Free Consent under Indian Contract Act | Law Optional Notes for UPSC PDF Download

Section 10 of the Indian Contract Act

Section 10 of the Indian Contract Act lays down the essential conditions for an agreement to be considered a contract:

• Free Consent: The agreement must be entered into by the free consent of the parties involved. This implies that the consent must not be obtained under coercion, undue influence, fraud, misrepresentation, or mistake.
• Competence of Parties: The parties involved in the agreement must be competent to contract, meaning they must be of sound mind and legal age.
• Lawful Consideration and Object: The agreement must be made for a lawful consideration and with a lawful object. It should not involve any illegal activities or objectives.
• Not expressly declared void: The agreement must not have been expressly declared as void by law.

Additionally, for an agreement to be considered a contract, there must be consensus ad idem or a meeting of the minds. This means that both parties must agree on the same thing in the same sense, as evidenced by offer and acceptance.

To ensure that both parties have entered into the agreement willingly, the concept of free consent is crucial. Free consent implies that the consent of the parties is not obtained through any form of coercion, undue influence, fraud, misrepresentation, or mistake. This ensures that the agreement is entered into voluntarily and without any external pressure or manipulation.

Free Consent under Indian Contract Act

• Defined in Section 13 as agreement in the same sense by willing parties.
• Criteria for Free Consent under Section 14:
  • Coercion
  • Undue Influence
  • Fraud
  • Misrepresentation
  • Mistake
• Example: Agreement to sell a car with differing intentions leads to lack of consensus ad idem.

Element vitiating free consent under Indian Contract Act

1. Coercion

Under Section 15 of the Indian Contract Act, coercion refers to forcing or compelling someone to enter into a contract without their consent. This includes the use of threats to obtain consent, which is not considered free consent under the Act.
Coercion is further elaborated as:

• Executing or threatening to perform any act prohibited by law under the Indian Penal Code (IPC).
• Illegally impeding or threatening to detain any property with the intention of causing a person to enter into a contract.
• Contracts where consent is obtained by coercion are considered voidable. This means that the affected party has the option to either affirm the contract or void it. Additionally, any consideration provided, such as money paid or goods delivered, under coercion must be reimbursed or restored once the contract is declared void.

In cases of coercion, the burden of proof lies with the aggrieved party. Therefore, the affected party must prove that coercion occurred and that their consent was not freely obtained in order to seek relief.

2. Undue Influence

Section 16 of the Indian Contract Act, 1872 addresses the concept of undue influence. It states that when one party to a contract is in a position to dominate the will of the other party and uses that position to obtain unfair advantage, it constitutes undue influence.
The section outlines various scenarios in which undue influence may occur:

• When one person holds real or apparent authority over another, or when a fiduciary relationship exists between them.
• When a person enters into a contract with someone whose mental capacity is affected by factors such as age, illness, or distress. The impairment of the mind can be temporary or permanent.

Undue influence occurs when the dominant party intentionally seeks to benefit themselves at the expense of the other party. If consent is obtained under undue influence, the contract is voidable at the option of the aggrieved party. The burden of proof lies with the dominant party to demonstrate the absence of undue influence. It's important to note that if the influence is used for the benefit of the other party, it does not constitute undue influence.

3. Fraud

Section 17 of the Indian Contract Act defines fraud as a deceitful action committed by a party to a contract, or in collusion with them, or by their agent, with the intention to deceive another party or their agent into entering the contract.

Fraud, as outlined in Section 17, occurs when one party induces another to enter into an agreement by making statements that are:

• Misrepresenting a fact that is untrue, and the party making the statement does not believe it to be true.
• Actively concealing facts that are relevant to the agreement.
• Making a promise without any intention of fulfilling it.
• Any other act intended to deceive.

It's important to note that fraud typically results in actual loss to the aggrieved party. Additionally, the statements made must pertain to matters of fact rather than mere opinion in order to constitute fraud.

4. Misrepresentation

Under Section 18 of the Indian Contract Act, misrepresentation occurs when one party makes incorrect, false, or inaccurate representations to induce another party to enter into a contract. The key difference between fraud and misrepresentation lies in intention: misrepresentation is typically innocent and unintentional.

Types of misrepresentation include:

• Making a positive statement believing it to be true.
• Breaching an obligation to gain an advantage by misleading another party, without intending to deceive.
• Inducing a mistake in the other party regarding the subject matter of the contract, but doing so innocently and not deliberately.

A mistake is an erroneous belief that is honest in nature, leading to a misunderstanding between the parties involved. The law distinguishes between two types of mistakes:

Mistake of law:

• Under the Indian Contract Act, mistaking the law, whether it's Indian law or foreign law, is a significant aspect. If a mistake pertains to Indian law, it is not excusable, and ignorance of the law is not a valid defense. This means that a party cannot claim unawareness of the law as a basis for relief, and such ignorance doesn't absolve them of their contractual obligations. This provision also encompasses the wrongful interpretation of any legal provisions under Indian law.
• However, when it comes to ignorance of foreign law, there is some leniency. Parties involved in a contract are not expected to be knowledgeable about foreign laws. Therefore, a mistake regarding foreign law is treated differently. It is considered a mistake of fact under Indian law, meaning that the mistaken belief about foreign law is viewed as a factual error rather than a legal one. This distinction allows for a more flexible approach in cases involving foreign legal provisions.

Mistake of fact:

This type of mistake occurs when both parties misunderstand each other's terms and conditions, leading to confusion or disagreement. It can arise due to ignorance, a gap in understanding, or a misconception. Importantly, this mistake is innocent and does not involve any intention to deceive.
Mistakes of fact can be categorized into two types:

• Unilateral Mistake: This type of mistake is caused by one party to the contract. One party holds a mistaken belief about a fact relevant to the contract, which leads to misunderstanding or confusion.
• Bilateral Mistake: In this scenario, the mistake is made by both parties to the contract. Both parties hold mistaken beliefs about certain facts essential to the contract, resulting in mutual misunderstanding or confusion.

These mistakes of fact can occur due to various reasons, but they are characterized by the absence of deliberate intent to deceive on the part of either party.