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If the consent of one of the parties is not free consent, i.e., it has been
caused by one or other of the above stated factors the contract is not a
valid one. When consent to an agreement is caused by fraud,
coercion, misrepresentation or undue influence, the agreement is a
contract voidable at the option of the party whose consent was so
caused. If, however, the consent is caused by mistake the agreement
is void.
1. COERCION
According to Section 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.
For coercion to be there it is not necessary that the Indian Penal Code
should be applicable at the place where the consent has been so
caused. Explanation to section 15 makes it clear that to constitute
coercion, “it is immaterial whether the Indian Penal Code is or is not in
force in the place where the coercion is employed.” The following
illustration would explain the point :
2. In India coercion may proceed from a person who is not a party to the
contract, and it may also be directed against a person who, again,
may be a stranger to the contract. In England duress should proceed
from a party to the contract and is also directed against the party to the
contract himself, or his wife, parent, child, or other near relative.
2. UNDUE INFLUENCE
(1) 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.
(1) where he holds a real or apparent authority over the other, or,
For example, A,, having advanced money to his son b, during his
minority, upon B’s coming of age obtains, by misuse of parental
influence, a bond from B for a greater amount than the sum due in
respect of the advance. A employs undue influence.
It is, in such a case, for the dominant party to rebut the presumption of
undue influence. If a party has got exorbitant gain at the cost of the
other party, it is for him to prove that this advantage had not been
gained by undue influence.
In Diala Ram Vs. Sarga, (1927) the defendant, who was already
indebted to the plaintiff, a village money lender, took a fresh loan from
the plaintiff and executed a bond, wherein he agreed to pay interest up
to 371/2 %, per annum, and also to deliver some bhoosa (wheat
husk) in addition thereto. It was held that the contract was
unconscionable and, therefore, the burden of proof was on the plaintiff
to show that there was no undue influence in this case.
In Wajid Khan Vs. Raja Ewaz Ali Khan (1891) an old, illiterate,
pardanashin lady, who was herself incapable of transacting any
business, conferred a grant of her substantial property without any
valuable consideration in favour of her confidential managing agent.
The Privy Council held that it was incumbent on the grantee to show
that he had made proper use of confidence reposed by the lady in him
and there was no undue influence.
3. FRAUD
(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.
Active concealment
Illustrations
It has been noted above that for constituting fraud there should be
representation as to certain untrue facts. Active concealment has also
been considered to be equivalent to a statement because in that case
there is a positive effort to conceal the truth and create untrue
impression on the mind of the other, Mere silence, however, as to
facts is no fraud. Explanation to Section 17, in this connection,
incorporates the following provisions :
Exceptions
Even if, in any case, the silence is fraudulent, but if the other party
could have discovered the truth by ordinary diligence he cannot avoid
the contract. In this connection the provision in the Indian contract Act
is as under :
“In the instant case the admission form of the appellant must have
been forwarded in December 1971 where as the examination was to
take place in April/May 1972. It is obvious that during this period of
four to five months it was the duty of the University authorities to
scrutinise the form in order to find out whether it was in order. Equally
2. Wrongful intention
4. Misrepresentation
When a false statement is made with the knowledge that it is false and
also with the intention to deceive the other party and make him to
enter into a contract on that basis, it is known as fraud. But when the
person making a false statement believes the statement to be true and
does not intend to mislead the other party to the contract it is known as
“Misrepresentation”. When the consent of a party to a contract has
been obtained by misrepresentation it is not free consent and the
contract is voidable at his option. Section 18 defines
misrepresentation as under :
Thus, in case of the flaw in consent one party or the other may have
either,
1. a right of recession of the contract, i.e., the contract may be
voidable at his option, or
2. a right to claim compensation.
“Where a contract of sale is not severable and the buyer has accepted
the goods or part thereof, the breach of any condition to be fulfilled by
the seller can only be treated as a breach of warranty and not as a
ground for rejecting the goods and treating the contract as repudiated,
unless there is a term of the contract, express or implied, to that
effect.”
(1) Damages in case of fraud : It has already been noted that fraud
is a tort. Therefore, a party whose consent has been obtained by a
fraudulent statement, may seek rescission of the contract as a
contractual remedy and may also claim damages under the law of
torts.
Section 30, Specific Relief Act, 1963 also empowers the court to order
payment of compensation when ordering rescission of a contract. It
provides as follows :“On adjudging the rescission of a contract, the court
may require the party to whom such relief is granted to restore, so far as
may be, any benefit which he may have received from the other party
and to make any compensation to him which justice may require.”
When the consent of the parties is caused by mistake, it is not the free
consent which is needed for the validity of a contract. One, or both, of
the parties may be working under some misunderstanding or
misapprehension of some fact relating to the agreement. If such a
misunderstanding or misapprehension had not been there, probably
they would not have entered into the agreement. Such contracts are
said to be have been caused by mistake.
For a valid contract both the parties should have given their
consent and the consent should be free also. According to section 13 :
“Two or more persons are said to consent when they agree upon the
same thing in the same sense.”
In Raffles Vs. Wichelhaus (1864) the buyer and the seller entered
into an agreement under which the seller was to supply a cargo of
cotton to arrive “ex peerless from Bombay”. There were two ships
of the same name. i.e., Peerless, and both were to sail from
Bombay, one in October and the other in December. The buyer in
mind Peerless sailing in October, whereas the seller thought of the
ship sailing in December. The seller dispatched cotton by December
ship but the buyer refused to accept the same. In this case the offer
and acceptance did not coincide and there was no contract and,
therefore, it was held that the buyer was entitled to refuse to take
delivery.
Illustration
(b) 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.
(1) Both the parties to the contract should be under a mistake and
There should be mistake of fact and not of law. The validity of the
contract is not affected by mistake of law. Regarding mistake of law
the provision contained in section 21 is as follows :
Every one is supposed to know the law of the land. Ignorance of law
is no excuse. If a person wants to avoid the contract on the ground
that there was a mistaken impression in his mind as to the existence of
some law while he entered into the contract, he will get no relief.