WRITTEN BY - BHARATI, BRAHM, DEVANGI
Any contract made in India should be made in conformity with the Indian contract act, 1872 and no agreement shall make a contract that does not fulfill the essentials that are mentioned in section 10 of the Indian contract act, 1872. One such essential mentioned in the Indian contract act, 1872 is free consent. Free consent is described in the Indian contract from section 14-18. The definition of free consent in the Indian contract act, 1872 is given in section 14 as consent which shall not be obtained by coercion, fraud, misrepresentation (innocent or deliberate), undue influence, and mistake of facts. This article will explore each of these vitiating factors along with their effects on an agreement.
2. DEFINITION CONSENT AND FREE CONSENT (S.13-14)
Section 13 of the Indian contract act, 1872 defines consent as agreeing of 2 parties on the same thing in the same sense. In other words, mere agreeing of parties is known as consent whereas free consent is defined in section 14 as already mentioned above, is slightly different from consent. If there is no consent between parties i.e., when both the parties do not agree on the same thing in the same sense then the agreement is void, whereas, in case of absence of free consent, the contract becomes voidable at the option of the aggrieved party.
If a person “A” wants to enter into a contract of buying a property of person “B” who does not wants to sell it and “A” points a gun on “B” and forces him to enter into the contract then the contract shall be voidable at the option of “B”.
If a person “A” enters into an agreement with person “B” to sell his horse named “Ferrari” and “B” enters into the agreement thinking that the agreement is about the sale of a Ferrari car then here the agreement becomes void as there is no meeting of minds and no conformity to the concept of consensus ad idem exists.
3. VITIATING FACTORS AND THEIR EFFECTS (S.15-18 & S.20-22)
As already mentioned above, certain factors or elements shall not be present to prove the existence of free consent in an agreement. These are described in the Indian contract act from sections 15-18 and 20-21. These are:
i) Coercion (S.15)
ii) Undue influence (S.16)
iii) Fraud (S.17)
iv) Misrepresentation (S.18)
v) A mistake of fact (S.20-22)
Coercion is mentioned in section 15 of the Indian contract act, 1872. When a person tries to commit or threatens to commit something forbidden by the Indian penal code of 1860 or unlawfully detains or threatens to detain a property to wrongfully threaten someone to enter into a contract then it is said that coercion has taken place.
Section 19 of the Indian contract act states that if consent is taken by coercion then the agreement becomes a voidable contract at the option of the party whose consent was so caused.
“A” criminally intimidates “B” to enter into an agreement. Later “A” sued “B” for breach of contract and “B” refused to fulfill the contractual obligations, so here "A" cannot force "B" to fulfill his contractual obligations as “A” used coercion under section 506 of IPC.
3.2 UNDUE INFLUENCE
Undue influence is described in section 16 of the Indian contract act. Undue influence is said to exist when one party is in the position to dominate the will of the other party according to his/her interest and succeeds in gaining an unfair advantage over the other party.
The sub-section (2) says that a person is deemed to be in a position to dominate the will of another:
i) When he /she is a real or apparent authority.
ii) Where he/she is in a fiduciary relationship with the other party.
iii) Where the other party’s mental capacity is affected due to age or any physical or mental illness.
When an agreement is caused by undue influence then the agreement shall become a voidable contract at the option of the aggrieved party.
Some examples of undue influence are mentioned below:
a) A son acts as a dominant authority over his old father who is living with him to influence him to sign a sale deed in the son's name, which the father does not want to sign.
b) An advocate asks for a greater amount from his client to fight his case. This is an example of a fiduciary relationship that exists between an advocate and his client.
3.2.1 BURDEN OF PROOF:
The burden of proof shall lie on the party who shall be in a position to dominate the other party's will. In order to prove the existence of free consent, it is necessary to prove that either party entering into the contract was not influenced by each other under the mentioned circumstances above.
Fraud is a common and popular term which we all might have heard in our daily lives. In simple terms, Fraud means an act done to deceive or to induce a person into a contract. It is also called fraudulent misrepresentation. The important ingredient in fraud is the intention of the person who makes false representation.
The Indian Contract Act 1872 defines fraud in section 17 as -"Fraud" means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agents, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract:
(1) the suggestion as a fact, of that which is not true, by one who does not 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 omission as the law specially declares to be fraudulent.
So, by the above definition of fraud, we come to know that fraud means that one party cheats the other by telling them to enter into a contract knowingly or without having belief in its truth or with the intent to deceive them. An act was done to deprive a person of money, property, or legal rights. The first subclause of the act deals with false representation made without belief in truth to cheat the other person to enter into the contract. But if the person is making false representation honestly, believing it to be true it will not result in fraud under this clause.
Subclause 2 states that the silence in every situation will not result in fraud and silence will result in misrepresentation. Mere silence as to facts likely is not a fraud. But silence regarding a material fact results in fraud where there is a duty to speak or where silence amounts to speech.
Subclause 3 deals with the promise made but it is not fulfilled or performed in the future. Subclause 4 mentions any other act done to deceive or cheat the other party.
Subclause 5 deals with any act declared fraudulent by law.
In fraud, the victim suffers loss as an effect of their dependence on a false statement
WHAT IS MISREPRESENTATION?
Misrepresentation is defined under section 18 of the Indian contract act.
In simple words, misrepresentation is a false statement, innocently made. i.e., the maker of the statement believes his statement to be true.
In both fraud as well as in misrepresentation, a false statement is made, but in fraud, its maker knows it to be false, but in misrepresentation, he believes it to be true.
Section 18 has (3) clauses within it, defining 3 forms of misrepresentation. These are
Section 18 (1) - Positive assertion of a fact which is not warranted by the information of the person making it i.e., making unwarranted statements. This happens when-
the maker of the statement relies on Hearsay, or on information from second-hand sources, a source that has been tampered with and hence is not accurate.
Case law –Howard Marine v Ogden – in this case, the defendants, Ogden, wished to hire 2 barges/boats from plaintiff H.M. Defendants then asked for the carrying capacity of those boats. The plaintiffs replied it was 1600 tons based on the figure quoted in Lloyd's register. The entry in Lloyd's register was however wrong. The real capacity was only 1055 tons. As a result of low carrying capacity, the operation was delayed. Ogden then refused to pay full price to H.M the plaintiff in turn filed a writ for outstanding hire. Ogden counterclaimed, saying H.M had misrepresented and claimed damages worth 6 lakh pounds. Here according to the court burden lay on the Representer to prove that – He had reasonable grounds to believe that the facts represented were true. In this case, H.M was also in possession of registration documents that showed the correct capacity. Here the eagerness to prefer Lloyd's register over Registration documents was not reasonable. Damages were payable for misrepresentation by H.M
Section 18(2) – has the following ingredients-