Ans.: Free consent:
One of the essential of a valid contract is free consent. Sec. 13 of the act defense consent has two or more persons are said to consent where they agree upon think in the same sense.
There should be consents at the ad idem or identity of minds.
The validity of consent depends not only on consents parties but their consents must also be free. According to section 14, consent is said to be free when it is not caused by
1) Coercion has defined under sec.15 or
2) Undue influence as defined under sec. 16 or
3) Fraud has defined under sec. 17 or
4) Mis-representation or defined under sec. 18 or
5) Mistake subject to the probations of sec. 21& 22.
1) Coercion:
Sec. 15 “coercion is the committing or threatening to commit any act forbidden by the Indian penal code 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. “ It is immaterial weather the Indian penal code is or is not in force in the place where the coercion is employed
Under English Law, coercion must be applied to one’s person only whereas under Indian Law it can be one’s person or property.
So also under English Law, the subject of it must be the contracting party himself or his wife, parent, child or other near relative. Under Indian Law, the act or threat may be against any person. It is to be noted that he act need not be committed in India itself. Unlawful detaining or threatening to detain any property it also coercion.
While threat to sue does not amount to coercion threat to file a false suit amounts to coercion since Indian Penal Code forbids such an act.
2) Undue influence:
In the words of Holland,” Undue influence refers to “the unconscious use of power over another person, such power being obtained by virtue of a present or previously existing dominating control arising out of relationship between the parties.”
According sec. 16(1) “ A contract is said to be induced by undue influence where the relation 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.”
A person is deemed to be in a position to dominate the will of other.
(a) Where he holds 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:
(c) Where a person, who is in a position to dominate the will of another, enters into a contract with him and the transaction appears to be unconscionable. The burden of proving that such contract was not by undue influence shall lie upon the person in a position to dominate the will of the other.
Both coercion and undue influence are closely related. What contributes coercion or undue influence depends upon the facts of each case.
Sec. 16(i) provides that two elements must be present. The first one is that the relations subsisting between the parties to a contract are such that one of them is in a position to dominate the will of the other.
Secondly, he uses that position to obtain unfair advantage over the other. In other words, unlike coercion undue influence must come from a party to the contract and not a stranger to it. Where the parties are not in equal footing or there is trust and confidence between the parties, one party may be able to dominate the will of the other and use the position to obtain an unfair advantage. However, where there is no relationship shown to exit from which undue influence is presumed, that influence must be proved.
3) Fraud:
A false statement made knowingly or without belief in its truth or recklessly careless whether it be true or false is called fraud.
Sec. 17 of the act instead of defining fraud gives various acts which amount to fraud.
Sec. 17: Fraud means and includes any of the following acts committed by a party to a contract or with his connivance or by his agent to induce him to enter into contract:
1) The suggestion that a fact is true when it is not true by one who does not believe it to be true. A false statement intentionally made is fraud. An absence of honest belief in the truth of the statement made is essential to constitute fraud. The false statement must be made intentionally.
2) The active concealment of a fact by a person who has knowledge or belief of the fact. Mere non-disclosure is not fraud where there is no duty to disclose.
3) A promise made without any intention of performing it.
4) Any other act fitted to deceive. The fertility of man’s invention in devising new schemes of fraud is so great that it would be difficult to confine fraud within the limits of any exhaustive definition.
5) Any such act or omission as the law specially declares to be fraudulent.
4) Misrepresentation:
Before entering into a contract, the parties will may certain statements inducing the contract. Such statements are called representation. A representation is a statement of fact made by one party to the other at the time of entering into contract with an intention of inducing the other party to enter into the contract. If the representation is false or misleading, it is known as misrepresentation. A misrepresentation may be innocent or intentional. An intentional misrepresentation is called fraud and is covered under section 17 sec. 18 deals with an innocent misrepresentation.
5) Mistake:
Usually, mistake refers to misunderstanding or wrong thinking or wrong belief. But legally, its meaning is restricted and is to mean “operative mistake”. Courts recognize only such mistakes, which invalidate the contract. Mistake may be mistake of fact or mistake of law.
Sec. 20”Where both parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void”.
Sec.21” A contract is not voidable because it was caused by a mistake as to any law in force in India: but a mistake as to a law not in force in India has the same effect as a mistake of fact”.
Bilateral mistake: Sec.20 deals with bilateral mistake. Bilateral mistake is one where there is no real correspondence of offer and acceptance. The parties are not really in consensus-ad-item. Therefore there is no agreement at all.
A bilateral mistake may be regarding the subject matter or the possibility of performing the contract.
