Free Consent

 What is Free Consent

 One of the essential of a valid contract mentioned under sec 10 of the ICA is that the
parties should entered into the contract with their free consent.
 Consent is defined under sec 13 as
 Sec 13: Two or more person are said to consent when they agree upon the same thing
in the same sense.
 And according to sec 14 consent is considered to be free when it is not caused by:

1. Coercion (sec 15)

2. Undue influence (sec 16)
3. Fraud (sec 17)
4. Misrepresentation (sec 18)
5. Mistake (sec 20,21 &22)
 If the consent of the parties is not free, the contract is not valid.
 When consent to an agreement is caused by coercion, undue influence, fraud and
misrepresentation the agreement is a contract voidable at the option of the party
whose consent was so caused (sec. 19 and 19A)
 However the consent is caused by mistake, the agreement is void (sec. 20)
 1. Coercion
 Sec 15: Coercion" is the committing, or threatening to commit, any act forbidden by
the Indian Penal Code (45 of 1860) 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.
 Essentials
 Coercion is said to be there where the consent of a party has caused either by:
1. Committing, or threatening to commit any act forbidden by the Indian Penal Code,
or by
2. Unlawful detaining, or threatening to detain any property.
3. Such an act should be to the prejudice of any person whatever.
 1. Act Forbidden by IPC
 If the threat or commission of offence, is covered under IPC and is used to obtain the
consent of the party then only consent is considered to be obtained by the means of
coercion.
 Eg: A threatens to shoot B if B does not sell his property to A. if B agreed then his
consent is considered to be obtained by coercion and is not free consent.
 Ranganayakamma v. Alwar Setti (1889)
  A widow was not allowed to remove her husband’s body from her house for cremation,
until she agreed to adopt a boy of 13 years by the relatives of the boy.
 Question before Madras high court was whether adoption was binding on the widow or
not.
 It was held that her consent was taken by the means of coercion so the adoption was not
binding upon her.
 Chikkan Ammiraju v. Chikkam Seshama (1918)
 A makes a threat to commit suicide.
 And procured a deed from his wife and son in the favour of his brothers.
 The question is whether consent is caused by coercion or not?
 Decision
 It was held by Justice Wallis and Justice Seshagiri Ayyar that threat to commit suicide
amounted to coercion.
 But Justice Oldfield was of the view that Commission of suicide is not punishable under
IPC. It is only unsuccessful attempt to commit the suicide, which is cover under sec 309
of IPC.
 Need of amendment
 Law Commission of India in its 13th Report recommended that there must be an
amendment to sec 15 of ICA so as to cover threat to commit suicide as coercion.
 2. Unlawful detaining of property
 Another aspect which is covered under sec 15 is unlawful detention of the property is
also cover under sec 15 of ICA.
 If an agent unlawfully rejects to hand over the account books in the demand of any
share in property, it amounts to coercion.

 3. To the prejudice of a person

 According to sec 15, threat, commission or detention must be to the prejudice of any
person whatever, with the intention of causing any person to enter into an agreement.
 It means it is not necessary that coercion must directly relate to the party to the
contract.
 Threat to third party is also cover under sec 15.
 Duress
 Under English law duress consists of actual violence or threat of violence to a person.
 It only includes fear of loss to life or bodily injury or harm.
 Duress does not covers threat to detain goods or damage to goods.
 Difference between Duress and Coercion
 Duress
 Duress covers actual violence or  Coercion
threat violence irrespective of  Coercion covers only those acts
specific law. which are forbidden by IPC
 It does not include property.
 It includes detention of property also.
 Effect upon contract
 Contract in which consent is caused by coercion is voidable and also is any benefit is
given to the party it may be recovers under sec 72 of ICA
 Sec 19: When consent to an agreement is caused by coercion, fraud or
misrepresentation, the agreement is a contract voidable at the option of the party
whose consent was so caused. A party to contract, whose consent was caused by fraud
or misrepresentation, may, if he thinks fit, insist that the contract shall be performed,
and that he shall be put on the position in which he would have been if the
representations made had been true.

 Sec 72: Liability of person to whom money is paid, or thing delivered, by mistake or
under coercion
 A person to whom money has been paid, or anything delivered, by mistake or under
coercion, must repay or return it.
 Undue influence
 Sec 16: "Undue influence" defined
 (1) A contract is said to be induced by "undue influence" where the relations subsisting
between the parties are such that one of the parties is in a position to dominate the will
of the other and uses that position to obtain an unfair advantage over the other.
 (2) In particular and without prejudice to the generally of the foregoing principle, a
person is deemed to be in a position to dominate the will of another -
 (a) where he hold a real or apparent authority over the other, or where he stands in a
fiduciary relation to the other; or
 (b) where he makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness, or mental or bodily distress.
 (3) Where a person who is in a position to dominate the will of another, enters into a
contract with him, and the transaction appears, on the face of it or on the evidence
adduced, to be unconscionable, the burden of proving that such contract was not
induced by undue influence shall be upon the person in a position to dominate the will
of the other.
 Essentials
 1. The relationship between the parties are such that one of the parties is in position to
dominate the will of the other.
2. Such person uses his dominant position to obtain an unfair advantage over the other.
 Persons deemed to hold dominant position
1. Where he holds a real or apparent authority over the other.
2. Where he stands in a fiduciary relation to the other.
3. Where he makes a contract with a person whose mental capacity is temporarily or
permanently affected by the reason of age, illness or mental or bodily distress.
 Real or Apparent Authority
 If person has an authority over the other party, it is expected that he would not abuse
the authority to gain an undue advantage from the other.
 An employer may be deemed to be having authority over his employees.
 Police officer over an accused.
 Judicial officer over a witness.
 Fiduciary Relationship
 These are the relations which are based upon trust and faith.
 If a person betrays the confidence and trust of the other it amounts undue influence.
 Eg: Advocate-Client, Doctor-Patient, Spiritual advisor-devotee.
 Mannu Singh v. Umadat Pande (1890)
 An aged person executed a deed of gift in favour of his spiritual advisor.
 Reason for this gift was his desire to secure benefits to his soul in the next world.
 Then he approached the court for the cancellation of the deed.
 Court applied sec 111 of The Indian Evidence Act.
 Sec 111: Proof of good faith in transactions where one party is in relation of active
confidence.-Where there is a question as to the good faith of a transaction between
parties, one of whom stands to the other in a position of active confidence, the burden
of proving the good faith of the transaction is on the party who is in a position of
active confidence.
 Since defendant failed to prove so, plaintiff got the desired relief from the court.
 Person in mental or bodily distress
 A Person’s will may be influenced because of his mental or bodily distress .
 Mental capacity may be affected by reason of age, illness or distress.
 In Merci Celine D’Souza v. Renie Fernandez (1998)
 Plaintiff was mentally infirm person and totally dependent upon the defendant gifted
his property in favour of defendant.
 It was found that defendant has obtained that property by undue influence.
 Unconscionable bargain
 1. These are so extremely unjust, or overwhelmingly one-sided in favour of the party
who has the superior bargaining power, that they are contrary to good conscience.
2. If the presence of dominant position is there the transaction may be considered as
unconscionable and the law raises the presumption of undue influence.
 Effect
 Sec 19-A declares that contracts in which consent happens because of undue influence
are voidable in nature.
 19-A. Power to set aside contract induced by undue influence - When consent to an
agreement is caused by undue influence, the agreement is a contract voidable at the
option of the party whose consent was so caused. Any such contract may be set aside
either absolutely or, if the party who was entitled to avoid it has received any benefit
thereunder, upon such terms and conditions as to the Court may seem just
 Fraud
 Sec 17: fraud defined
 "Fraud" means and includes any of the following acts committed by a party to a
contract, or with his connivance, or by his agents, with intent to deceive another party
thereto or his agent, or to induce him to enter into the contract;
(1) the suggestion as a fact, of that which is not true, by one who does not 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 omission as the law specially declares to be fraudulent.
 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

 Essentials
1. There should be a false statement of the fact by a person who himself does not believe the
statement to be true.
2. The statement should be made with a wrongful intention of deceiving another party
thereto and inducing him to enter into a contract on that basis.
 False statement of facts S. 17(1)
 It is necessary that the statement about any facts made by the person must not be true.
 Mere expression of opinion is not enough to constitute fraud.
 In Edington v. Fitzmaurice (1885)
  A company was in great financial difficulties and needed funds to pay some pressing
liabilities.
 Directors raised some amount by issuance of debenture and stated that the amount was
needed for the development, purchase of assets etc.
 Court held that directors has committed fraud.
 Mere Silence is no fraud
 As per explanation attached to the sec. 17 it is crystal clear that mere silence does not
amount to fraud, unless person is bound to speak.
 If a person makes no disclosure about the patent defect he is not committing any fraud.
 But if he makes wrong statement about the quality of the product, then he may be
liable for committing fraud.
 Shri Krishan v. Kurukshetra University (1976)
 Shri krishan, a candidate for the LLB examination, who was short of attendance, did
not mention the same fact in the examination form.
 Neither the head of the department nor university authorities made proper scrutiny to
discover the truth.
 It was held by the supreme court that there was no fraud.
 And university had no power to withdraw the candidature of the candidate.

 Exceptions
1. When there is duty to speak, keeping silence amounts to fraud.
2. When silence is, in itself, equivalent to speech, such silence is fraud.
 i) Duty to speak (contracts Uberrima fides)
 Certain contracts are considered as contracts Uberrima fides i.e. Contracts of utmost
good faith.
 In such cases it is the duty of the party to disclose each and every fact to the other
party.
 Keeping silence in these kind of contracts amounts to fraud.
 This doctrine is mostly applied in contracts of Insurance.

 Kiran Bala v. Bhaire Prasad Srivastava (1982)

 First marriage of the girl was annulled on the ground that she was of unsound mind at
the time of the marriage.
 She was married to the respondent second time.
 But the fact of annulment of the marriage was not disclosed to the respondent.
 It was held that the consent of the groom was taken by fraud.
 And on this ground he was granted divorce.
 ii) Silence being equivalent to speech
  Depending upon the circumstances of any case, some times silence also amounts
equivalent to speech.
 Like, if A says to B that if he do not deny it, it will be presumed that the horse is of
sound mind. If B keeps silence, his silence would amount to speech and the affirmation
of the fact that horse is of sound mind.
 Exception to Sec. 19
 Exception : If such consent was caused by misrepresentation or by silence, fraudulent
within the meaning of section 17, the contract, nevertheless, is not voidable, if the
party whose consent was so caused had the means of discovering the truth with
ordinary diligence.
 It means that if a party is capable to discover the truth then silence from other side
does not amount to fraud (Shri Krishan v. KUK Uni.)
 Active Concealment S. 17(2)
 When there is an active concealment of any fact by one having knowledge or belief of
the fact, that can also be considered to be equivalent to the statement of fact and
amounts to fraud.
 Eg: A discovered that there is an ore on the estate of B. He did not discloses this fact
and purchased the estate on an under value. Contact is voidable at the option of B.
 Promise made without any intention to perform it S. 17(3)
 Making a promise with an undertaking to perform it and having intentions not to
perform it also amounts to fraud.
 Thus if a man took a loan with an intention not to pay the same, he is committing
fraud.

 Any other act fitted to deceive S. 17(4)

 This clause is general and means that instances defined under sec 17 are not of
exhaustive nature.
 This provision widens the scope of applicability of this sec.
 Any act or omission which law declares as fraudulent S. 17(5)
 Some times law itself provides some acts or omissions which may be considered as
fraudulent.
 Like sec 55 of TPA 1882, it states that the buyer of immovable property is bound to
disclose to the seller any fact as to the nature or extent of the seller’s interest in the
property of which the buyer is aware, but of which he has reason to believe that the
seller is not aware and which materially increases the value of such interest, and
omission to make the above stated disclosure is fraud.
 Wrongful Intention to deceive another party
  In order to constitute fraud it is very important that wrong statement must be made
with a intent to deceive another party.
 If intention to deceive is not there is may not be a fraud.
 In Derry v. Peek (1889)
 The directors of a company issued a prospectus stating that they got authority to run
tramways with steam and mechanical power instead of animal power.
 A plan was submitted to get licence from the Board of Trade.
 And it was honestly believed by the directors that they will got the licence.
 But Board refused to grant the licence.
 It was held by the house of lords that since the statement had not been made with a
intention to deceive there was no fraud.

 Misrepresentation
 Sec 18: "Misrepresentation" defined
"Misrepresentation" means and includes -
(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 anyone claiming under him; by misleading another to his
prejudice, or to the prejudice of any one 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 subject of the agreement.
 1. Positive assertion i.e. An explicit statement of fact by a person of that which is not
true, though he believes it to be true amounts to misrepresentation.
 It means there should be a false statement made innocently i.e. Without any intention
to deceive.
 2. when there is a breach of duty whereby the person making a false statement gains
some advantage at the cost of the other party and the statement though false is made
without an intention to deceive, it amounts to misrepresentation.
 3. if party acting innocently, causes another party to make a mistake as to the substance
of the thing which is the subject of the agreement, there is said to be misrepresentation.

 Fraud and Misrepresentation distinguished

1. In fraud, the false statement is made by a person, who knows that it is false or does not
believe in its truth, whereas in misrepresentation the person making the statement
believes the same to be true.
2. In fraud, intention to deceive is there, in misrepresentation it is not so.
 3. Apart from cancelation of the contract, in fraud additional remedy for compensation
under law of torts is there, as fraud is also covered under the law of tort, but it not so in
case of misrepresentation.

 Effect of flaw in consent

 Sec 19 deals with effect of flaw in consent caused by coercion, misrepresentation and
fraud.
 Sec 19-A comes into play when the consent is caused by undue influence.
 Two kind of remedies are provided by these sections
 1. A right of rescission of the contract.
 2. A right to claim to compensation.
 1. Right of Rescission
 As it is clear that nature of the contract is voidable in which consent of a party has
been obtained by coercion, undue influence, fraud, misrepresentation, so rescission of
the contract is one remedy which is available in these kind of contracts.
 A voidable contract will be avoided only if the party having a right to do so avoids it, if
he affirms the contract then, the contract will be binding on both the parties.
 As per sec. 66 various rules of communication are also applied on revocation.
 Communication of revocation or rescission is also mandatory.
 If the other party is not available, doing some act to this effect constitutes valid
revocation or rescission.
 Car and Universal Financial Co. Ltd. V. Caldwell (1961)
 The purchaser of a car committed fraud against the seller by making the payment
through a cheque, which was dishonoured.
 The seller wanted to avoid the contract and to regain the possession of the car.
 But the buyer was not traceable.
 The seller immediately informed to the police and also to Automobile Association.
 Meanwhile buyer sold the car to another party, who was bonafide purchaser.
 It was held by the court that the rescission of contract was completed when the seller
informed to police.
 So the new buyer got no good title.

 Limitations on right to rescission

1. When the contract is affirmed.
There are two rights available, either avoid a contract or enforce a contract.
 Sec 19 provides that : When consent to an agreement is caused by coercion, fraud or
misrepresentation, the agreement is a contract voidable at the option of the party
whose consent was so caused. A party to contract, whose consent was caused by fraud
 or misrepresentation, may, if he thinks fit, insist that the contract shall be performed,
and that he shall be put on the position in which he would have been if the
representations made had been true.

 Long v. Lloyd 1958

 A sold a lorry to B by making a false representation that the lorry was in excellent
condition.
 On lorry’s first journey, B discovered serious defects.
 But instead of rescinding the contract he accepted A’s offer to bear half the repair
cost.
 On second journey, lorry completely broke down.
 Then he wanted to rescind the contract.
 Whether contract can be avoided?

 Decision
 It was held that accepting repair cost amounts to affirmation of the contract. And once
a contract has been affirmed, it can not be avoided at later stage
 2. Lapse of Time
 A person has right to rescind the contract must exercise his right within a reasonable
time.
 In Leaf v. International Galleries (1950)
 it was held that if a person purchasing a picture on the misrepresentation that it has
been painted by a renowned painter.
 But afterwards wants to avoid the contract after five year of its purchase.
 The rescission would not be allowed.

 3. Acquisition of a right by a third party.

 The right of rescission may be gone if before the contract has been rescinded some
third party has aquired a right in the subject matter of the contract,
 A voidable contract is valid till it is avoided.
 If A purchased a watch from B with fraud, but before it can be rescinded, A further
sold the watch to C. Now B can not rescind the contract.
 4. Inability to restore the goods
 When a party wants to avoid the contract, he must do so, so long as the parties to the
contract can be placed in the same position in which they were before the contract was
made, but not afterwards.
 Eg: A purchased a piece of cloth and the contract was voidable at his option. If he
converted this piece into a suit, there arises no question to rescind the contract.
 2. Damages in lieu of rescission
 A party may claim damages in lieu of rescission if the circumstances demand so.
 Fraud is also covered under tort, so action in both i.e. Under Indian Contract Contract
Act as wel as under Law of Torts is maintainable.
 Mistake
 When the consent of the parties to the contract is caused by mistake, it is not free
consent which is required for the validity of a contract.
 Mistake may work in two ways:
1. There may be no consensus ad idem i.e. Meeting of mind is not there. Means absence
of consent as defined under sec 13. offer and acceptance do not coincide and thus no
genuine agreement is constituted.
2. There may be a genuine agreement, but there may be mistake as to the matter of fact
relating to that agreement.

 1. Consensus ad idem
 Some times two parties may think differently regarding offer and acceptance, i.e. No
meeting of mind is there.
 In such circumstances consent is considered to be affected by mistake and is not a free
consent.
 Raffles v. Wichelhaus (1864)
 The buyer and the seller entered into an agreement under which the seller was to
supply a cargo of cotton to arrive on a ship named “Peerless” from Bombay.
 There was two ships of the same name. Both were to sail from Bombay, one in
October and the other in December.
 The buyer had in mind peerless sailing in October.
 But seller dispatched cotton by December.
 Court held that offer and acceptance did not coincide. There was no consensus ad
idem. So there constitutes no good contract.
 2. Mistake as to a matter of fact essential to the agreement
 Sec 20: Agreement void where both parties are under mistake as to matter of fact:
Where both the parties to an agreement are under mistake as to a matter of fact essential to
the agreement, the agreement is void.
 Explanation: An erroneous opinion as to the value of the things which forms the
subject-matter of the agreement, is not be deemed a mistake as to a matter of fact.
Illustrations
 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 the agreement, both parties were ignorant to the fact. The agreement is void.
 Essentials of sec 20
1. Both the parties to the contract should be under a mistake.
2. Mistake should be as regards a matter of fact.
3. The fact regarding which the mistake is made should be essential to the agreement.

 1. Mistake of both the parties

 To declare an agreement to be void under sec 20 it very necessary that mistake must be
from both sides.
 A fact unknown to only one party is not covered under sec 20, i.e. Unilateral mistake
did not render an agreement void under this provision of law.
 Sec 22 made the condition clear in this regard as under:
 Sec 22: Contract caused by mistake of one party as to matter of fact
A contract is not voidable merely because it was caused by one of the parties to it being
under a mistake as to a matter of fact.
 Ayekam Angahal Singh v. Union of India (1970)
 Plaintiff was the highest bidder at an auction for the fishery rights with Rs. 40,000.
 The rights has been auctioned for 3 years.
 The rent in fact was Rs. 40,000 per year.
 Plaintiff sought to avoid the contract on the ground that he was under a mistake that he
made a bid of Rs. 40,000 for all the three years.
 Court held that since the mistake is unilateral only. Contract can not be avoided on this
ground.
 2. Mistake as to Fact
 It is very clear under sec 20 that mistake must be of a fact and not of the law.
 Basic rule is Ignorantia juris non excusat or ignorantia legis neminem excusat, i.e.
Ignorance of law is no excuse.
 Sec 21 made it clear as follows
 Sec 21: Effect of mistake as to law
A contract is not voidable because it was caused by a mistake as to any law in force in
India; but mistake as to a law not in force in India has the same effect as a mistake of
fact.
 3. Mistake essential to the agreement
 It is also necessary that the fact regarding which the mistake is made should be
essential to the agreement.
 No hard and fast rule is there in this regard. Situation may vary with circumstances.
 Some situations are discussed as under
 1. Mistake as to the existence of a subject matter.
  If both the parties are under mistake in regard to the existence of a subject matter,
which in fact does not exist, the agreement would be void.
 Such an agreement is void for other reason also, because sec 56 declares agreements to
do impossible things void.
 Also sec 7 of Sale of Goods Act 1930 also declare that if there is a contract for the sale
of specific goods but they are non-existence at the time of the contract, the contract is
void.

 Galloway v. Galloway (1914)

 A man and woman executed a separation deed, both of them working under a common
mistaken impression that they were married to each other.
 In fact they were not.
 Since the fact of marriage was non-existent, the deed was held void.
 2. Mistake regarding quality
 Mistake in regard to the quality does not render a contract void.
 Smith v. Hughes (1871)
 There was sale of a parcel of oats by sample from A to B.
 B refused to accept the delivery on the ground that he thought oats were old, when in
fact they were new.
 A sued B for the breach of contract.
 Court held that mistake regarding quality is no mistake and held him liable to pay
damages to A.

 3. Mistake as to the identity

 If one intends to enter into a contract with specific person and made an offer to him.
Other person can not accept the same.
 if A made offer to B for the purchase of goods and the same has been accepted by the
C, A is not bound to pay for the delivery of goods from C. Because he never intended
to enter into a contact with C.
 Boulton v. Jones (1857)
 Jones used to have business dealings with Brocklehurt, sent an order to him for the
purchase of certain goods.
 By the time, Brocklehurt sold his business to Boulton.
 Boulton supplied goods to Jones.
 Jones refused to pay for the goods and sued by Boulton for the same.
 Whether Jones is liable?
 Decision
 It was held that Jones had never made an offer to Boulton, he was not bound to pay for the
goods.