LAW OF CONTRACTS

2.1
FREE CONSENT

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CONSENT

● Section 14
● For a Contract to be valid, the consent of the parties must be
genuine. The principle of consensus-ad-idem is followed which
means that the parties entering into the contract must mean the
same thing in the same sense.  The parties to the contract must
have the same understanding in regards to the subject matter of
the contract.

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CONSENT

● Section 14
● Consent is said to be free when it is not caused by —
1. coercion, as defined in section 15, or
2. undue influence, as defined in section 16, or
3. fraud, as defined in section 17, or
4. misrepresentation, as defined in section 18, or
5. mistake, subject to the provisions of sections 20, 21 and 22.

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CONSENT - Coercion (Section 15)

● Coercion (Section 15)

● Coercion means compelling or forcing a person to enter
into a contract under pressure or a threat.
● Under section 15 of the Act, coercion means committing or
threatening to commit any act forbidden by IPC.
● In case Chickam Amiraju v/s chicken Sheshamma it was
held that threat to suicide amounts to coercion.

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CONSENT - Coercion (Section 15)

● Coercion (Section 15)

● Meaning: It is committing, or threatening to commit, any
act forbidden by the Indian Penal Code (XLV of 1860), 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.

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CONSENT - Coercion (Section 15)

● Coercion (Section 15)

● Example : A on a ship on the high sea threatens to murder B, if he
(B) does not write a pronote in his (A’s) favour A’s act amounts to
Coercion, although Indian Penal Code does not apply on the high
seas.

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CONSENT - Undue Influence (S.16)

● Undue Influence (S.16)

● When parties to a contract are in a relationship in such a way
that one party can dominate the will of others to obtain the
consent of the other party, consent is said to have been obtained
by undue influence.

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CONSENT - Undue Influence (S.16)

● Undue Influence (S.16)

● Use of improper use of power over the mind of the contracting
party
● A contract is said to be induced by “undue influence” when
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
2. Uses that position to obtain an unfair advantage over the other.

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CONSENT - Undue Influence (S.16)

● Undue Influence (S.16)

● Example:
● (a)   A, a man enfeebled by disease or age, is induced, by B’s
influence over him as his medical attendant, to agree to pay B an
unreasonable sum for his profession services. B employs undue
influence.
● (b)   A being in debt to B, the money-lender of his village,
contracts a fresh loan on terms which appear to be unconscionable
(unacceptable). It lies on B to prove that the contract was not
induced by undue influence.
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Difference Between Coercion and undue Influence

a) Definition, Coercion is an act punishable under the Indian Penal Code,

while Influence is not a penal act.
b) Mode of Obtaining Consent
c) Nature of force used
d) Effect 

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CONSENT - Fraud (S.17)

● Fraud (S.17)
● 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.

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CONSENT - Fraud (S.17)

● Fraud (S.17)
● Consent when obtained by fraud, it is not considered as free
consent. In fraud, the party making it know that it is fraud.
● The burden of proof in case of fraud lies on the party who
alleges it. In this case aggrieved party can claim for damages as
their right.
● In case Derry v/s Peek it was held that representation made
with reckless indifference amount to fraud.

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CONSENT - Fraud (S.17)

● Fraud (S.17)
● “Fraud” means and includes any of the following acts
committed by a party to contract or with his connivance
(involvement), or by his agent, with intent to deceive another
party thereto of his agent, or to induce him to enter into the
contract:
1. the suggestion, as to fact, of that which is not true, by one who
does not to 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 commission as the law specially declares to be
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CONSENT - Fraud (S.17)

● Fraud (S.17)
● Explanation
● Mere silence as to facts likely to affect the willingness of a
person to enter into a contract is not fraud, unless the
circumstances of the case are such that, regard being had to
them it is the duty of the person keeping silence to speak, or
unless his silence is in itself, equivalent to speech. 

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CONSENT - Fraud (S.17)

● Fraud (S.17)
● Examples
● (a)   A sells, by auction to B, a horse which A knows to be unsound. A says nothing to B
about the horse’s unsoundness. This is not fraud by A.
● (b)   B says to A “If you do not deny it, I shall assume that the horse is sound”. Here, A’s
silence is equivalent to speech. Here, the relation between the parties would make it A’s
duty to tell B if the horse is unsound.
● (c)   B is A’s son and has just come of age. Here the relation between the parties would
make it A’s duty to tell B if the horse is unsound.
● (d)   A and B, being traders, enter upon a contract. A has private information of a change
in prices which would alter B’s willingness to proceed with the contract. A is not bound
to inform B.
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CONSENT - Misrepresentation (S.18)

● Misrepresentation (S.18)
● The representation of a misstatement, made innocently, which
persuades other party to enter into the contract, is known as
misrepresentation.
● In this party, making representation believes the statement
made by him to be true as he was not intentionally making any
false statement.
● The aggrieved party can not sue him for damages.

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CONSENT - Misrepresentation (S.18)

● Misrepresentation (S.18)
● Misrepresentation is when a party makes a representation
which 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
1) A person makes a positive assertion believing it to be true
2) 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
3) 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.

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CONSENT - Misrepresentation (S.18)

● Misrepresentation (S.18)
● “Misrepresentation” means and includes:-
● (a)   the positive assertion, in a manner not warranted by the
information of the person making it, of that which is not true
though he believes it to be true;
● (b)   any breach of duty which without an intent to deceive,
gains an advantage to the person committing it, or any one
claiming under him, by misleading another to his prejudice or
to the prejudice of anyone claiming under him.
● (c)   causing, however innocently, a party to an agreement to
make a mistake as to the substance of the thing which is the
subject of the agreement.

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CONSENT - Misrepresentation (S.18)

● Misrepresentation (S.18)
● Effect of Misrepresentation
● The party being affected by misrepresentation has got the
following rights:
● (1)   He can avoid or revoke the contract; or
● (2)   He can affirm the contract and insist on the
misrepresentation to be made good, if it is possible to do so; or
● (3)   He can rely upon the misrepresentation as a defense to an
action of the contract.

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CONSENT - Misrepresentation (S.18)

● Misrepresentation (S.18)
● Distinction between Fraud and Misrepresentation
● Fraud and Misrepresentation can be distinguished on the following basis:
● (a)   Intention: In Fraud the party’s intention is to deceive the other party
and got the benefit from him, while in Misrepresentation the party does not
have any intention to deceive. It makes a careless misstatement of facts of
only.
● (b)   Rights: Fraud gives two rights to the aggrieved party, a right to action
for damages and also to avoid the contract, i.e. while misrepresentation give
only one right, i.e. to avoid the contract. It does not allow any damages.
● (c)   Plea: Fraud does not allow the defendant to take the place that the
plaintiff had means to discover the truth but defendant is allowed to take
this plea in case of misrepresentation.
● (d)   Penalty: The party defrauding the other can be prosecuted for cheating
under I.P.C. also but such is not the case in misrepresentation. 

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CONSENT - Mistake (S.20)

● Mistake (S.20)
● A mistake is an erroneous belief that is innocent in nature. It
leads to a misunderstanding between the two parties.
● the law identifies two types of mistakes, namely

1) A Mistake of Law

2) A Mistake of Fact

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CONSENT - Mistake (S.20)

● Mistake (S.20)
● A mistake is an erroneous belief held by one or both parties to a
contract at the time of its formation.
● Under Contract Law, a mistake is classified into two parts:
a) Mistake of Law- when the party has any misunderstanding
with regard to the legal provisions, it is called a mistake of law.
b) Mistake of Fact- when the parties have any misunderstanding
regarding the subject matter or terms of the contract, it is said to
be a mistake of fact.

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CONSENT - Mistake (S.20)

● Mistake (S.20)
● Mistake of Law
● This mistake may relate to the mistake of the Indian laws, or it
can be a mistake of foreign laws. If the mistake is regarding
Indian laws, the rule is that the ignorance of the law is not a
good enough excuse. This means either party cannot simply
claim it was unaware of the law.

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CONSENT - Mistake (S.20)

● Mistake (S.20)
● The Contract Act says that no party shall be allowed to claim
any relief on the grounds of ignorance of Indian law. This will
also include a wrong interpretation of any legal provisions.
● However, ignorance of a foreign law is not given a similar
treatment. Ignorance of the foreign law is given some leeway,
the parties are not expected to know foreign legal provisions
and their meaning. So a mistake of foreign law is in fact treated
as a mistake of fact under the Indian Contract Act.
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CONSENT - Mistake (S.20)

● Mistake (S.20)
● Mistake of Fact
● This is when both the parties misunderstand each other leaving
them at a crossroads. Such a mistake can be because of an error
in understanding, or ignorance or omission etc.
● But a mistake is never intentional, it is an innocent
overlooking.
● These mistakes can either be unilateral or bilateral.

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CONSENT - Mistake (S.20)

● Mistake (S.20)
● Mistake of Fact – Bilateral Mistake
● When both parties of a contract are under a mistake of fact
essential to the agreement, such a mistake is what we call a
bilateral mistake.
● Here both the parties have not consented to the same thing in
the same sense, which is the definition of consent.
● Since there is an absence of consent altogether the agreement is
void.
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CONSENT - Mistake (S.20)

● Mistake (S.20)
● Mistake of Fact – Unilateral Mistake
● A unilateral mistake is when only one party to the contract is
under a mistake. In such a case the contract will not be void.
● So the Section 22 of the Act states that just because one party
was under a mistake of fact the contract will not be void or
voidable.
● So if only one party has made a mistake of fact the contract
remains a valid contract.
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CONSENT - Mistake (S.20)

● Mistake (S.20)
● Mistake of Fact – Unilateral Mistake
● Contract is not be void or voidable. Contract remains a valid contract.
● However, there are some exceptions to this. In certain conditions,
even a unilateral mistake of fact can lead to a void or voidable
agreement.
● Let’s see a few of these exceptions via some examples and case
studies.
1. When Unilateral Mistake is as to the Nature of the Contract

2. When the Mistake is regarding theService

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CONSENT - Mistake (S.20)

● Mistake (S.20)
● Solved Example for You
● Q: What are the effects of fraud on a contract?
● Ans: When a contract is entered into via fraud, the defrauded party can

⮚ Rescind (cancel) the contract within a reasonable time

⮚ Sue for damages

⮚ He can treat the contract as a valid one and ask for the specific
performance, or for damages in addition to the substitution of the original
contract.

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CONSENT - Mistake (S.20)

● Mistake (S.20)
● Solved Example for You
● Q: A mistake of law always leads to a valid contract. True or False?
● Ans: The statement is False. A mistake of India law if is regarded as a valid
contract since ignorance of the law is not a good enough excuse. But a mistake
of foreign law is considered as a mistake of fact, and if such a mistake is
bilateral it will lead to a void contract.

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