AMITY GLOBAL BUSINESS SCHOOL

Chandigarh

FREE CONSENT-(SECTION 13-21)

COERCION UNDUE INFLUENCE FRAUD MISREPRESENTATION MISTAKE

VOIDABLE

VOID

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Chandigarh

Coercion (sec 15)

Undue influence

misrepre sentation

mistake

Fraudulent(sec17)

Innocent (sec 18)

Mistake of law (sec21) Of the country Of the foreign

Mistake of fact (sec20) Bilateral unilateral

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DEFINITIONS
COERCION(SEC-15) committing or threatening to commit any act forbidden by IPC OR unlawfully detaining or threatening to detain, any property to the prejudice of any person with the intention of inducing any person to enter into an agreement. UNDUE INFLUENCE(SEC-16) 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 the position to dominate the will of the other and uses the position to obtain an unfair advantage over the other

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COERCION(SEC-15)
When the person is compelled to enter into a contract by the use of force by the other party under a threat coercion is said to be employed. Eg. A threatens to shoot B if he does not release him from Debt which A owes to B.B releases A under the threat. Other e.g. Ranganayakamma v Alwar Setty (girl was forced to adopt a kid after her husbands death) Effect-the contract is voidable at the option of party Threat to commit suicide also amount to coercion Duress-near equivalent term of coercion ,is used in English law

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- 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 e.g. master servant ,public officer& accused b) Where he stands fiduciary relationship to the other e.g. father son ,guardian ward c) Where he is mentally or physically ill either temporarily or permanently due to age, illness, mentally or bodily distress

UNDUE INFLUENCE Section16(2) of IC Act

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Obtaining the consent-consent obtained by committing or threatening to commit an offense Physical force is used May be even used by stranger to the contract

Coercion

undue influence

Here, consent is obtained by dominating the will of other person Mental force is used Can only be used by party to contract

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Chandigarh

FRAUD SECTION -17

MEANS AND INCLUDES ANY OF THE FOLLOWING ACTS; A false suggestion as to a fact known to be false or not believed to be true (e.g. a companys prospectus) Active concealment of fact by one having knowledge or belief of fact (A sold mare to B which had a defected foot, and the defect was filled up to defy detection ,B discovered the defect and it was held that the agreement could be avoided by B) A promise made without any intention of performing it (eg .man marrying wife just as a fraud)

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Any other act fitted to deceive Any such act or omission as law specifically declares to be fraudulent

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Chandigarh

Means false representation made innocently with an honest belief as to its truth by a party without any intention to deceive Thus false statement is made willfully or innocently

MISREPRESENTATION (SECTION-18)

Fraudulent misrepresentation

innocent misrepresentation

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Chandigarh

Misrepresentation
It is innocent The suggestion is believed to be true The aggrieved party can rescind the contract or sue for restitution but cannot suit for damages I truth is discovered the contract will not be avoided

fraud

It is deliberate Fraud is not believed to be true He can also claim damages

If truth is discovered the contract is voidable

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MISTAKE SECTION -20

MEANS erroneous belief concerning something. it means that parties intending to do one thing have by intentional error done something else Mistake is of two kinds 1. Mistake of fact 2. Mistake of law Mistake of law is of Indian law or foreign law Mistake may be unilateral or bilateral

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Mistake of fact-a man and a woman made a separation deed under which the man agreed to pay a weekly allowance to the woman under a mistaken assumption that they were lawfully married. it was held that the agreement was void as there was common mistake on a point of fact which was material to the existence of the agreement( Galloway v. Galloway)

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BILATERAL MISTAKES
Mistake as to subject matter i.e existence, identity, price, quantity, title, price, quality Mistake as to possibility of performance i.e physical impossibility, legal impossibility UNILATERAL MISTAKE As to nature of contract As to identity of persons

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Existence of Subject matter-there is an agreement between A and B for the purchase of a certain horse, but the horse is dead at the time of the contract. the agreement is void Mistake of identity of subject matter-eg. Of 2 cars maruti and santro Price-a seller, within the knowledge of B ,the buyer makes a mistake n writing a figure $1250,the agreement is void

E.g. of bilateral mistakes

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Mistake as to nature of contract-e.g.. A blind man signing a document read over to him wrongly will not bind him. this is because of the fact that the mind of the signer does not accompany the signature, but this rule will not apply to the person who can read. (b) mistakes as to identity of persons-mistake as to the identity of a person may also avoid a contract, where A intends to contract only with B ,but enters into a contract with C believing him to be B, the contact is vitiated

Unilateral mistakes

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Doctrine of caveat emptor

Under the doctrine of caveat emptor, the buyer could not recover from the seller for defects on the property that rendered the property unfit for ordinary purposes. The only exception was if the seller actively concealed latent defects Caveat emptor means let the buyer beware or that the buyers should examine and check for themselves things which they intend to purchase and that they cannot later hold the vendor responsible for the broken condition of the thing bought.

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Chandigarh

A agreed to sell B a specific cargo of corn per S.S.Malwa supposed to be on its way from London to Mumbai. it turned out that before the day of the bargain the ship had been cast away, and the goods lost. Discuss the rights of A and B. A contracts with B to buy a necklace ,believing it is made of pearls whereas it is in fact made up of imitation pearls of no value .B knows that A is mistaken and takes no steps to correct the error. is A bound by the contract?

Exercise

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A an old man of feeble sight, signed a bill of exchange thinking it was a guarantee there was no negligence on the part of A .is A liable. A purchased a typing machine on a dealers representation that it was a new model .after paying the purchase price ,he discovered that ,although the machines looked new ,it was actually a re-built model. what are As legal rights?

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answers

Chandigarh

1.agreement is void 2yes,the doctrine of caveat emptor will apply 3.no 4.a may void the contract on account of fraud and claim damages