Free Consent under Indian Contract Act, 1872

Free consent is an essential element for a valid contract. Under the

Indian Contract Act, 1872, an agreement becomes a contract only if it
is made with the free consent of the parties involved.
Section 10 of the Indian Contract Act, 1872: Essentials of a Valid
Contract
Essentials of a Valid Contract
1. Agreement:
o A contract begins with an agreement, which is formed
when one party makes an offer and the other accepts it.
2. Free Consent:
o Consent of the parties involved must be free from:
 Coercion,
 Undue influence,
 Fraud,
 Misrepresentation, and
 Mistake.
o If consent is affected by any of these factors, the contract
may become voidable or void.
3. Competency of Parties:
o Parties entering into the contract must be competent,
meaning:
 They must have attained the age of majority.
 They must be of sound mind.
 They must not be disqualified by any law to which
they are subject.
4. Lawful Consideration:
 o The consideration for the contract must be something of
value and must not be:
 Forbidden by law,
 Fraudulent,
 Involves or implies injury to a person or property,
 Immoral, or
 Opposed to public policy.
5. Lawful Object:
o The purpose or object of the contract must be lawful and
should not:
 Violate any legal provisions,
 Involve criminal acts,
 Be immoral or opposed to public policy.
6. Not Expressly Declared Void:
o The agreement must not fall under categories expressly
declared void by the Indian Contract Act, such as:
 Agreements in restraint of trade,
 Agreements in restraint of marriage,
 Agreements with uncertain terms, and
 Wagering agreements.
Section 13: Definition of Consent
“Two or more persons are said to consent when they agree upon the
same thing in the same sense.”
 Consent refers to a meeting of minds or consensus ad idem,
meaning both parties must understand the terms and the subject
matter of the contract in the same way.
Section 14: Free Consent
“Consent is said to be free when it is not caused by:
1. Coercion (Section 15),
2. Undue influence (Section 16),
3. Fraud (Section 17),
4. Misrepresentation (Section 18), or
5. Mistake (Section 20, 21, and 22).”
If consent is affected by any of the above factors, it is not considered
free, making the contract voidable or void.

Elements of Free Consent

1. Coercion (Section 15)
o Definition: Coercion means committing or threatening to
commit an unlawful act or detaining property to compel a
person to enter into a contract.
o Example:
 Threatening to harm someone unless they sign a
contract.
o Case Law: Chikham Amiraju v. Chikham Seshamma
(1911):
 A threat of suicide was held to constitute coercion,
rendering the contract voidable.
2. Undue Influence (Section 16)
o Definition: Undue influence arises when one party uses
their position of power over the other to obtain an unfair
advantage.
o Key Elements:
  A dominant position (e.g., relationships like parent-
child, doctor-patient).
 Unfair advantage is obtained.
o Case Law: Mannu Singh v. Umadat Pande (1890):
 A religious adviser induced a devotee to transfer
property. The court held that undue influence vitiated
the contract.
3. Fraud (Section 17)
o Definition: Fraud includes any act done with the intent to
deceive or induce another party to enter into a contract.
o Examples:
 Concealing material facts.
 Making false statements knowingly.
o Case Law: Derry v. Peek (1889):
 The court held that fraud requires an intention to
deceive.
o Indian Case: Cheatam Veerayya v. Sriramulu (1954):
 Concealment of facts about property was considered
fraud.
4. Misrepresentation (Section 18)
o Definition: Misrepresentation involves an innocent or
negligent false statement of material fact, leading the other
party to enter the contract.
o Example:
 Selling land as fertile when it is not, without
knowledge of its condition.
o Case Law: Bisset v. Wilkinson (1927):
  A seller's statement about the capacity of sheep
farming was considered an opinion, not
misrepresentation.
5. Mistake (Sections 20–22)
o Definition: A mistake occurs when both or one of the
parties act under a false belief about a fact or law.
o Types:
 Mistake of Fact (Section 20):
 Mutual mistake: Both parties misunderstand the
same fact; the contract is void.
 Case Law: Raffles v. Wichelhaus (1864):
 Confusion over the name of a ship led to
a void contract.
 Mistake of Law (Section 21):
 Ignorance of Indian law is not excusable, but a
mistake about foreign law may void a contract.

Effect of Lack of Free Consent

1. Voidable Contracts:
o A contract induced by coercion, undue influence, fraud, or
misrepresentation is voidable at the option of the
aggrieved party (Section 19).
2. Void Contracts:
o Contracts based on mutual mistake of fact are void
(Section 20).
3. Restitution:
o If the contract is voidable and rescinded, benefits obtained
under it must be restored (Section 64).
Case Laws Illustrating Free Consent
1. Ranganayakamma v. Alwar Setti (1889):
o A widow was forced to adopt under threat of withholding
her deceased husband’s body. The contract was voidable
due to coercion.
2. Lloyd v. Grace, Smith & Co. (1912):
o A managing clerk defrauded a client by abusing their trust.
The firm was held liable.
3. Allcard v. Skinner (1887):
o A nun gifted property to her superior under undue
influence. The gift was set aside.
4. Kalyani Bhasker v. M.S. Srinivasan (2009):
o Misrepresentation about repayment terms in a hire-
purchase agreement led to the contract being declared
voidable.
Unlawful Consideration and Object Under Indian Contract Act,
1872
For a contract to be valid, it must have a lawful consideration and a
lawful object. If either is unlawful, the contract becomes void. This
principle is outlined under Sections 23 and 24 of the Indian
Contract Act, 1872.
Section 23: What Considerations and Objects are Lawful
"The consideration or object of an agreement is lawful unless:
1. It is forbidden by law.
2. It defeats the provisions of any law.
3. It is fraudulent.
4. It involves or implies injury to a person or property.
5. It is immoral.
6. It is opposed to public policy."
If the consideration or object of an agreement falls under any of these
categories, the agreement is void.

Section 24: Agreements Void if Considerations and Objects are

Partly Unlawful
"If any part of a single consideration for one or more objects, or any
one of several considerations for a single object, is unlawful, the
agreement is void."

Key Components of Unlawful Consideration and Object

1. Forbidden by Law:
o When an act is prohibited by statutory provisions.
o Example: A contract for smuggling goods.
 2. Defeats the Provisions of Any Law:
o When the object or consideration violates the intention or
purpose of any law.
o Example: An agreement to bypass tax regulations.
3. Fraudulent:
o When the agreement involves deceit or intends to commit
fraud.
o Example: A contract formed to forge documents.
4. Injury to Person or Property:
o Agreements involving harm to individuals or damage to
property are unlawful.
o Example: A contract to commit assault.
5. Immoral:
o Immoral acts are determined by societal standards.
o Example: Agreements promoting prostitution.
6. Opposed to Public Policy:
o Public policy includes principles that uphold societal
welfare and order.
o Example: Agreements restraining marriage or trading with
an enemy.

Case Laws on Unlawful Consideration and Object

1. Gherulal Parakh v. Mahadeodas Maiya (1959):
o The court held that an agreement to conduct a wagering
transaction was void as the object was opposed to public
policy.
2. Kedar Nath v. Gorie Mohammad (1886):
 o A contract involving illegal construction without
municipal approval was void as it was forbidden by law.
3. Alexander v. Rayson (1936):
o An agreement to defraud the tax authorities was declared
void for being unlawful.
4. Bai Vijli v. Narsingh Lal (1882):
o An agreement for immoral purposes, such as cohabitation
in exchange for monetary benefits, was held void for being
immoral.
5. Pearce v. Brooks (1866):
o A contract for renting a carriage to a prostitute was void as
it promoted immoral purposes.

Effect of Unlawful Consideration or Object

 Agreements with unlawful consideration or objects are void-ab-
initio.
 No legal remedy can be sought to enforce such agreements.
 Benefits received under unlawful agreements cannot be claimed
back.

Examples of Unlawful Consideration and Object

1. A contract to sell counterfeit currency (forbidden by law).
2. An agreement to avoid paying taxes (defeats the law).
3. A partnership for smuggling drugs (involves injury to property).
4. A contract for fraudulent marriage (fraudulent and immoral).
5. An agreement to commit a crime for money (opposed to public
policy).
Discharge of Contracts
A contract is discharged when the obligations under it are terminated.
Discharge can occur in the following ways:
(a) By Performance
When both parties fulfil their respective obligations, the contract is
discharged. Performance must be complete and as per the terms of the
contract.
 Relevant Provision: Section 37 of the Indian Contract Act,
1872.
 Case Law: Startups.com v. Wipro Ltd. (2018) – Complete
performance of obligations by both parties discharged the
contract.
(b) By Agreement or Consent
Parties may mutually agree to discharge a contract through novation,
rescission, or alteration.
 Relevant Provision: Section 62 of the Indian Contract Act,
1872.
 Case Law: Lata Construction v. Dr. Rameshchandra Ramniklal
Shah (2000) – A new agreement substituted the old one, leading
to discharge.
(c) By Impossibility
If after the formation of a contract, performance becomes impossible
or unlawful, the contract is discharged.
 Relevant Provision: Section 56 of the Indian Contract Act,
1872.
 Case Law: Satyabrata Ghose v. Mugneeram Bangur & Co.
(1954) – Performance became impossible due to government
requisition of land.
(d) By Operation of Law
A contract may be discharged by operation of law, such as insolvency,
merger of rights, or unauthorized material alteration of terms.
(e) By Lapse of Time
If a contract is not performed within the limitation period, as provided
by the Limitation Act, it is discharged.
(f) By Breach
A contract may be discharged due to a breach, either actual or
anticipatory.
Performance, Impossibility of Performance, and Frustration
Performance
Performance entails fulfilling the obligations as stipulated in the
contract.
 Types of Performance:
o Actual Performance: When parties perform their
obligations.
o Attempted Performance: When a party offers to perform
but the other refuses to accept.
Impossibility of Performance
Performance becomes impossible in situations such as:
 Destruction of the subject matter.
 Death or incapacity of a party in a personal contract.
 Supervening illegality.
 Relevant Provision: Section 56 of the Indian Contract Act,
1872.
 Case Law: Taylor v. Caldwell (1863) – Destruction of a music
hall meant the contract could not be performed.
Frustration
The doctrine of frustration applies when an unforeseen event
fundamentally alters the contract's nature.
 Key Elements:
1. The event occurs after the formation of the contract.
2. The event is beyond the control of parties.
3. The event renders performance impossible or radically
different.
 Relevant Provision: Section 56 of the Indian Contract Act,
1872.
 Case Law: Satyabrata Ghose v. Mugneeram Bangur & Co.
(1954) – Frustration was applied as the contract became
impractical to perform.
Breach of Contract: Anticipatory and Present
Breach of Contract
A breach occurs when one party fails to perform their obligations.
Breach can be:
 Anticipatory Breach
 Actual/Present Breach
(a) Anticipatory Breach
An anticipatory breach occurs when one party, before the due date of
performance, declares their inability or unwillingness to perform.
 Key Features:
o The other party may terminate the contract immediately or
wait until the due date.
o Remedies include claiming damages or treating the
contract as rescinded.
 Case Law: Hochster v. De La Tour (1853) – A courier was
entitled to damages when the employer repudiated the contract
before performance.
(b) Actual/Present Breach
An actual breach occurs when a party fails to perform their
obligations on the due date or during the performance.
 Key Features:
o The non-breaching party can sue for damages and specific
performance if applicable.
 Case Law: Union of India v. Kishorilal Gupta & Bros. (1960) –
A breach was established when a party failed to perform as per
contractual obligations.

Remedies for Breach

1. Damages
Damages are monetary compensation awarded to the aggrieved party
for the loss suffered due to the breach.
Types of Damages
1. Compensatory (Ordinary) Damages
Awarded for losses that naturally arise from the breach.
o Relevant Provision: Section 73 of the Indian Contract
Act, 1872.
o Case Law: Hadley v. Baxendale (1854) – Damages were
limited to losses foreseeable at the time of contract
formation.
2. Consequential Damages
Cover losses arising as a consequence of the breach, provided
they were foreseeable by both parties.
3. Exemplary or Punitive Damages
Granted in cases involving fraud, malice, or willful breach to
punish the breaching party.
o Common in contracts involving public duty, such as
breach by a carrier.
4. Nominal Damages
Awarded when a breach occurs, but no actual loss is suffered.
o Case Law: Brace v. Calder (1895) – Nominal damages
were awarded despite no quantifiable loss.
5. Liquidated Damages and Penalty
o If the contract specifies a pre-determined sum for breach, it
is enforceable if it represents a genuine pre-estimate of
loss (liquidated damages).
o Relevant Provision: Section 74 of the Indian Contract
Act, 1872.
 o Case Law: Fateh Chand v. Balkishan Das (1963) – The
court emphasized the distinction between liquidated
damages and penalties.

2. Specific Performance
Specific performance compels the breaching party to fulfill their
contractual obligations. It is an equitable remedy granted when
damages are inadequate.
When Specific Performance is Granted
 Contracts for unique or irreplaceable goods (e.g., rare art,
antiques).
 Sale of immovable property.
When It Is Not Granted
 Personal service contracts.
 Contracts requiring constant supervision.
 Relevant Law: Specific Relief Act, 1963.
 Case Law: Ardeshir H. Mama v. Flora Sassoon (1928) –
Specific performance was granted for the sale of immovable
property, emphasizing its unique nature.

3. Rescission
The aggrieved party may choose to rescind (terminate) the contract
and treat it as void due to the breach.
Effects of Rescission
 The aggrieved party is no longer bound to perform their
obligations.
 They may claim damages for any loss suffered due to the
breach.
Relevant Provision
 Section 75 of the Indian Contract Act, 1872: A party who
rightfully rescinds a contract is entitled to compensation for
damages.
Case Law
 Kamal Kant v. DDA (1996): The court allowed rescission and
compensation when the defendant failed to deliver the property
within the stipulated time.

4. Injunction
An injunction is an equitable remedy where the court orders a party
to do or refrain from doing something to prevent a breach of contract.
It can be:
 Temporary Injunction: Granted during the pendency of the
case.
 Permanent Injunction: Granted as a final relief to prevent
actions causing irreparable harm.
When Injunctions Are Granted
 To prevent the breach of negative covenants in contracts.
 In cases of intellectual property disputes or non-compete
agreements.
Case Law
 Warner Brothers v. Nelson (1937): An actress was restrained
from working with another studio as it would breach her
exclusive contract.

5. Quantum Meruit
Quantum meruit ("as much as earned") is awarded when a party has
performed part of their obligations and the contract is later
discharged. It ensures fair compensation for the value of services or
goods provided.
When Quantum Meruit Applies
 When a contract is discharged due to impossibility, breach, or
rescission.
 When a party partially fulfils their obligation but is prevented
from completing it by the other party.
Relevant Provision
 Section 70 of the Indian Contract Act, 1872: Addresses
compensation for acts done or goods delivered without a
contract.
Case Law
 Cutter v. Powell (1795): The claim for quantum meruit was
denied as the deceased seaman's contract was for entire
performance.