Introduction
For an agreement to be constituted as a Valid contract consent is very important and pure consent is not accepted it must be free consent that is free from misrepresentation, fraud, Mistakes, and undue influence. Consent is dependent upon a principle called “consensus ad idem” which means “meeting of minds” where there is no meeting of minds there is no consent that can be formed.
Indian Contract Act 1872
Indian Contract Act 1872 mainly deals with the provisions related to the contracts like what are the essentials for a contract, acceptance & revocation, consent, and conditions for a valid contract. It also defines the difference between Consent and Free Consent which we will discuss in the coming sections. Consent is defined in Section 13 of the ICA as “when two parties entered into the contract, they must agree on the same thing in the same manner”[1] and “If there is no ad idem, or meeting of minds, on the contract’s essential provisions, the contract will be void”[2].
Coercion
It is defined under “section 15 it is said that Coercion means implied or expressed threats to a person to do something or to agree on something. It involves forceful acts which dominate the free will of the party and make a party bound to do the threatening party wants to do. Coercion is defined as the act of performing or attempting to perform, an act banned by the Indian Penal Code (45 of 1860), or the unlawful detention, or threat of detention, of any property, to the disadvantage of any person, with the intent of compelling that person to sign a contract”[3]. For Example: If A wants to buy B’s car, but if B doesn’t want to sell his car. Still, if A threatens him that if he doesn’t sell the car to A then he would kill his son this is called Coercion
Undue influence:
when one party to the contract with his power or position influences the other party to do what he/she wants to be done in their favour, the influence which has been used on the weaker party to the contract is called Undue Influence. “Undue influence is addressed in Section 16 of the Indian Contract Act of 1872. When one of the signatories is in a position to exercise another’s own will and manipulate it for his profit, the contract is said to be made by “undue influence.” (2) If a person has actual or apparent power over the other and, or is in a fiduciary relationship with the other, or if he manages to enter into a contract with a person whose mental ability is partially or wholly defective by age, disease, or psychological or individual’s physical distress, he is in a position to affect that people’s will.
(3) When an individual with the authority to influence the will of some other party entered a contract with him and the compensation would seem to be unjustifiable on its face or based on the facts presented, the person with the ability to control the will of the both these bears the burden of proving that the contract was not influenced by undue influence.”[4].
For Example: if M wants to sell his car for 5lakh rupees and if N uses his power and asks M to sell his car for 3 lakhs to N then it is Undue Influence.
Fraud
If a person knows the material fact of the contract and the flaws relating to it. Doesn’t disclose it to deceive the other party and claim some benefit put off it is called Fraud. “Any of the following acts deemed by a party to a contract, or with his permission, or by his agency, with the intent to deceive another party to the contract or his agent, or to encourage him to sign the contract are regarded fraud,” says Section 17 of the Indian Contract Act 1872.
- the purposeful concealing of a fact by anyone who has adequate information or belief in the fact;
- the promotion as a fact of something that is not true by someone who does not believe it to be true.
- a decision was taken but not intended to be kept;
- any other deception-inducing act;
- any conduct or omission that the law expressly declares fraudulent”[5].
For Example: if S proposes to sell Shimla apples to R and R believes that it is Shimla apples buy it. but S knowing the fact that they are not Shimla apples but Kashmir apples sell Kashmir apples to R in the name of Shimla apples and flew away with that money then it is Fraud.
Misrepresentation
Misrepresentation means any representation made by one person by his actions, words or by any means that amounts to an assertion not in accordance with the facts then it is called Misrepresentation “According to section 18 of the Indian Contract Act of 1872, misrepresentation is defined as:
(1) the positive assumption of something that is not true, even though the man attempting to make it appears to believe it to be true;
(2) any clear violation of responsibility that rewards the person committing it, or anybody else trying to claim under him, without desiring to deceive, by trying to mislead another to his bias, or the bias of any one claiming under him;
(3) inadvertently causing a party to a contract to make a mistake about the material of the product that is the subject of the agreement”[6]
For Example – C wants to sell mangoes and D wants to buy Alphonso mangoes so C sold him normal mangoes in place of Alphonso mangoes but later D discovered that they are not Alphonso mangoes. this is called Misrepresentation.
From the above five attributes besides a mistake of law all the above if implicated then would be voidable of the party. for whom the free consent is intended to be given voluntarily without any force applied.
The concept of Free consent is better understood in the landmark case of “Raffles v Wichelhaus, 1864 in this case it is said that the defendant consented to the claimant’s offer to sell cotton. According to the contract, the cotton would be delivered on the ‘Peerless’ ship. The Peerless was the name of two ships, they agreed on the first ship, which left in October, according to the defendant. The claimant thought they’d reached an agreement on the second ship, which was set to leave in December. The other party was obliged to sue to recover damages when the defendant refused to accept the goods. A reasonable person could not have known which sailing had been agreed to beforehand, the court decided. As a result of the lack of consensus ad idem, the contract was void”[7].
Derry v Peek
“The court concluded in the landmark case Derry v Peek that a person is not committed fraud if he or she honestly believes a fraudulent statement is accurate. As a result, only intentional misrepresentation will be considered fraud. The line between misrepresentation and fraud was also clarified in this case and all the ambiguity related to the consent was cleared”[8].
Smith v Land & House Property Corp[9]
“In this case The complainant listed his hotel for sale on Craigslist, alleging that it had been leased to a “highly desirable renter.” The defendants came to an arrangement to buy the hotel. Because he was bankrupt, the tenant was unable to pay his rent. As a result, the respondents refused to fill out their contractual obligations, prompting the plaintiff to sue for a particular performance. The plaintiff’s statement was a fact, not an opinion. according to the Court of Appeal”[10].
The offended party then has the choice to:
- Rescind/cancel the contract
- Making it unenforceable in a court of law
- Or insist on the fulfilment of the contract if he is permitted to do so
- Or demand damages for the loss sustained as a result of the above-mentioned circumstances’ enticement.
What is the position of Such contracts formed?
When consent is taken from Fraud, Misrepresentation, Undue Influence, and Coercion. it is voidable at the option of the party whether to continue or rescind the contract. And once the party agrees to continue, then he cannot file a case later on.
Advantages and disadvantages
For suppose when a person commits Coercion, Undue Influence, misrepresentation, or fraud then the other party can file a case and make the contract invalid. So that he/she can abstain from not performing the contract for which he/she has not consented. And the weaker parties are protected. There must be some specific laws in order to control these activities, otherwise, the stronger party to the contract may influence his power over the weaker party. When we talk about the disadvantages of these sections. Assume, that if there is a weaker party in a contract and if he doesn’t want to perform a contract, he/she may make false allegations about the other party, as the other party will be in a position to dominate the weaker party the society may also believe it until proven that those allegations are fake. Some people may use these for the wrong purposes.
Conclusion
Therefore, after all the discussions it is clear that consent obtained from Coercion, Undue Influence, misrepresentation, or fraud is voidable at the option of the party whose consent was so caused. And the consent which is free from all these is acceptable to constitute a valid contract. so from the above case laws and explanation, you may come to the conclusion that only free consent is accepted and is valid.
Author(s) Name: B. Solomon Raju (Damodaram Sanjivayya National Law University)
References:
[1] S. 13, Indian Contract Act 1872.
[2] Supra 1
[3] S. 15, Indian Contract law 1872.
[4] S.16, Indian Contract law 1872.
[5] S.17 Indian Contract Act 1872.
[6] S.18, Indian Contract Act 1872.
[7] Raffles v Wichelhaus [1864] EWHC Exch J19.
[8]Derry v Peek [1889] UKHL1.
[9] (1884) 28 Ch D 7
[10] Smith v Land & House Property Corp (1884) 28 Ch D 7
