-of-a-contract/

➢ Universal’s law publishers, Indian Contract Act, 1872

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