Table of Contents
CONSENT
It states that, “Two or more persons are said to consent when they agree upon the same thing in the same sense.”
Section 13 talks about the consensus ad idem i.e. meeting of minds of the parties.
Example: If you have two horses, one black and one white, and you want to sell the white horse, the other party should also agree to buy the same horse.
SECTION 14 – FREE CONSENT
Section 14 states that consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake.
COERCION
Section 15 of the Indian Contract Act, 1872 defines Coercion as:
“Coercion is the committing, or threatening to commit, any act forbidden by the Indian Penal Code (45 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.”
It simply means that coercion is said to be there where the consent of a person has been caused either by:
1. Acts Forbidden by IPC
If a person commits or threatens to commit an act that is prohibited under the Indian Penal Code to force someone into an agreement, the consent obtained is not free—it is deemed as obtained by coercion.
Landmark Case: Chikkan Ammiraju vs Chikkam Sheshamma [(1917) 32 MLJ 494]
- In this case a man threatened to commit suicide if his wife and son did not sign a release deed in favour of his brother.
- The wife and son, under pressure, executed the deed.
- Held: Threat to commit suicide is an act forbidden by the IPC. Hence, the consent was not free, and the deed was declared voidable by the court.
2. Unlawful Detaining of Property
Coercion is also present when someone unlawfully detains or threatens to detain property to force another person into an agreement.
💡 Example: An outgoing agent refuses to hand over account books to the new agent unless the principal signs a release deed in his favour. This is considered coercion because property is being wrongfully withheld to influence consent.
In both cases, the key element is the presence of a wrongful threat or action intended to compel someone to enter into a contract.
UNDUE INFLUENCE
Section 16 of the Indian Contract Act, 1872 defines the concept of Undue Influence.
🔹 Section 16(1): Definition
A contract is said to be induced by undue influence when the relationship between the parties is such that one is in a position to dominate the will of the other and uses that position to obtain an unfair advantage.
“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.”
🔹 Section 16(2): Situations That Indicate Undue Influence
The law outlines specific situations where undue influence is presumed to exist:
- (a) Real or Apparent Authority: When one party holds authority over the other. Example: An employer over an employee, or a police officer over an accused.
- (b) Fiduciary Relationship: Relationships based on trust and confidence. Examples: Parent and child, husband and wife, master and servant.
- (c) Mental or Physical Distress: When a person is temporarily or permanently affected due to age, illness, or mental distress.
Case Law: Philip Lukka v. Franciscan Association (AIR 1987 Ker 204)
The plaintiff, a lifelong invalid, gifted his only property to a priest based on promises of care. The deed was executed far from his home and under suspicious circumstances. In this case it was held that the gift was vitiated by undue influence and fraud.
Case Law: Merci Celine D’souza v. Renie Fernandez
A mentally infirm plaintiff, wholly dependent on the defendants, gifted them his property. In this case it was held that the deed was unconscionable and influenced by undue advantage, and thus not valid.
Section 16(3): Burden of Proof
Where a transaction appears to be unconscionable or suspicious, the burden of proving that it was not induced by undue influence lies on the person who was in a dominant position.
“If a contract seems so one-sided that no rational person would normally enter into it, the dominant party must prove it was fair and free from undue influence.”
💡 In essence, undue influence protects individuals from being exploited in unequal or vulnerable relationships, ensuring consent is genuine and free.
FRAUD
Section 17 of the Indian Contract Act, 1872 defines fraud as:
“Fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract.”
📌 Effect: A contract induced by fraud is voidable at the option of the party whose consent was obtained through fraud.
ESSENTIAL ELEMENTS OF FRAUD
- There must be a false statement.
- The statement must be made with wrongful intention to deceive.
🔹 Section 17(1): False Statement of Fact
“The suggestion, as a fact, of that which is not true, by one who does not believe it to be true.”
Case: Edington vs Fitzmaurice [(1885) 29 Ch D 459] – In this case a company in debt issued debentures claiming it was for development. It was held this was fraud as the intention was to repay liabilities, not for the development of company.
🔹 Section 17(2): Active Concealment of Facts
When a person intentionally hides a fact that he knows to be true, it amounts to fraud.
Example: B finds a vein of ore on A’s estate and conceals this while buying the land at a low price. This is fraud.
🔹 Section 17(3): Promise Without Intention to Perform
Making a promise with no intention of performing it amounts to fraud.
🔹 Section 17(4): Any Act Fitted to Deceive
This is a residuary clause to include all the deceptive acts not covered in the previous clauses.
🔹 Section 17(5): Acts Declared Fraudulent by Law
Acts or omissions specifically declared to be fraudulent under any law, like Section 55 of the Transfer of Property Act, 1882.
Explanation: Mere Silence ≠ Fraud
Mere silence, even if it affects the willingness of a party to contract, is not fraud unless:
- It is the duty to speak.
- Silence is equivalent to speech.
EXCEPTIONS: When Silence Becomes Fraud
1️⃣ Duty to Speak (Contracts Uberrima Fides)
Contracts based on utmost good faith require full disclosure. Such contract includes insurance contracts.
Case: P. Sarojam vs L.I.C. of India – In this case the insured person hid his heart condition and later died. It was held that LIC will not be held liable.
2️⃣ Silence Equivalent to Speech
here are certain situations where silence is more or less equal to speech. Example: A says to B, “If you do not deny it, I will assume the horse is sound.” B stays silent. Here, silence = speech = fraud.
Case: Shri Krishan vs Kurukshetra University (AIR 1976 SC 376) – Shri Krishan, a candidate for the LLB Part I examination of the university did not complete the prescribed number of lectures which could make him eligible for appearing in the examination. He, however, filled the examination form for appearing in the examination without mentioning the fact that his attendance was short. The university wanted to cancel his candidature. But it was held that it was on the part of department to check whether his attendance was short or not and not on him. So, in this case his silence was not equivalent to speech.
💡 In summary, fraud occurs when one party intentionally deceives another to enter into a contract. But not every silence is fraud—unless the law or circumstances demand disclosure.
MISREPRESENTATION
Section 18 of the Indian Contract Act, 1872 defines misrepresentation and covers situations where a party, without any intention to deceive, causes another to enter into a contract based on false information.
✨ Key Point: Unlike fraud, misrepresentation involves no intention to deceive — but still misleads the other party.
ESSENTIAL ELEMENTS OF MISREPRESENTATION
🔹 Section 18(1): Positive but Innocent Assertion
“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.”
This clause refers to a false statement made innocently, where the person believes it to be true but has no solid grounds for that belief.
🔹 Section 18(2): Breach of Duty Without Intention to Deceive
“Any breach of duty which, without an intent to deceive, gains an advantage of the person committing it, by misleading another to his prejudice.”
This applies where a party gains an advantage due to a breach of duty, but without deliberate deception. Still, the other party is misled to their detriment.
🔹 Section 18(3): Innocent Misunderstanding About the Subject Matter
“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.”
If a party, without intending, causes the other to make a mistake regarding the subject matter of the contract, this constitutes misrepresentation.
LEADING CASE: Derry vs Peek [(1889) LR 14 App Cas 337]
Facts: The directors of a company stated in their prospectus that they were authorized to run tramways using steam power. However, approval from the Board of Trade was still pending. They honestly believed they would get the permission.
Outcome: The Board of Trade refused permission, and a shareholder sued for fraud. The court held:
- There was no fraudulent intention.
- But there was a misrepresentation as the statement turned out to be untrue, albeit innocently made.
🟰 Verdict: A false belief, even if made honestly, can vitiate consent and render the contract voidable.
💡 In simple terms, misrepresentation occurs when someone says something untrue but genuinely believes it to be true — yet it still causes the other party to enter into the contract based on a mistaken belief.
MISTAKE
The Indian Contract Act recognizes that consent to a contract must be free and informed. If both or either party is under a mistake, the agreement may become void or voidable depending on the nature of the mistake. Sections 20, 21, and 22 deal with such mistakes.
SECTION 20: MISTAKE OF FACT BY BOTH PARTIES
“Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.”
✅ Essentials of Section 20
- ✔️ Both parties must be under a mistake.
- ✔️ The mistake must be about a matter of fact.
- ✔️ The fact must be essential to the agreement.
Case- Galloway vs Galloway[(1914) 30 TLR 531] – In this case a man and woman signed a separation deed believing they were legally married. In reality, they were not married. It was held that the deed was void because the mistake of fact (marriage) was essential to the agreement.
Explanation: An erroneous opinion about the value of the subject matter is not considered a “mistake of fact.”
Example: A sells his house to B for ₹9 lakhs. Later, both discover the market value was ₹15 lakhs. The contract remains valid, as the mistake was about value, not an essential fact.
SECTION 21: MISTAKE OF LAW
“A contract is not voidable because it was caused by a mistake as to any law in force in India; but a mistake as to a law not in force in India has the same effect as a mistake of fact.”
📌 Key Takeaways:
- ⚖️ Mistake of Indian law ➤ No relief
- 🌍 Mistake of foreign law ➤ Treated like a mistake of fact
SECTION 22: UNILATERAL MISTAKE
“A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact.”
Only a mutual mistake of fact can make a contract void under Section 20. If only one party is mistaken, the contract remains valid.
Case: Ayekam Angahal Singh vs. Union of India (AIR 1970 Manipur 16)- In this case plaintiff won fishery rights in an auction for ₹40,000. He believed it was for 3 years combined, but it was ₹40,000 per year. It was held that since the mistake was unilateral, the contract was not voidable.
🔍 In summary, mutual mistake of essential fact voids a contract (Section 20), mistake of Indian law gives no relief (Section 21), and unilateral mistake doesn’t void a contract (Section 22).
References:
- Law of Contract-I by R.K. Bangia
- Indian Contract Act, 1872- Bare Act
