1.

6 Free Consent
Free Consent
Contracts are usually described as valid, void and voidable. Valid Contract is an
agreement enforceable at the law courts. Those agreements which are not
enforceable at the law courts, i.e., for the enforcement of which legal recourse
cannot be taken, are known as Void Contracts. In between the valid and the void
contracts are the voidable contracts. Such contracts are the outcomes of Flaw in
Consent. At an early stage you have read that, “an agreement can be called a
contract provided it is made with the Free Consent of the parties, competent to
contract for a lawful consideration and for a lawful object and is not expressly
declared to be void”. When we analyse this statement we come to know that to
be a contract, an agreement must be made with the Free Consent of the parties
to the contract. Here is the importance of “Free Consent” which is very much
necessary for the validity of the contract. The genuineness of the consent implies
that the parties to the contract must mean the same thing in the same sense and
not only that but they should mutually agree voluntarily. If their minds do not
meet at the same thing in the same sense voluntarily, then their consent shall
not be called Free or Voluntary. The consent in such case might have been
obtained under Fraud or Misrepresentation or Coercion or undue influence. In
such a case the party giving his consent under any of these four elements shall
have a right to withdraw his consent. Such a contract where the consent of a
party or parties to the contract is caused by any of the elements stated above,
i.e. Fraud Misrepresentation, Coercion or Undue Influence/shall be called a
Voidable Contract and shall be enforceable at the option of the aggrieved party
or parties and not at the option of the other or others.
Let us make our point clear with the help of an example. Suppose A is willing to
sell his car to B for Rs. 15,000, but B is willing to purchase it for Rs. 10,000 only.
A tells B if he (B) refuses, to purchase the car for Rs. 15,000 he (A) shall fire upon
him. Due to this threat of getting himself hit by A’s gun, B gives his consent to
purchase the car for Rs.15,000 only. Here B’s consent cannot be said to be
obtained freely or voluntarily. It is cause by threat to the injury of B’s person.
Therefore B has a right to withdraw his consent even at a later stage. B’s consent
shall be said to be caused by Coercion. Such similar examples can be multiplied.
Thus Free Consent plays a very important role in the validity of a Contract. If
there is no Consent, there is no Contract. Sir John Salmond has called flaws in
Consent as ‘Error in Causa’. According to him error has been made in causing
consent of one of the parties to the agreement which has become responsible for
vitiating the validity of the contract. Error in Causa is created by the cause of
either Coercion, or Undue Influence or Fraud or Misrepresentation.
Let us now take up these elements, i.e. Coercion, Undue Influence, Fraud and
Misrepresentation responsible to vitiate Free Consent one by one.

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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.
Explanation : It is immaterial whether the Indian Penal Code (XL V of 1860) is
or is not in force in the place where coercion is employed.
Characteristics:
The above definition as stated by Sec. 15 of the Indian Contract Act specific
certain characteristics of the term ‘Coercion’ which vitiates the consent of the
parties to a contract. These characteristics are:
Example: An agent refused to hand over the account books to a business man to
a new agent unless the principal released him from all liabilities. The principal
had to give a release deed as demanded.
It was decided in Muthia vs Muthu Karuppa (1927, 50 Mad. 786) that the release
deed was given under Coercion and the principal could avoid it. It is necessary
that the Indian Penal Code is in force at the place where Coercion is employed.
Example : A on a ship on the high sea threatens to murder B, if he (B) does not
write a pro-note in his (A’s) favour A’s act amounts to Coercion, although Indian
Penal Code does not apply on the high seas.
Coercion by threat need not necessity be directed by a party to the contract. It
may or may not emanate from a stranger to the contract. Similarly, it may be
aimed at any person. either a party to the contract or a strange to the contract.
But the idea or intention of the party resorting to coercion should be to cause a
person to enter a contract.
Example :
(a) A threatens to Kill C (B’s son), if B does not lend Rs. 10,000 to A. B agrees
to lend the aforesaid amount. The agreement is caused by Coercion.
(b) A threatens to Kill B if B does not lend Rs. 10,000 C.B agrees to lend the
amount to C. This agreement is made under Coercion.
Effect of Coercion
Coercion vitiates Free Consent. The party or parties whose consent is taken under
the effect of Coercion get a right to avoid the contract, if he so likes. However,
if the aggrieved party has received any benefit under the contract which he is
avoiding on the basis of Coercion, he has to return that benefit to the other party
or parties (S.72). The point can be made clear by the following example:
A enters into a contract with B to sell his horse for Rs. 5000 B takes A’s consent
under Coercion. A at the time of entering into an agreement receives Rs. 1000
as an advance from B. Later on, A avoids the sale of the horse on the basis of

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Coercion. A has to return Rs. 1000 to B. He cannot retain the money received as
an advance from B.
Burden of Proof: The party avoiding the contract has to prove that Coercion
was exercised upon him and his consent received is not voluntary or he has not
exercised his consent freely.
Threat to commit suicide : It is an important question whether threat to
commit suicide amounts to ‘Coercion? The act of committing suicide is forbidden
by the Indian Penal Code and on this basis Madras High Court has decided in
Amiraju vs Seshamma (1918, 41 Mad. 33) that threat to commit suicide amounts
to Coercion and the party affected is entitle to avoid the contract. Wallis, C.J
and Seshhagiri Iyer J. held the threat of suicide amounted to Coercioin The
learned judged observed, “it was impossible to hold that an act which it is made
punishable to abet or attempt is not forbidden by the Indian Penal Code,
especially as the absence of of any section punishing the act itself is due to the
fact that the suicide is in the nature of things beyond the jurisdiction of the
Court.” However, Old Field J. gave a dissent. He held that the section should be
strictly construed and that an act not punishable under the Penal Code could not
be said to be forbidden by the code.
However, it is not a well recognized fact that threat to commit suicide is an
offence punishable under the Indian Penal Code and amounts to Coercion.
The facts of the case are as under:
Amiraju held out a threat to commit suicide to his wife and son, if they did not
execute a release in favour of his brother in respect of certain properties. The
wife and the son executed the release deed under the threat. Later on the wife
and the son took the plea of Coercion to avoid the release deed.
Coercion and Duress distinguished
(a) Coercion is the term applied under the Indian law of Contracts while Duress
is the term applied under the English law of Contracts.(b) Coercion has a wide
scope than Duress, Coercion includes threat to property also while Duress
includes actual act of violence over the person and not of property. (c) Coercion
can be applied by even a stranger, while Duress must be applied by a party to
the Contract upon the other party or to his wife or patent or child.
Undue Influence (S.16)
Definition as per S.16: (1) A contract is said to be induced by “undue influence”
where 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 uses that position to
obtain an unfair advantage over the other.
(2) In particular and without prejudice to the generality of the foregoing
principle, a person is deemed to be in a position to dominate the will of another.

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(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) when 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.
(3) 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 fact of it or on the
evidence adduced, to be unconscionable, he 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.
Nothing in this sub-section shall affect the provision of section III of the Indian
Evidence Act 1872.
Illustrations
(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. It lies on B to prove that the
contract was not induced by undue influence.
Salient Features
The above definition has got the following salient features:-
(1) One of the two parties to the contract is in a position to dominate the will
and mind of the other party. This is presumed when the parties to the contract
have a real or apparent authority over the other or one of the parties has got a
fiduciary relationship which puts him in a position to win over the mind of the
other party. Such position or relationship exists in the cases of minor and
guardian; trustee and beneficiary; son and father, wife and husband or vice-
versa.
The positon is also presumed where the party is disabled or infirm and has to
depend upon the other party to the contract. Mentally deficient and physically
disabled people can take the plea of undue influence in avoiding the contract.
(2) The dominating party should have obtained an unfair advantage from the
weaker party: and
(3) The transaction between the contracting parties is unconscionable. The
bargain is called
‘unconscionable’ where the two parties are not on equal footing and one of them
is making an exorbitant profit of the other’s distress.
Unless all the three above stated conditions exist, the contract cannot be avoided
on the pretext of Undue Influence. In the words of Sir Samuel Romilly undue

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influences is presumed in “all the variety of relations in which dominion may be
exercised by one person over another”.
Effect of Undue Influence (S.19-A)
A contract vitiated by undue influence is voidable at the option of weaker party.
The court can set aside such contract-
(i) either wholly: or
(ii) where the weaker party has enjoyed some benefit under the terms of the
contract, then upon just and equitable terms
Examples
(a) A’s son has forged B’s name to a promissory note. B under threat of
prosecuting A’s son obtains a bond from A for the amount of the forged note. If
B sues on this bond, the court may set the bond aside.
(b) A, a money-lender, advances Rs. 100 to B, an agriculturist, and by undue
influence induces B to execute a bond for Rs. 200 with interest at 6 per cent per
month. The Court may set the bond aside, ordering B to repay Rs. 100 with such
interest as may seem just.
Burden of Proof
The weaker party has a right to avoid the transaction on the plea of Undue
Influence. It is the other party who is to prove that he has not exercised any
undue influence in getting the consent of the weaker party. If the other party is
unable to prove it, the court shall set aside the transaction. (Refer to example
(b) given after definition of Undue (Influence).
(a) Parties suffering with physical or mental distress e.g. a patient suffering
with acute pain entering into a contract with a doctor.
(b) Parties having confidential relations. Confidential relationship is presumed
in between parent and child; guardian and ward; solicitor and client; managing
clerk of an attorney and his client; trustee and cetstui que trust; doctor and
patient Chela (disciple) and a Guru (spiritual advise; fiancé and fiancée. There is
no undue influence in the relationship of mother and daughter; husband and
wife; grandfather and grandson and landlord and tenant; creditor and debtor.
Rebuttal: all cases of prescribed Undue Influence can be rebutted on the
following grounds: (i) full disclosure of material facts was made to the weaker
party;
(ii) adequate consideration existed; and
(iii) the weaker party received independent legal advice.
Transaction with Parda-nishin women: Who is a parada-nishin women?
A woman who observes complete seclusion due to the prevailing custom in her
community is said to be parda-nishin. She does not act independently but has to

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depend upon someone else for performing her outward duties. A woman going to
the Court to give her evidence, settling gent with her tenant, collecting rents
from them, dealing with other parties in matters of business, falling to outsiders
can not be regarded as a Parda- nishin woman. The training, habit and
surrounding circumstances are the main elements to be considered to decide
whether a woman is a Parda-nishin or not Wearing a Burga does not make a
woman a Parda- nishin.
A Parda-nishin woman can be influenced by undue influence. Persons entering
into contracts with such a woman have to be very careful because they may be
required to prove (1) that such woman understood the contents of the contracts;
(2) she had free and independent advice and (3)she exercise her free will.
The Privy Council has stated in 1931 in Tara Kumari Vs Chandra Mauleshwar that
the principles to be applied to transactions with such women are not merely
deductions from the law as to undue influence but have to be founded upon wider
basis of equity and good conscience. A good number of cases have been decided
not only by the privy Council but also by the Indian High Courts over the point.
Distinction between Coercion and Undue Influence
We can distinguish between Coercion and Undue Influence. The distinction can
be made on the following basis:
(a) Definition, Coercion is an act punishable under the Indian Penal Code, while
Influence is not a penal act.
(b) Nature of force used, Coercion requires physical force exercised by one
of the parties to contract, while undue influence requires moral force.
(c) Parties Even a stranger’s act may account to coercion, but undue influence
can be exercised only by one of the parties to the contract. Stranger has no place
in undue influence.
(d) Effect. Coercion gives a right to the effected party to repudiate the contract
in full but under undue influence court may set aside the contract absolutely or
modify the terms of the contract on such terms which it feels just and equitable.

2. FRAUD AND MISREPRESENTATION

“Fraud” : (S.1)
“Fraud” means and includes any of the following acts committed by a party to
contract or with his connivance, 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;

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(4) any other act fited to deceive;
(5) any such act or commission as the law specially declares to be fraudulent.
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.
1. Sir Samuel Romilly argued in Hurgamin Vs. Raseley (1807) Ves. 285;Mulla on
the Indian Contract Act 10th Ed. P. 53.
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 daughter 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 chnage in prices which would after B’s willingness to proceed with the contract.
A is not bound to inform B.
Characteristics
From the above definition we can state the following characteristics of Fraud:
(1) The act done by the party is done with an intention to device.
(2) The act may be done by the party himself or with his connivance by some
one else or by his agent.
(3) The act amounting to fraud may be a suggestion of fact (suggestion false)
i.e., the statement being made is without belief to its truth.
(4) The act may amount to an active concealment of a fact (suppressio veri) i.e.
the party has concealed a fact which was duty bound to disclose.
(5) The act amounting to fraud is in the form of a false promise.
(6) The act or mission is declared fraudulent by the Court or regarded by the
Court as a deceit. (7) The act committed must have deceived the other party
and the party has suffered the damage
on account of it. If the party does not suffer a damage on account of the
fraudulent act committed by the other party, it shall not amount to fraud.

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Is silence a Fraud?
Explanation to S.17, states in clear terms that mere silence is not fraud. Where
silence amounts to active concealment, it shall amount to fraud. Thus generally
silence does not amount to fraud. However where a party chooses to speak, he
must do so clearly and fully. He should not make a partial and fragmentary
statements of fact, so that the other party is misled. The court has decided in
Bimla Bai vs Shankarlal (AIR 1959 M.P. 8) that a partial statement verbally
accurate may be as false a statement as if it has been misstated fully. A father
called his illegitimate son, a ‘son’ at the time of fixing his marriage. It was held
that the statement was false and thereby fraudulent.
Effects of Fraud
Fraud gives the following rights to the aggrieved party.
(1) He can avoid the contract and file a suit on the other party for damages; or
(2) He can revoke the contract, or
(3) He can refuse to fulfill his part of the promise and defend the suit filed by
the other party for the breach of contract for damages or specific performance,
or
(4) 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.
Misrepresentation (S.18)
Misrepresentation has been defined by the Act as follows: “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.
Characteristics
The ingredients of a contract vitiated by misrepresentation are: (a) There must
be a misstatement of a material fact.
(b) The statement must not be a mere opinion, or hearsay, or commendation,
because praise carries no obligation.
(c) The mis-statement must be made with the intention that the other party
shall act upon he contract.

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(d) The other party must have been induced by the mis-statement.
(e) The statement being made is a wrong one, although the party making it has
not known it to be false.
(f) The statement has been made by the party to the contract or his agent and
not by a stranger.
Kinds
The term misrepresentation as defined by S.18 is quite exhaustive as can be seen
by the words
“Means and Includes”. Misrepresentations may be of any of the three kinds:-
(1) It may take the form of an unwarranted positives statement which is not
true, but the party believes it to be true; or
(2) It may take form of breach of duty on the part of one party which misleads
the other party to his prejudice or to the prejudice of anyone claiming title under
him. This kind of misrepresentation includes such cases which are named as
‘Constructive Fraud’ by the Courts of equity. The party getting a benefit under
the Act even under an obligation is not making full disclosure of facts but his non-
disclosure misleads the other party.
(3) It may take the form of causing a party to the contract to make a mistake
as to the subject matter of the contract. For example, if erroneous statement is
made as to the tonnage of a ship, the contract can be avoided on the basis of
misrepresentation. This decision was given in Oceanic Steam Navigation Co., vs
Soonderdas (1890, 14 Bomb.92).
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 defence to an action of the
contract.
When the aggrieved party loses his rights?
The aggrieved party shall not be able to exercise any of the above rights in the
following cases:- (a) If he comes to know of mis-representation and even then
takes the benefit of the contract or approves the contract; or
(b) If the parties can not be brought back to their original position. Such
situation arises where the subject matter of the contract has already been
consumed or destroyed.

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(c) If the contract cannot be rescinded in full, then it can not be rescinded at
all. Such decision has already been given in Sheffield Nickel Co. vs Dawin (1872,
2 Q.B.D. 215).
(d) If the aggrieved party has transferred the rights under the contract of the
third party and the has acquired these rights in good faith and for consideration.
(Phillips Vs Brroks, 1919, K.B. 243)
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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