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Indian Contract Act 1872: Part II

Free Consent

There have to be two parties to a contract, who willingly and knowingly enter into an agreement. But how does the law determine if the parties are both these things? This is where the concept of free consent comes in. Let us learn more about free consent and the elements vitiating free consent.

Free Consent

In the Indian Contract Act, the definition of Consent is given in Section 13, which states that “it is when two or more persons agree upon the same thing and in the same sense”. So the two people must agree to something in the same sense as well. Let’s say for example A agrees to sell his car to B. A owns three cars and wants to sell the Maruti. B thinks he is buying his Honda. Here A and B have not agreed upon the same thing in the same sense. Hence there is no consent and subsequently no contract.

Now Free Consent has been defined in Section 14 of the Act. The section says that consent is considered free consent when it is not caused or affected by the following,

  1. Coercion
  2. Undue Influence
  3. Fraud
  4. Misrepresentation
  5. Mistake

Elements Vitiating Free Consent

Let us take a look at these elements individually that impair the free consent of either party.

1] Coercion (Section 15)

Coercion means using force to compel a person to enter into a contract. So force or threats are used to obtain the consent of the party under coercion, i.e it is not free consent. Section 15 of the Act describes coercion as

  • committing or threatening to commit any act forbidden by the law in the IPC
  • unlawfully detaining or threatening to detain any property with the intention of causing any person to enter into a contract

For example, A threatens to hurt B if he does not sell his house to A for 5 lakh rupees. Here even if B sells the house to A, it will not be a valid contract since B’s consent was obtained by coercion.

Now the effect of coercion is that it makes the contract voidable. This means the contract is voidable at the option of the party whose consent was not free. So the aggravated party will decide whether to perform the contract or to void the contract. So in the above example, if B still wishes, the contract can go ahead.

Also, if any monies have been paid or goods delivered under coercion must be repaid or returned once the contract is void. And the burden of proof proving coercion will be on the party who wants to avoid the contract. So the aggravated party will have to prove the coercion, i.e. prove that his consent was not freely given.

Who Performs the Contract?

2] Undue Influence (Section 16)

Section 16 of the Act contains the definition of undue influence. It states that when the relations between the two parties are such that one party is in a position to dominate the other party, and uses such influence to obtain an unfair advantage of the other party it will be undue influence.

The section also further describes how the person can abuse his authority in the following two ways,

  • When a person holds real or even apparent authority over the other person. Or if he is in a fiduciary relationship with the other person
  • He makes a contract with a person whose mental capacity is affected by age, illness or distress. The unsoundness of mind can be temporary or permanent

Say for example A sold his gold watch for only Rs 500/- to his teacher B after his teacher promised him good grades. Here the consent of A (adult) is not freely given, he was under the influence of his teacher.

Now undue influence to be evident the dominant party must have the objective to take advantage of the other party. If influence is wielded to benefit the other party it will not be undue influence. But if consent is not free due to undue influence, the contract becomes voidable at the option of the aggravated party. And the burden of proof will be on the dominant party to prove the absence of influence.

Legality of Object and Consideration

3] Fraud (Section 17)

Factors Impairing Free Consent: Fraud

Fraud means deceit by one of the parties, i.e. when one of the parties deliberately makes false statements. So the misrepresentation is done with full knowledge that it is not true, or recklessly without checking for the trueness, this is said to be fraudulent. It absolutely impairs free consent.

So according to Section 17,  a fraud is when a party convinces another to enter into an agreement by making statements that are

  • suggesting a fact that is not true, and he does not believe it to be true
  • the active concealment of facts
  • a promise made without any intention of performing it
  • any other such act fitted to deceive

Let us take a look at an example. A bought a horse from B. B claims the horse can be used on the farm. Turns out the horse is lame and A cannot use him on his farm. Here B knowingly deceived A and this will amount to fraud.

One factor to consider is that the aggravated party should suffer from some actual loss due to the fraud. There is no fraud without damages. Also, the false statement must be a fact, not an opinion. In the above example if B had said his horse is better than C’s this would be an opinion, not a fact. And it would not amount to fraud.

Performance of Reciprocal Promise

4] Misrepresentation (Section 18)

Misrepresentation is also when a party makes a representation that is false, inaccurate, incorrect, etc. The difference here is the misrepresentation is innocent, i.e. not intentional. The party making the statement believes it to be true. Misrepresentation can be of three types

  • A person makes a positive assertion believing it to be true
  • Any breach of duty gives the person committing it an advantage by misleading another. But the breach of duty is without any intent to deceive
  • when one party causes the other party to make a mistake as to the subject matter of the contract. But this is done innocently and not intentionally.

The last factor of mistake will be covered by the next article.

Solved Question on Free Consent

Q: What are the effects of fraud on a contract?

Ans: When a contract is entered into via fraud, the defrauded party can

  1. Rescind the contract within a reasonable time
  2. Sue for damages
  3. Can insist the other party to perform the contract on the condition that he shall be put in the position in which he would have been if the false statement had been made true
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Pratham Sethi
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Pratham Sethi

K and A had entered into a contract where K was to supply 50,000 phones to A within 2 months from the date of signing of contract. K was to procure the phones from China and deliver the same to A. The rate of the phone was Rs. 5000/- a piece (inclusive of all taxes and duties). At the time of the execution of the contract, the duty was at 5% (five percent). Immediately after the execution of the Agreement, India had increased the duties to 1000% (one thousand percent). Therefore, K was finding it difficult to sell the phones… Read more »

Amber
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Amber

section 20 of the contract act 1872 says that if there is a mistake of fact and both the parties did not know the fact occurred after assigning the contract then it can’t be enforceable by law and the money or any reward will be return to the party who accepted that offer(section 65,72 of contract act).

Sushil Kumar Singhal
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Sushil Kumar Singhal

At the time of execution of contract Taxes and duties were different than while implementing the contract. which was not foreseeable hence K and A if agree than contract can be implemented otherwise K can rescind the contract.

RANABEER HALDER
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RANABEER HALDER

K CAN CLAIM RELIEF UNDER DOCTRINE OF FRUSTRATION

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