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Factors vitiating free consent | Law Optional Notes for UPSC PDF Download

Introduction

Every agreement can be considered a contract if it meets certain criteria: it must be formed with the free consent of the parties, involve individuals who are legally capable of entering into a contract, and pertain to a lawful consideration and object. This article focuses on the concept of free consent and explores the factors that can compromise the free consent in a contractual agreement.

"Free consent" is defined in Section 14 of the Indian Contract Act, 1872. In a contract, consent is considered "free" when it is not influenced or tainted by any of the following factors:

  • Coercion
  • Undue Influence
  • Fraud
  • Misrepresentation
  • Mistake

If consent in a contract is influenced by any of these elements, the contract can be voided or considered voidable.

Coercion (Section 15)

Coercion, as defined in Section 15, occurs when consent is obtained through the application of pressure using any of the following methods:

  • Committing or threatening to commit any act that is prohibited by the Indian Penal Code (IPC).
  • Unlawfully detaining or threatening to detain any person.

For instance, if 'A' threatens to commit suicide, an act forbidden by the IPC, unless 'B' agrees to enter into a contract, such a contract can be voided.

Effect of Coercion

If a contract is formed due to coercion, it can be annulled, and the parties involved are relieved from their obligations to fulfill the terms of the contract.

Undue Influence (Section 16)

Undue influence, as defined in Section 16, occurs when there is a relationship between the parties to a contract in which one party has the power to control or manipulate the decisions of the other party and uses that position to gain an unfair advantage.

So, who can exert this dominant influence?

  • Someone who has actual or perceived authority or holds a fiduciary relationship (a relationship of trust and confidence, such as that between a doctor and a patient or an advocate and a client).
  • When one of the parties is mentally or physically incapacitated due to factors like age, illness, or mental distress.

Effect of Undue Influence

  • If an agreement is the result of undue influence, the contract can be rendered void at the discretion of the party whose consent was manipulated in this way.
  • In such situations, the person in a dominant position must bear the burden of proving that the contract was not influenced by undue influence.
  • For instance, if 'A,' who is suffering from an illness, is coerced by 'B,' a medical practitioner, to pay an excessively high fee for their services, then 'B' is exerting undue influence on 'A.'

Fraud (Section 17)

Fraud, as defined in Section 17, refers to any action performed by an individual (or by an agent on their behalf) with the intention to deceive another person and induce them into entering a contract.
The following actions constitute fraud:

  • Making a false statement of fact, knowing it to be false, to persuade someone to believe it is true. For example, 'A' sells imitation jewelry to 'B,' claiming that its polish will last for ten years, even though 'A' knows this statement to be untrue.
  • Actively concealing a fact that one has knowledge or belief about. For instance, 'X' sells a motorcycle to 'Y,' stating it is in good condition, although 'X' is aware that it is not in good working condition.
  • Making a promise without any intention of fulfilling it. In the case of Delhi Development Authority v. Skipper Construction Co. Pvt. Ltd. (2000) 10 SCC 130, a builder took bookings for more than three times the available units of accommodation and collected money from customers. The court found the builder guilty of committing fraud because he knew he couldn't fulfill the contract.
  • Engaging in any other deceptive act. For example, 'A' persuades his wife to sign a document to mortgage two of her lands to clear his debt, but in reality, he mortgages four of her lands.
  • Any act or omission specifically designated as fraudulent by the law, such as certain transfers outlined in the Insolvency Act or Companies Act.

Effect of Fraud

A contract resulting from fraud is considered voidable. The deceived party has the right to annul the contract and seek damages from the other party.

However, if a person remains silent about a fact that could impact their willingness to enter into a contract, it is not considered fraud unless one of the following conditions is met:

  • It is the legal duty of the person who is keeping silent to disclose the information.
  • The person's silence is equivalent to making a statement. For example, if 'X' tells 'Y,' "If you agree, then I will assume the car is in good condition," and 'Y' remains silent, 'Y's silence is equivalent to agreeing to the statement.

Misrepresentation (Section 18)

Misrepresentation, as defined in Section 18, encompasses three aspects:

  • When a person makes a positive assertion or declaration that is not backed by accurate information, even if they believe it to be true. For instance, if 'A' wants to sell a bike and claims that it gets a mileage of 50km per liter, but 'A' never used the bike and is unaware that it actually gets 80km per liter.
  • Any breach of duty that benefits the person committing it by misleading the other party to their disadvantage. For example, if 'A' signs a deed without reading it, assuming it contains only formalities already settled between them, but the deed actually contains a release in favor of 'B'.
  • Causing another person to make a mistake, even if done innocently, about the subject matter of the contract.

However, if a person has the means to discover the truth with ordinary diligence, they cannot claim misrepresentation.

Effect of Misrepresentation

When consent has been obtained due to misrepresentation, the affected person has the right to seek damages and initiate a lawsuit to return the party to their original state.

Mistake (Section 20)

Where both the parties to the contract are in mistake as to the subject matter of fact which is essential to the contract, then such a contract is void.
However, a mere erroneous or incorrect opinion as to the value of the thing which is the part of the subject matter of the contract is not considered as a mistake.
If ‘A’ buys a bike thinking that it is of Rs. 1 Lakh and pays the same amount for it, however, it was only worth Rs. 70 thousand, the contract remains valid. ‘A’ cannot avoid the contract on the ground of mistake due to his own ignorance.

Following are the types of mistakes:

  • Mistake as to the subject matter of agreement. If at the time of the agreement, the parties were unaware that the subject matter ceases to exist, then such agreement is said to be void. For eg., ‘A’ agrees to buy ‘B’s house. As to the matter of fact, the house collapsed at the time of purchasing it and both the parties were unaware of it. The agreement is said to be void.
  • Mistake as to title or rights. Where the person is already the owner of the subject matter which the other party wishes to sell.
  • Mistake as to the different subject matters in mind of the parties. Where one party has one thing in mind and the other party has another thing, the agreement is void for want of true consent. For eg., In Tarsem Singh v Sukhminder Singh, (1998) 3 SCC 471 the buyer thought that the land was sold at per bigha rate and the seller thought that per kanal rate was applicable. The court had held that the agreement is not enforceable.
  • Mistake as to the subject matter which may relate to its substance, nature or quality. For eg., ‘A’ sells his farm stating that it yields 40 tonnes of crops, however, it turned out it yields only 20 tonnes. Such a contract is void.
  • Mistake as to the possibility of the contract. It could be a physical impossibility of legal impossibility. 
  • Physical impossibility: Where an agreement is made between the parties and it is found that the subject matter of the dispute is no longer available, or ceases to exist, then in such a case, it is considered that the agreement is physically impossible to perform and becomes void.
  • Legal impossibility: Where an agreement is made between the parties residing in different countries and eventually war arises between the said countries, which makes it impossible to perform the agreement.

Conclusion

Consent is the most critical part of the contract and must be handled with utmost care. A contract is voidable if it is made in the absence of a free will. So, in order to constitute a free consent, it should be kept in mind that the consent is not backed by coercion, undue influence, fraud, misrepresentation or mistake.

The document Factors vitiating free consent | Law Optional Notes for UPSC is a part of the UPSC Course Law Optional Notes for UPSC.
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