Law of

Contract
Free Consent
Guided By Prof. Eqbal
Hussain

Haider Zoya

ACKNOWLEDGMENT
I would like to express my special thanks of gratitude to my teacher Prof. Eqbal
Hussain, who gave me the golden opportunity to do this wonderful project on the
topic, which also helped me in doing a lot of Research and I came to know about
so many new things. I am really thankful to them. The resources of my college
library as well as the internet have been extremely contributory in the completion
of my project
Secondly, I would also like to thank my parents and friends who helped me a lot in
finishing this project within the limited time.
I am making this project not only for marks but to also increase my knowledge.
THANKS AGAIN TO ALL WHO HELPED ME.

Free Consent

One of the essentials of a valid contract mentioned in Section 10

is that the parties should enter into contract with free consent.
According to Section 14, Consent is said to be free when it is not
caused by
1. coercion, as defined in Section 15, or
2. undue influence, as defined in section16, or
3. fraud, as defined in Section 17, or
4. misrepresentation as defined in Section 18, or
5. Mistake, subject to the provisions of Section 20, 21 and 22.
Consent is said to be caused when it would not have been
given but for the existence of such coercion, undue influence,
fraud, misrepresentation or mistake.
If the consent of one of the parties is not free consent, i.e.,
it has been caused by one or other of the above stated factors the
contract is not a valid one. When consent to an agreement is
caused by fraud, coercion, misrepresentation or undue influence,
the agreement is a contract voidable at the option of the party
whose consent was so caused. If, however, the consent is
caused by mistake the agreement is void.

Coercion

According to Section 15, Coercion is the committing, or

threatening to commit, any act forbidden by the Indian Penal
Code, 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.
Coercion is said to be there when the consent of a person
has been caused either by
1. committing, or threatening to commit any act forbidden by
the Indian Penal Code, or by
2. unlawful detaining, or threatening to detain any property, to
the prejudice of any person whatever.

Act forbidden by the Indian Penal Code

It has been noted that if a person commits or threatens to
commit an act forbidden by the Indian Penal Code with a view
to obtain the consent of the other person to some agreement, the
consent in such case is deemed to have been obtained by
coercion. For instance, A threatens to shoot B if B does not
agree to sell his property to A at a stated price, Bs consent in
this case has been obtained by coercion.
For coercion to be there it is not necessary that the Indian
Penal Code should be applicable at the place where the consent
has been so caused. Explanation to section 15 makes it clear

that to constitute coercion, it is immaterial whether the Indian

Penal Code is or is not in force in the place where the coercion is
employed. The following illustration would explain the point :
A, on board an English ship on the high seas, causes B to
enter into an agreement by act amounting to criminal
intimidation under the Indian Penal Code. A afterwards sues B
for breach of Contract at Calcutta. A has employed coercion,
although his act is not an offence by the law of England, and
although section 506 of the Indian Penal Code was not in force
at the time when, or at the place where, the act was done.
In Ranganayakamma Vs. Alwar Setti (1889) the
question before the Madras High Court was regarding the
validity of the adoption of a boy by a widow, aged 13 years.
On the death of her husband, the husbands dead body was
not allowed to be removed from her house by the relatives
of the adopted boy until she adopted the boy. It was held
that the adoption was not binding on the widow.
In Chikkam Ammiraju Vs. Chikkam Seshama (1918)
the question before the Madras High Court was that
whether coercion could be caused by a threat to commit
suicide. In this case a Hindu by a threat of suicide induced
his wife and son to execute a release deed in favour of his
brother in respect of certain properties claimed as their own
by the wife and the son. The question before the court was
whether a threat to commit suicide could be considered to

be an act forbidden by the Indian Penal Code. It was held

by Wallis, C.J. and Seshagiri Ayyar, J. that a threat to
commit suicide amounted to coercion within the meaning
of Section 15 of the Indian Contract Act and therefore the
release deed was voidable.

ii.

Unlawful detaining of property

According to Section 15 coercion could also be caused by

unlawful detaining, or threatening to detain, any property, to the
prejudice of any person whatever, with the intention of causing
any per to enter into an agreement. For example, if an outgoing
agent refuses to handover the accounts books to the new agent
until the principal executes release in his favour, it is coercion. (
Muthiah Chettiar Vs. Karupan (1927) If the detention of
property is not unlawful there is no coercion. Thus, if a
mortgagee refuses to convey the equity of redemption except on
the terms dictated by him, there is nothing unlawful in it and,
therefore, no coercion is caused in this case. (Bengal Stone Co.
Ltd. Vs. Joseph Hyam (1918)
To the prejudice of a person
Section 15 requires that there is committing or threatening
to commit, any act forbidden by the Indian Penal Code, or the
unlawful detaining, or threatening to detain, any property, to the
prejudice of any person whatever, with an intention of any
person to enter into an agreement.

It means that the act causing coercion should not

necessarily be directed against the contracting party, it is
enough that the act is to the prejudice of any person whatever,
and with the intention of any person to enter into an agreement.
If, for example, A unlawfully detains Bs friend C, in order to
coerce B to enter into agreement, the case would be covered
within this section.
Threat to strike is no coercion
In Workmen of Appin Tea Estate Vs. Industrial Tribunal
(1966) the demand of the workers for bonus was accepted after
a threat of strike. The question which had arisen was, whether
such a decision between the Union of the workers and the Indian
Tea Association could be declared void on the ground that there
was coercion. It was held that because of the doctrine of
collective bargaining under the Industrial Dispute Act the
demand of the workers could be backed by a threat of strike.
Such a threat was neither a threat to commit an offence under
the Indian Penal Code, nor was it unlawful detaining or
threatening to detain any property and hence it did not amount to
coercion, and as such the agreement was valid.
Statutory Compulsion is no coercion
When a Statue requires a contract to be entered into the
consent in such a case is not deemed to be caused by
coercion, undue influence, fraud, misrepresentation or
mistake.
In Andhra Sugars Ltd. Vs. State of A.P.

(1968) if any cane grower offered to sell his sugarcane to a

factory in a certain zone, the factory was bound to accept
the offer under the Andhra Pradesh Sugarcane (Regulation
of Supply and Purchase) Act, 1961, and accordingly the
agreement was entered into. It was held that in such a case
even though there was a legal compulsion for the factory to
make the agreement, the agreement could not be said to be
entered into by lack of free consent, and there was no
coercion either.

Duress under English law

Under common law duress consists in actual violence or
threat of violence to a person. It only includes fear of loss to
life or bodily harm including imprisonment, but not a threat of
damage to goods. The threat must be to do something illegal,
i.e., to commit a tort or a crime. The duress must be directed
against a party to the contract, or his wife, child, parent or other
near relative, and also caused by the party to the contract, or
within his knowledge. It has been noted above that the common
law recognises only a threat to a mans person, and not to his
goods to constitute duress. It may be noted that Indian law also
recognises an action for the recovery of money paid or goods
delivered under coercion, through the provision contained in
section 72,Indian Contract Act. The provision is as under :

 A person to whom money has been paid. Or anything

delivered, by mistake or undue coercion, must repay or return it

For example, a railway company refuses to deliver up

certain goods to the consignee, except upon the payment of an
illegal charge for carriage. The consignee pays the sum charged
in order to obtain the goods. He is entitled to recover so much
of the charge as was illegally excessive.

Undue influence
If the consent of a party to the contract has been obtained
by undue influence the consent is not free consent which is
needed for the validity of a contract and if the consent has
been caused by undue influence, the contract is voidable at
the option of the party whose consent had been so obtained.
Section 16 defines undue influence as under :
16. Undue influence defined.(1) 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 a position to obtain an unfair advantage over
the other.
(2) In particular and without prejudice to the generality of the
foregoing principle, a 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 ;

or
where he stands in a fiduciary relation to the other ; or
(b) where he makes a contract with a person whose mental
capacity is temporarily or permanently affected by reason of
age, illness, or mental or bodily distress.
(3) Where a person who is in a position to dominate the
will of another, enters into contract with him, and the
transaction appears, on the face of it or on the evidence
adduced, to be unconscionable, the burden of proving that
such contract was not induced by undue influence shall lie
upon the person in a position to dominate the will of the
other.
Nothing in this sub-section shall affect the provisions of
Section 111 of the Indian Evidence Act, 1872.
Explaining the nature of the provisions contained in section
16, Indian Contract Act and the adoption of English law in
India, our Supreme Court has observed in the case of Ladli
Parshad Vs. Karnal Distillery Co., (1963)
The doctrine of undue influence under the common law
was evolved by the courts in England for granting
protection against transactions procured by exercise of
insidious forms of influence spiritual and temporal. The
doctrine applies to acts of bounty as well as to other

transactions in which one party by exercising his position

of dominance obtains an unfair advantage over another.
The Indian enactment is founded substantially on the rules
of English Common law. The first Sub-section of Section
16 lays down the principle in general terms. By subsection (2) a presumption arises that a person shall be
deemed to be in a position to dominate the will of another if
the conditions set out therein are fulfilled. Sub-section (3)
lays down the conditions for raising a rebut table
presumption that a transaction is procured by the exercise
of undue influence. The reason for the rule in the third subsection is that a person who has obtained an advantage over
another by dominating his will, may also remain in a
position to suppress the requisite evidence in support of the
plea of undue influence.
Essentials of undue influence
In order to constitute undue influence it is necessary that :
1) 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.
2) such a person uses his dominant position to obtain an unfair
advantage over the other.
It is manifest that both the conditions have ordinarily to be
established by the person seeking to avoid the transaction : he
has to prove that the other party to the transaction was in a

position to dominate his will and that the other party had
obtained an unfair advantage by using that position.
Person in dominant position and obtaining of unfair
advantage
Sometimes one of the parties to the contract may be in
such a dominant position in relation to the other that he has
peculiar opportunity of exercising that position to the prejudice
of the other party. If the dominant party takes an undue
advantage of his position in procuring a contract to the detriment
of the other contracting party, the contract is voidable at the
option of the party whose will is so dominated.
In the following cases a person is deemed to be
dominate the will of another

in a position to

(1) where he holds a real or apparent authority over the other,

or,
(2) where he stands in a fiduciary relation to
or,

the other,

(3) where he makes a contract with a person whose mental

capacity is temporarily or
permanently affected by reason of
age, illness, or mental or bodily distress.

Fraud
When the consent of a party to the contract has been obtained by
fraud, the consent is not free consent, which is necessary for the
formation of a valid contract. In such a case the contract is
voidable at the option of the party whose consent has been so
obtained. Fraud or deceit is also9 tort, for which an action for
damages can also lie. Section 17 defines fraud as follows :
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--(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 :
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.
Explanation :-- Mere silence as to facts likely to affect the
willingness of a person to enter into a contract is not fraud,
unless the circumstances of the case are such that, regard
being had to them, it is the duty of the person keeping

silence to speak, or unless his silence is, in itself, equivalent

to speech.
The essentials of fraud are :
1. There should be a false statement of fact by a person who
himself does not believe the statement to be true.
2. The statement should be made with a wrongful intention of
deceiving another party thereto and inducing him to enter
into the contract on that basis.
1. False statement of fact.
In order to constitute fraud it is necessary that there should
be a statement of fact which is not true. Mere expression of
opinion is not enough to constitute fraud. Thus, if while taking a
policy of marine insurance, the insured communicates to the
insurers a letter from the master of his vessel mentioning that in
the masters opinion the anchorage of a place of destination of
the vessel is safe and good, there is only an expression of
opinion and not a statement of fact, which could constitute
fraud.

Misrepresentation
When a false statement is made with the knowledge that it
is false and also with the intention to deceive the other
party and make him to enter into a contract on that basis, it
is known as fraud. But when the person making a false
statement believes the statement to be true and does not
intend to mislead the other party to the contract it is known
as Misrepresentation. When the consent of a party to a
contract has been obtained by misrepresentation it is not
free consent and the contract is voidable at his option.
Section 18 defines misrepresentation as under :
Misrepresentation means And includes
(1) 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 :
(2) any breach of duty which, without an intention to deceive,
gains an advantage to the person committing it, or any one
claiming under him, by misleading another to his prejudice or to
the prejudice of any one claiming under him ;
(3) 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.
Positive assertion, i.e. an explicit statement, of fact by a
person of that which is not true, but he believes it to be true

amounts to misrepresentation. There should be a false

statement made innocently, i.e., without any intention to
deceive.
When there is a breach of duty whereby the person making
a false statement gains some advantage at the cost of the
other party, and the statement though false is made without
an intention to deceive, it also amounts to
misrepresentation. For example, Section 57, Indian
Easement Act, 1882, lays down that the grantor of a licence
i8s bound to disclose to the licensee any defect, which is
likely to be dangerous to the person or property of the
licensee, of which the grantor is aware but the licensee is
not. Omission to make such a disclosure, if it is without
any intention to deceive, would amount to
misrepresentation.
If one party, acting innocently, causes another party to
make a mistake as to the substance of the thing which is the
subject of the agreement, there is said to be
misrepresentation.

In case of misrepresentation the person making the

statement is innocent and he makes the statement without
any intention to deceive the other party. His statement is
false although he himself believes that the same is true. It
is known as innocent misrepresentation as against fraud,
where the person making the false statement knows that

the same is false but makes the same intentionally to

deceive the other party and make him enter into an
agreement which he would not have done otherwise. For
instance, A sells his horse to B which is unsound but A
himself does not know about this fact. He tells B that the
horse is sound. There is misrepresentation.

Mistake
When the consent of the parties is caused by mistake, it is
not the free consent which is needed for the validity of a
contract. One, or both, of the parties may be working under
some misunderstanding or misapprehension of some fact
relating to the agreement. If such a misunderstanding or
misapprehension had not been there, probably they would
not have entered into the agreement. Such contracts are
said to be have been caused by mistake.
Mistake may work in two ways :
1. Mistake in the mind of the parties is such that there is no
genuine agreement at all. They may be no consensus ad
idem. i.e. the meeting of the two minds. The offer and
acceptance do not coincide and thus no genuine agreement
is constituted between the parties.
2. There may be a genuine agreement, but there may be
mistake as to a matter of fact relating to that agreement.

For a valid contract both the parties should have given their
consent and the consent should be free also. According to
section 13 :
Two or more persons are said to consent when they agree
upon the same thing in the same sense.
Sometimes even such a consent, where two or more
persons agree to the same thing in the same sense, may not be
there. In other words, there may be absence of meeting of the
minds of the parties, or there may be no consensus ad idem. In
such case there is no contract which can be enforced
In Raffles Vs. Wichelhaus (1864) the buyer and the seller
entered ito an agreement under which the seller was to supply a
cargo of cotton to arrive ex peerless from Bombay. There
were two ships of the same name. i.e., Peerless, and both were
to sail from Bombay, one in October and the other in December.
The buyer in mind Peerless sailing in October, whereas the seller
thought of the ship sailing in December. The seller dispatched
cotton by December ship but the buyer refused to accept the
same. In this case the offer and acceptance did not coincide and
there was no contract and, therefore, it was held that the buyer
was entitled to refuse to take delivery.

Section 20 deals with such mistake. It provides :

 20.
Agreement void where both parties are under
mistake as to matter of fact.-- Where both the parties to
an agreement are under a mistake as to a matter of fact
essential to the agreement is not to be deemed a mistake as
to a matter of fact.
Illustration
(a) A agrees to sell to B a specific cargo of goods supposed to
be on its way from England to Bombay. It turns out that, before
the day of the bargain, the ship conveying the cargo had been
cast away, and the goods lost. Neither party was aware of these
facts. The agreement is void.
(b) A agrees to buy from B a certain horse. It turns out that the
horse was dead at the time of the bargain, though neither party
was aware of the fact. The agreement is void
A being entitled to an estate for the life of B , agrees to
sell it to C . B was dead at the time of the agreement, but both
the parties were ignorant of the fact. The agreement is void.
When the type of mistake contemplated is section 20 is
present in an agreement, the agreement is void. Section 20
requires that :
1. Both the parties to the contract should be under a mistake
and
2. Mistake should as regards a matter of fact.

3. The fact regarding which the mistake is made should be

essential to the agreement.