Table of Contents

Free consent , coercion, fraud, mistake, , misrepresentation, undue influrenca

Table of Contents

Theoretical overview

Consent is said to be given when both parties agree on the same thing in the same sense. According to Section 10, free consent is an essential requirement of a contract. Sec-14 states consent is said to be free when it is given without-

  • Coercion (sec-15)
  • Undue Influence (sec-16)
  • Fraud (sec-17)
  • Misrepresentation (sec-18)
  • Mistake (sec- 20, 21& 22)

Where consent to an agreement is caused by coercion, undue influence, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.

Coercion (sec-15)

Consent is said to be caused by coercion when it is obtained by pressure exerted by either of the following techniques:

  • Committing or threatening to commit any act forbidden by the Indian Penal Code; or 
  •  Unlawfully detaining or threatening to detain any property.

(It is immaterial if IPC is in force or not in the place where coercion is employed)

Undue Influence (sec-16)

  1. A contract is said to be induced by “undue influence” where 
  • 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. 
  1. A person is deemed to be in a position to dominate the will of another— 

[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.

  1. 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 evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other. 

Real or Apparent Authority

  • Persons in real authority would include an Income Tax Officer in relation to an assessee; a magistrate or police officer in relation to an accused person and the like. The expression “apparent authority” would include cases in which a person has no real authority, but is able to approach the other with a show or colour of authority.

Fiduciary Relationship

  • Every relationship of trust and confidence is a fiduciary relation.

Burden of Proof

Whenever there is a fact alleged by a party, that party has to prove it in a court of law. The party who says that his will was moulded by the other party will have to prove the undue influence in a court of law. 

If one party is in a position to dominate the will of the other party and the terms of the contract are unconscionable or there exists an economic duress, or thirdly, one of the parties was a pardanasheen woman, then the burden to prove that undue influence did not exist will lie with the dominant party.

Pardanasheen Woman– One who is not aware of how the society and commerce functions because of a virtual veil.

Economic Duress

Special case of Undue Influence.  Neither fiduciary nor authoritative relationship. One party has some means, by which, if exercised, can cause catastrophic economic loss to the other party. 

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 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 
  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 fraud.

Misrepresentation (Sec-18)

It can be done by unwarranted Statements throughpositive assertion which are not really true and where the speaker believes it to be true. When a person misleads the other he is said to commit misrepresentation. A mere expression of opinion cannot be regarded as a misrepresentation of facts even if the opinion turns out to be wrong. But in some cases, a statement of opinion may also amount to misrepresentation

Mistake (Sec-20, 21 & 22)

Under section 20, consent given under mistake is void. It can take place when when both the parties to an agreement are mistaken, or their mistake is as to a matter of fact, and the fact about which they are mistaken is essential to the agreement.
S. 21 states that a contract is not voidable because it was caused by a mistake as to any lawinforce in India) but a mistake as to a law not in force in India has the same effect as a mistake of fact. S. 22. Says that 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.

Areas where the mistake is committed usually-

  1. MISTAKE AS TO IDENTITY OF THE PARTIES

Assumption of false identity or mistake caused by takeover of business or mistake of identity caused by fraud

  1. MISTAKE AS TO SUBJECT-MATTER

 The subject-matter may have ceased to exist before the contract was made. Where the parties, due to a reasonable mistake of fact, have different subject-matters in mind, the agreement will be void for want of true consent. The parties may be mistaken as “to the existence of some fact or facts forming an essential and integral element of the subject-matter. A mistake as to the quality of the subject-matter as distinguished from its substance may not render the agreement void..

  1. MISTAKE AS TO NATURE OF PROMISE

When a deed of one character is executed under the mistaken impression that it is of a different character, then it is wholly void and inoperative.

Relevant sections

  • Coercion (sec-15): Consent is said to be caused by coercion when it is obtained by pressure exerted by either of the following techniques: Committing or threatening to commit any act forbidden by the Indian Penal Code; or  Unlawfully detaining or threatening to detain any property.
  • Undue Influence (sec-16)A contract is said to be induced by “undue influence” where 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. 
  • 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 with intent to deceive another party thereto or his agent, or to induce him to enter into the contract
  • Misrepresentation (Sec-18)
  • S. 20 – VOID
    (1) when both the parties to an agreement are mistaken,
    (2) their mistake is as to a matter of fact, and
    (3) the fact about which they are mistaken is essential to the agreement
  • S. 21. Effect of mistakes as to law.—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.
  • S. 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.

Important case laws

Chikham Amiraju v. Chikham Seshamma (1917) 32 MLJ 494

  • Facts: Husband told wife to transfer property to his brother otherwise he’d commit suicide.
  • Held: It would be coercion, committing suicide is punishable under the IPC.

Astley v. Reynolds (1731 2 Str 915)– Detaining or threatening to detain

  • Facts: The plaintiff pledged a plate with the respondent. At the time of taking it back, the plaintiff was in urgent need of it and the respondent asked for additional amount.

Held: Person was induced into giving more money, and it was not with his own free will 

Wajid Khan v Raja Ewaz Ali Khan (1890-91) 18 lA 144.

Held- All the facts of the case go to show that there was active undue influence. The onus is on the grantee to show conclusively that the transaction is honest, bona fide, well-understood, the subject of independent advice and free from undue influence.

Kali Baksh Singh v Ram Gopal Singh
Held-The court said that the agreement was entered into with a pardanasheen lady. Thus, there was a presumption of Uundue Influence.

Shrimati v Sudhakar R Bhatnakar

  • Held- no undue influence. Persuasion. He was not in a position to dominate her will, despite holding her land in his possession and having a fiduciary relationship with him. 

Universe Tankship Inc v International Transport Workers Federation
Held-The workers were in a position to cause great economic loss to the other party, and used this position for their benefit, making the contract extremely biased. Thus, it was Undue Influence and the contract was voidable at the option of the shipping company.

Derry v. Peak
Held: for fraud to be committed, you need to prove that the person who made statement knew it was false, but directors believed they would be sooner or later be given approval. So, not fraud.

P L Raju v. Dr. Nandan Singh
    Held: It was a case of active concealment and the buyer was allowed a refund

Shri Krishnan v. Kurukshetra University
Held: Would be said to not have committed fraud as it would have been the duty of the University to scrutinize the forms.

DDA v. Skipper Construction Co
Held: while it entered into an agreement with these parties, it was not in a position and it could not have reasonably intended to perform this contract. Therefore, agreement is void and asked DDA to return initial deposits along with interest.

Bindu Sharma v Ram Prakash
Held: She was allowed to avoid the marriage.

With v. O’Flanagan
Held: it was the duty of the doctor to tell the other person because he had earlier made a representation regarding the value of the property

OceanicSteam Navigation Co v Soonderdas Dharamsey,ILR (1890) 14 Bom241.
Held- There was the positive assertion by the plaintiffs about the size of the ship—an assertion not warranted by any information the plaintiff had at the time, and which was not true.

Thake v Maurice, 1986 QB 644 (CA)
Held-The court said that the plaintiffs were entitled to damages for distress, pain and suffering, since the personal distress of both plaintiffs and the pain and suffering of the birth was a separate head of claim which was not canceled out by the relief and joy felt after the birth of a healthy baby and there was no reason in principle why damages could not be recovered for the discomfort and pain of a normal pregnancy and delivery.

Dambarudhar Behera VState of Orissa, AIR 1980 Ori 188.
Held- The contract was held to be vitiated by misrepresentation. The purchaser was allowed to recover damages for loss

R. v Kylsant (1932) 1 KB 442.
Held- The prospectus of a company stated that the company had regularly paid dividends, which created the impression that the company was making profits, whereas the truth was that the company had been running into losses for the last several years and dividends could only be paid out of wartime accumulated profits. The suppression of this fact was held to be a misrepresentation

Smith v Land & House Property Corpn (1884)LR28ChD7(CA)
Held- In a case where the facts are equally well-known to both parties, what one of them says to the other is frequently nothing but an expression of opinion. But if the facts are not equally well-known to both sides, then a statement of opinion by one who knows the facts best involves very often a statement of a material fact, for he impliedly states that he knows facts which justify his opinion.
Bisset v Wilkinson. 1927 AC 177 (PC
Held- In these circumstances the purchasers were not justified in regarding anything said by the vendor as to the carrying capacity as being anything more than an expression of opinion on the subject.

Shoshi Mohun Pal Chowdhry v Nobo Krishto Poddar, ILR (1874) 5 Cal 801.
Held- A person who bought a quantity of rice, was precluded from alleging misrepresentation about its quality because he lived very near the place where the goods were lying and, therefore, might have discovered the truth with ordinary diligence

James Cundy v Thomas Lindsay  (1878) LR 3 AC 459: 38 LT 573: 47 LJ QB 481.
Held- The plaintiffs intended to contract with Blenkiron & Co and consequently no contract could have arisen between them and Blenkarn as there was no consensus of mind which could lead to any agreement or any contract whatsoever.

Phillips v Brooks Ltd} (1919) 2 KB 243.
Held- The plaintiff intended to contract with the person present before him. The minds of the parties met and agreed upon all the terms of the sale, the thing sold, the price and time of payment, the person selling and the person buying. The fact that the seller was induced to sell by the fraud of the buyer made the sale voidable, but not void.

The authority of this case seems to have been considerably shaken by the decision of the Court of Appeal in Ingram v Little  (1961) 1 QB 31 (1960) 3 WLR 504 (CA)
Held-
There could be no doubt that the offer which the plaintiffs made.was one made soley to, and one which was capable of being accepted only by, the honest Hutchinson. So far as the rogue was concerned there was no offer made to him and consequently there could be no contract with him.

Another stance came in the case of Lewis v Averay (1972) 1 QB 109: (1971) 3 WLR 603 (CA).
Held-  a mistake as to the identity of a person is one thing; and a mistake as to his attributes is another. A mistake as to identity, it is said, avoids a contract, whereas a mistake as to attributes does not. But this is a distinction without a difference. A man’s very name is one of his attributes. It is also a key to his identity. If then, he gives a false name, is it a mistake as to his identity? Or, a mistake as to his attributes? These fine distinctions do no good to the law.

Final stance- Shogun Finance Ltd v Hudson [2003] UKHL 62
Held- It held with a 3:2 majority that the rules held in James Cundy v Thomas Lindsay will prevail.

Cooper V Phibbs (1867) LR 2 HL 149: 16 LT 678 (HL)
Held- the mistake was such as not only to make the agreement voidable, but also liable to be set aside on such terms as the court thought fit to impose.

Bell v Lever Bros Ltd 1932 AC161 (HL)
Held- Once a contract has been made, that is to say, once the parties, whatever their inmost states of mind, have to all outward appearances agreed with sufficient certainty in the same terms, on the same subject-matter, then the contract is good unless and until it is set aside for breach of some condition expressed or implied in it, or for fraud, or on some equitable ground. Neither party can rely on his own mistake to say it was a nullity from the beginning, no matter that it was a mistake which to his mind was fundamental, and no matter that the other party knew he was under a mistake.

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