Free Consent under Indian Contract Act – Coercion, Undue Influence, Fraud, Misrepresentation & Mistake
Section for Reference : 13,14,15,16,17,18,20 & 22 Under Indian Contract Act 1872
FREE CONSENT- MEANING (SEC 13)
Consent -Two or more persons are said to consent when they agree upon the same thing in the same sense.
COERCION-CONDITION (Sec. 15)
| a)Acts forbidden by IPC Unlawful detention of property | • Actually committing an offence forbidden by IPC, or • Threatening to commit an offence forbidden by IPC • Actually detaining the property ;or • Threatening to detain the property |
| B)Intention | • Causing any person to enter into an agreement. |
OTHER POINTS:
| Applicability of IPC is not relevant | It is irrelevant as to whether or not IPC is in force- • At the time when coercion is employed or • At the place where coercion is employed |
| How coercion may proceed? | • Coercion may proceed from – • A party to the contractor; or • Stranger to contract. |
| Against whom coercion may be directed? | Coercion may be directed against- • A party to the contract or • Stranger to contract |
UNDUE INFLUENCE CONDITIONS (Sec. 16)
| Relations between the parties | • one party is in a position to dominate the will of the other. |
| Use of the dominant position | • The dominant party uses his dominant position, |
| Dominant party obtains an unfair advantage | • The dominant party obtains an unfair advantage by way of entering into a contact |
UNDUE INFLUENCE WAS EMPLOYED/NOT EMPLOYED-BURDEN OF PROOF.
| Unconscionable transactions | • The burden of proof is on the dominant party • The dominant party has to prove that undue influence was not employed |
| Any other transaction | • The burden of proof is on the weaker party • The weaker party has to prove that undue influence was employed |
ESSENTIALS OF FRAUD (Sec. 17)
| By a party to the contract | It must be proved that fraud was committed by- (a) A party to the contract; or (b) Anyone with the connivance of a party to the contract |
| The party makes a representation | • The party has made a representation of a fact • An opinion, a statement of expression, or a statement of intention does not constitute a fraud |
• The representation is false.
• The misrepresentation was made willfully.
• The misrepresentation was made with a view to deceive the other party.
• The other party is actually deceived.
• The other party has suffered a loss.
WHEN IS A REPRESENTATION CONSIDERED AS FALSE?
| Suggestion of a false fact | • Where the person makes a representation of a fact knowing that such fact is not true |
| Concealment of fact | • Where the person conceals a fact even though he has knowledge of such a fact |
| Promise | • Where a person makes a promise without any intention of performing it |
| An act/omission | • Any act omission declared by law as fraud also amounts to fraud. |
| Any other act | • Any other act fitted to deceive also amounts to fraud |
SILENCE AS FRAUD
| General rule | • Mere silence, which is likely to affect the willingness of the other party is not a fraud |
| Exceptions | • Where the parties stand in fiduciary relationship • When silence is equivalent to speech. • Partial disclosure of truth which deceives the other party is a fraud. |
ESSENTIALS OF FRAUD (Sec. 18)
- By a party to the contract
- The party makes a representation
- The representation is false.
- The misrepresentation was made innocently.
- The misrepresentation was not made with a view to deceive the other party
- The other party has actually acted
MISTAKE (Sec 20 & 22)
| Mistake of Indian law | • The contract is not voidable |
| Bilateral mistake | • The agreement is void if- (a) The mistake relates to a fact, (b) Such fact is material to the agreement, and (c) Both the parties are at mistake. • Bilateral mistake may be (a) Mistake as to the subject matter. (b) Mistake as to the possibility of performance |
| Unilateral Mistake | The contract is neither void nor voidable. |
