Consent

As per section 10 of the Contract Act, “ An agreement made by free

consent, by parties competent to contract, for lawful consideration, with a
lawful object and nor expressly declared void by the Contract Act is a
contract”.

Section 13 of the Contract Act defines the term 'Consent' as “two or more
persons are said to consent when they agree upon the same thing in the
same sense”. Thus, consent involves identity of minds in respect of the
subject matter of the contract. In English Law, this is called 'consensus-
ad-idem'

Free Consent

Section 10 of the Contract Act specifically provides that all agreements

are contracts if they are made by the free consent of the parties. Section
14 of the Act states that Consent is said to be free when it is not caused
by:
i) Coercion [Section 15]
ii) Undue influence [Section 16]
iii) Fraud [Section 17]
iv) Misrepresentation [ Section 18]
v) Mistake [ Section 20, 21,22 ]

Effect of absence of Free Consent :- If consent was obtained by

coercion, undue influence, fraud, Misrepresentation, the contract is
voidable at the option of party whose consent was not free [19, 19A]

i) COERCION

If a person commits or threatens to commit an act forbidden by the

Pakistan Penal Code with a view to obtaining the consent of the other
person to an agreement, the consent in such case is obtained by coercion.
In simple words coercion means "making a person to give his consent by
force or threat."

Essential Ingredients of Coercion:

i) Committing or threatening to commit any act forbidden by Pakistan’s
Penal Code or,

ii) The unlawful detaining or threatening to detain any property to the

prejudice of any person whatever.

iii) With the intention of causing any person to enter into an agreement.

Chikkam Ammiraju V. Chickam Seshamma, in this case, the husband

by a threat of suicide, induced his wife and son to execute a release deed
in favor of his brother in respect of a certain properties claimed as their
own by the wife and son. Court held that to commit suicide amounted to
coercion within the meaning of Section 15 of the Contract Act and
therefore release deed was voidable.

Committing or threatening to commit any act forbidden by PPC

Act forbidden by PPC( Pakistan Penal Code)- The word act forbidden by
Pakistan’s Penal Code make it necessary for the court to decide in a civil
action, whether the alleged act of coercion is such as to amount to an
offence. A threat of bringing a false charm with the object of making
another do a thing amount, to blackmail or coercion. In the case of
Ranganayakamma v Alwar Setti, where the widow was obstructed from
removing the corpse(dead body) of her husband until she consented for
the adoption. The court held that her consent was not free and it was
coerced. It is clear that coercion is committing or threatening to commit
any act which is contrary to law.

Unlawful Detaining of Property

A consent can be said to be caused by coercion, if it is caused because

of unlawful confining or detaining of a property, or a risk to do as such.

Coercion/Duress

Under the English law, actual or threatened violence to the victim's person
has long been recognized to amount to duress. Duress is a term applied
under English Contract Law & Coercion is a term applied under Pakistan’s
Contract Law. In coercion even third party can perform the act but in
duress only the party to contract should perform the act. In Duress, it is
only applied for person and cannot detain property. Also coercion can be
seen as the practice of putting someone under duress (i.e almost like
stress.) Coercion is the act of forcing, while duress is more the
consequence (or stressful feeling) that happens as a result of coercion. In
this way the extent of coercion is more extensive than duress.

Undue Influence

when one party is in a position to dominate the will of others and actually
misuses the power, then it is a case of undue influence, and the contract
becomes voidable. When all the following three conditions are fulfilled
then only the situation is considered as an undue influence:

i) One person is in a position to dominate the will of others.

ii) He misuses his position.
iii) He obtains an unfair advantage.

The word 'undue' means unnecessary, unwarranted, or more than

required. "Influence' means convincing the mind of another through
changing his mind or changing his will, but this influence must be undue
i.e it is not required. Undue influence applies to a relationship which may
be blood relation or some other kind of relation i.e fiduciary or relation
based on trust. It may also arise where the parties are in a relation of
confidence or dependence which puts one of them in a position to
exercise over the other an influence which may be perfectly natural and
proper in itself, but is capable of being unfairly used.

Elements of undue influence

Section 16(1) gives the following two elements of undue influence,

i) The relationship subsisting between the parties is such that one is in

a position to dominate the will of the other, and

ii) He uses that position to obtain an unfair advantage over the other.

The party who wants to rescind the contract on the ground of undue
influence ordinarily must prove both the conditions laid down in Section
16(1). It must be proved first of all that the other party was in a position to
dominate the will of the aggrieved party. It is only after this that the
question arises regarding the second element of undue influence. In Smt.
Chinnamma Verses Devanga Sangha, it was held that it is not necessary
that the person in a position of domination must benefit himself. A benefit
to a third party may be sufficient. In this case undue influence by office
bearers of a society benefiting the society was held to be sufficient to avoid
the contract.

In Subhash Chandra Das v. Ganga Prasad Das, the Court held that, "it
is well settled that the law relating to undue influence is the same in the
case of a gift inter vivos (from one living person to another) as in the case
of contract. The Court trying a case of undue influence must consider two
things to start with namely,

i) are the relations between the donor and the donee such that the done
is in a position to dominate the will of the donor

ii) has the donee used that position to obtain unfair advantage over the
donor"

A contract cannot be set aside on the ground of undue intluence when

one ot the parties is not in a position to dominate the will of the other, that
is., when the parties are on equal footing.

Illustration (d) appended to the Section makes the point clear, A applies
to a banker for a loan at a time when there is stringency in the market.
The banker declines to make loan except at an unusually high rate of
interest. A accepts the loan on these terms.This is a transaction in the
ordinary course of business and the contract is not induced by undue
influence.

In Shrimati Verses Sudhakar, AIR Bom 122, the Court said, "Influence
in the eye of law has to be contra distinguished with persuation. Any and
every persuation by one party to the other to contract cannot lead to the
inference/conclusion that such party has influenced the other party.
One may by his act or conduct convince and persuade the other party to
do a particular act and if the other party does such an act freely and of
own volition (may be to his/her disadvantage or even to his/ her peril), it
cannot be said that such act was influenced by the other." In the present
case the gift was not held to be induced by undue influence as the gift
deed was made by a woman, though illiterate, was intelligent enough to
manage her properties and was getting agricultural land cultivated from
various persons from time to time for about two decades.

Different forms of influence and presumption of domination of will

Section 16(2) provides that 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 (b) where he stands in a fiduciary relation to another or
(c) where he enters into a transaction with a person whose mental
capacity is temporarily or permanently affected by reason of age, illness,
mental or bodily distress. These cases are discussed below,

Ability to dominate the will of other

The dominant position is not defined in the Contract Act but Section 16(2)
provides certain conditions when a person is in a position to dominate the
will of another. Cases, where a person is In a position to dominate the will
ot others, are as follows: There must be a relation
between the partes.

i) Real or apparent authority/relation in which one party can be

dominated by the other

ii) Fiduciary relation is the relation which is made upon the belief and
trust between the parties.

Example of real or apparent authority:

a) A Father exerts undue influence upon his son to do something on the

will of his father. Otherwise, he will part his relation with a son.

b) A factory owner exerts undue influence upon his employee to make

a certain agreement with him. If not he (employee) will be drawn from
his job.

Example of fiduciary relation: an advocate asks his client to give him extra
money to fight the case from his side. Doctor and patient relationship.

Mental or bodily distress means the mental capacity of a person is

affected. It can be either permanently or temporarily affected. The reason
behind such health condition can be age, illness, mental or bodily distress.
Consent under pressure means when consent is obtained forcefully. In
this manner, consent is not lawful, so it had no binding effect.

Relations which involves domination

All cases where there is an active trust and confidence between the
parties and both parties are not on equal footing. The principle of undue
influence applies to all the cases where influence is acquired and abused.
It applies to all relations where domination can be exercised by one party
over another. The existence of a dominating position along with its use is
mandatory to invoke an action. Merely a dominant position does not lead
to undue influence. It arises only when this position is used for gaining an
undue advantage. Undue advantage means any kind of advantage which
is not warranted by circumstances in which the contract was entered.

Fiduciary relationship

In the following cases fiduciary relationships or a relationship of mutual

trust and contidence is said to exist,
i) guardian and ward,
ii) parent and child,
iii) trustee and beneficiary,
iv) solicitor and client,
v) doctor and patient,
vi) spiritual advisor and his devotee or disciple,
vii) woman and her confidential managing agent.

In such cases it is essential to show that one party relies on the other to
such an extent that complete trust and confidence is placed in the other
enabling him to influence the former. Thus the parties need not be related
by blood, marriage or adoption. What is necessary to establish the
presumption is that their relations are such that one is in a superior
position over the other.

According to illustration (a) appended to the Section 16, A, having

advanced money to his son B, during his minority, upon Bs coming of age
obtains, by misuse of parental influence, a bond from B for a greater
amount than the sum due in respect of advance. A employs undue
influence.

Real or Apparent authority

Section 16(2) of the Contract Act states that Undue Influence can arise
wherever the donee stands in a fiduciary relationship to the donor or holds
a real or apparent authority. In this type of influence, there is a real
authority like a police officer or an employer who uses his dominance for
his enrichment. Apparent authority is pretending as a real authority without
its existence.
The following persons, inter alia, being impositions of authority are said to
be in a position to dominate the will of the other,

i) an income-tax officer in relation to an assessee,

ii) a magistrate or police officer in relation to an accused,
iii) superior in relation to a subordinate

Fraud

According to Section 17 of the Contract Act, 1872 "FRAUD" means and

includes any of the following acts committed by a party to a contract, or
by his agent, with intent to deceive another party thereto or his agent. or
to induce him to enter into the contract:

 The suggestion, as a fact, of that which is not true, by one who does
not believe it to be true;

 The active concealment of a fact by one having knowledge or belief

of the fact;

 A promise made without any intention of performing it;

 Any other act fitted to deceive;

 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.

Illustrations

(a) A sells, by auction, to B, a horse which A knows to be unsound. A

says nothing to B about the horse's unsoundness. This is not fraud in
A.
(b) B is A's daughter and has just come of age. Here, the relation
between the parties would make it A's duty to tell B if the horse is
unsound.
(c) B says to A-"If you do not deny it, I shall assume that the horse is
sound." A says nothing. Here, A's silence is equivalent to speech.

Essentials of Fraud

 There should be a false statement of fact by a person who himself

does not believe the statement to be true.

 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.

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. For example - A person, who is aged over 60
years and thus beyond insurable age, deliberately makes a false
statement that his age is 48 years in order to take out an insurance policy,
it amounts to fraud, and the insurer is entitled to avoid the policy.

In Edington vs. Fitzmaurice, a company was in great financial difficulties

and needed funds to pay some pressing liabilities. The company raised
the amount by the issue of debentures. While raising the loan, the
directors stated that the amount was needed by the company for its
development, purchasing assets and completing buildings. It was held
that the directors had committed a fraud.

Mere silence is no fraud

It has been noted above that to constitute fraud; there should be a

representation as to be certain untrue facts. Mere silence is no fraud
unless, there is duty to speak, or his silence is, in itself, equivalent to
speech. In Keates v Lord Cadogan, A let his house to B which he knew
was in ruinous condition. He also knew that the house is going to be
occupied by B immediately. A didn't disclose the condition of the house to
B. It was held that he had committed no fraud.

In Shri Krishan v. Kurukshetra University, Shri Krishan, a candidate for the

L.L.B. exam, who was short of attendance, did not mention that fact
himself in the admission form for the examination. Neither the head of the
law department nor the university authorities made proper scrutiny to
discover the truth. It was held by SC that there was no fraud by the
candidate and the university had no power to withdraw the candidate on
that account.

Exceptions

 When there is a duty to speak, keeping silence is fraud.

 When silence is, in itself, equivalent to speech, such silence is a
fraud.

Silence being equivalent to speech

Sometimes keeping silent as to certain facts may be capable of creating

an impression as to the existence of a certain situation. In such a case,
silence amounts to fraud. Means of discovering the truth "If such consent
was caused by misrepresentation or by silence fraudulent within the
meaning of Section 17, the contract, nevertheless, is not voidable, if the
party whose consent was so caused had the means of discovering the
truth with ordinary diligence".

Illustration

A says to B "If you do not deny it I shall accrue that the horse is sound".
B says nothing. Here B's silence is equal to speech that the horse is
sound. Later if the horse turns out to be unsound, B will be guilty of fraud.

Active Concealment | Section 17(2)]

When there is an active concealment of a fact by one having knowledge

or belief of the fact, that can also be considered to be equivalent to a
statement of fact and amount to fraud. By active concealment of certain
facts, there is an effort to see that the other party is not able to know the
truth and he is made to believe as true which is in fact not so. Active
concealment of a fact has also been considered as amounting to fraud
because in that case there is a positive effort to conceal the truth from the
other party. He is made to believe as true that fact which false.But if he
merely keeps silence it will not constitute fraud subject to certain
exceptions.

In case of sale of goods, the rule which is applicable is caveat emptor -

or the doctrine of let the buyer beware. It means that it is the duty of the
buyer to be careful while purchasing the goods as there is no implied
condition or warranty as to quality or litness of goods.

Promise Made Without Any Intention to Perform It [Section 17(3)|

When a person makes a promise, there is deemed to be an undertaking
by him to perform it. If there is no such intention when the contract is being
made, it amounts to fraud. Thus, it a man takes a loan without any
intention to repay, or when he is insolvent, or purchases goods on credit
without any intention to pay for them, there is fraud. If, there is no such
bad intention at the time of making contract, but the promise doesn't
perform the contract, it doesn't amount to fraud.

Any act or omission which anyother act fitted to deceive' Section

17(4)

Clause (4) of Section 17 provides that any other act fitted to deceive' will
also amount to fraud. This clause is general and is intended to include
such cases of fraud which would otherwise not come within the purview
of the earlier three clauses.

Any act or omission which the law declares as fraudulent [Section

17(5)

According to this Section 17(5), fraud also includes any such act or
omission as the law specially declares to be fraudulent. In such cases, the
law requires certain duties to be performed, failure to do which is
expressly declared as a fraud.

Statement should be meant for the party misled

It is necessary that the misleading statement should be meant for the party
who is misled. If a person is purchasing the shares of the company in the
open market on the basis of any prospectus then he can't sue the
company later on because the prospectus is meant for an original allottee
of the shares by the company, not for the person like the present appellant
who buys the shares from the original allottee and therefore, the
promoters were not liable for fraud.

MISREPRESENTATION

The word representation means a statement of fact made by one party to

the other, either before or at the time of making the contract, with regard
to some matter essential for the contract, with an intention to induce the
other party to enter into contract. A representation, when wrongly made,
either innocently or intentionally, is called 'misrepresentation' When the
wrong representation is made willfully with the intention to deceive the
other party, it is called fraud.But, when it is made innocently i.e., without
any intention to deceive the other party, it is termed as 'misrepresentation'.
In such a situation, the party making the wrong representation honestly
believes it to be true. For example, A while selling his car to B, informs
him that the car runs 18 kilometers per litre of petrol. A himself believes
this. Later on, B finds that the car runs only 15 kilometers pr litre. This is
a misrepresentation by A. Section 18 of the contract Act classifies acts of
misrepresentation into the following three groups:

Positive assertion

When a person makes a positive statement of material facts honestly

believing it to be true though it is false, such act amounts to
misrepresentation

Breach of Duty

Section 18(2) says that any breach of duty which, without an intent to
deceive, gives an advantage to the person committing it, or anyone under
him, by misleading another to his prejudice or to the prejudice of anyone
claiming under him, amounts to misrepresentation. In such a case, there
is no intention to deceive, but party representing commits a breach of duty
which he owes to the other party. A breach of duty would also exist where
a party bound to disclose certain information does not do so. Such non-
disclosure would also amount to misrepresentation. For example, in a life
policy, the assured does not disclose the fact that he had previously
suffered from some serious ailments. The non-disclosure, however,
innocent it may be, would entitle the insurer to avoid the contract on the
ground of misrepresentation of facts such a duty exists between banker
and customer, landlord and tenant and all contracts of utmost good faith.
Such cases can also be termed as 'constructive fraud'

Inducing mistake about subject-matter

The subject matter of every agreement must clearly be understand by the

concerned parties. If one of the parties, leads the other, even innocently,
to commit a mistake regarding the nature or quality of the subject-matter,
it is considered misrepresentation.
Essentials of Misrepresentation

i) The representation should be made innocently, honestly believing it

to be true and without the intention of deceiving the other party.

ii) Misrepresentation should be of facts material to the contract. A mere

expression of one's opinion is not a statement of facts.

iii) The representation must be untrue, but the person making it should
honestly believe it to he true.

iv) The representation must be made with a view to inducing the other
party to enter into contract and the other party must have acted on
the faith of the representation. A party cannot complain of
misrepresentation if he had the means of discovering the truth with
ordinary diligence.

v) The false representation must have been made by one party to the
contract to the other who is misled. If it is not addressed to the party
who is misled, then it is not misrepresentation.

Effect of Misrepresentation

Section 19 of Contract Act provides that when consent to an agreement

is caused by misrepresentation, the agreement is voidable at the option
of the party whose consent was so caused. Thus, the aggrieved party has
the following two rights:

i) He can rescind the contract. This right is available only in such cases
where he was not in a position to discover the truth with ordinary
diligence.
ii) If the aggrieved party thinks it proper, he may accept the contract and
insist upon its performance. He may compel the other party to pay
damages.

You have seen that the party whose consent was caused by
misrepresentation can avoid or rescind the contract. However, this right is
lost in the following cases:

i) If he could discover the truth with ordinary diligence. It his consent is

not induced by misrepresentation.
ii) If he, after coming to know about the misrepresentation, expressly
affirms the contract or acts in such a manner which shows that he
has accepted it.

iii) If, before the contract is rescinded, the third party acquires some right
in the subject-matter in good faith and for some consideration.

iv) If the parties cannot be restored to their original position.

MISTAKE

Mistake may be defined as the erroneous belief concerning something.

Whenever an agreement is made under a mistake, there is no consent,
and the agreement is not valid. Broadly speaking, Mistake may be of two
types-mistake of law and mistake of fact. Mistake of law can be further
classified into (a) mistake of Pakistan’s law, and (b) mistake of foreign law.
Similarly, mistake of fact can be (a) bilateral mistake or (b) unilateral
mistake.

Mistake of Law (Section 21)

Mistake of law can be further classified into (a) mistake of Pakistan’s law,
and (b) mistake of foreign law

Mistake of Pakistan Law

The general rule is that mistake of law of the land is no excuse. Section
21 lays down that a contract is not voidable because it was caused by a
mistake as a law in force in Pakistan. It is because everyone is supposed
to know the law of the country and if a person does not know the law of
his country then he must suffer the consequences

Mistake of Foreign Law

A person is supposed to know the laws of his country but he cannot be

expected to know the laws of other countries. Therefore, the rule that
'ignorance of law is no excuse' cannot be applied to foreign law. A mistake
of foreign law is treated as a mistake of fact.

Mistake of Fact (Section 20)

Mistake of fact may be classified into two groups. viz., (a) Bilateral
mistake, and (b) Unilateral mistake.
Bilateral Mistake

When both the parties to an agreement are under a mistake of fact

essential to the agreement, the mistake is known as bilateral mistake of
fact. In such a situation, there is no agreement at all because there is
complete absence of consent. Section 20 of the Act provides 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. Thus, for declaring an
agreement void under this Section, the following three conditions must he
satistied

Both the parties must be under a mistake

The mistake must be mutual. For example, A, having two cars, one is
Honda Civic and another Toyota Corolla. A offers to sell his Civic car to B
and B not knowing that A has two cars, thinks of the Toyota Corolla car
and agrees to buy it. In this case, there is no consent whatsoever.
Therefore, the agreement shall be void.

Mistake must be of fact and not of law

Mistake must relate to as essential fact: The mistake must relate to a

matter of fact which is essential to the agreement. In other words, only
such mistake of fact that goes to the root of the agreement, renders the
agreement void. For example, 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, because the mistake
relates to something i.e., the horse, which is essential to the contract

A bilateral mistake may be

i) Mistake as to the subject-matter, or

ii) Mistake as to the possibility of performance.

Mistake as to the subject matter of the contract

Where both the parties to an agreement are under a mistake relating to

the subject-matter of the contract, the agreement is void. A mistake as to
the subject-matter may take following forms.

Mistake as to an existence of the subject-matter

When both the parties are under a mistake regarding the existence of the
subject-matter, the agreement is void. For example; A agrees to sell B a
specific cargo of goods supposed to be on its way from England to
Karachi. It turns out that, before the day of the bargain, the ship carrying
the cargo had been cast away and the goods lost. Neither the party was
aware of these facts. The agreement is void.

Mistake as to the identity of subject-matter

Where the parties to a contract have different subject-matter in their minds

i.e., one party had one thing in mind and the other party had another, the
agreement is void because there is no consensus-ad-idem. For example,
A offers to sell his house located in DHA Karachi to B. A had another
house in DHA Islamabad. B thinks he is buying the Islamabad's house.
There is no agreement between A and B.

Mistake as to the title of the subject-matter

Sometimes the buyer already owns the property which a person wants to
sell to him, but the concerned parties are not aware of this fact. In such a
case, the agreement is void as there is a mistake about the title of the
subject-matter.

Mistake as to the quantity of the subject-matter

Where both the seller and the buyer make a mistake regarding the
quantity of the subject matter, the agreement is void. In the case of
Henked v. Pape, Pape inquired about the price of rifles from Henked
suggesting that he might buy fifty rifles. On receiving the quotation, Pape
telegraphed "send three rifles". But. because of the mistake of the
telegraph authorities, the message transmitted was "send the rifles"
Henked despatched fifty rifles. Pape accepted three rifles and returned
the remaining forty seven rifles. It was held that there was no contract.
However, Pape was liable to pay for three rifles on the basis of an implied
contract.

Mistake as to the quality of the subject-matter

If the subject-matter is something essentially different from what the

parties thought it to be, the agreement is void. For example, A contracts
to sell a particular horse to B. A and B believe it to be a race horse. But, it
turns to be a cart horse. The agreement is void.
Mistake as to tire possibility of performance

If the parties to an agreement believe that the contract is capable of

performance, while in fact it is not so, the agreement is treated as void or
the ground of impossibility. It may be a physical impossibility or a legal
impossibility.

i) Physical impossibility: A contract for the hiring of a room for

witnessing the coronation procession of Edward VII was held to be
void because unknown to the parties the procession had already
keen cancelled and there is no question of witnessing it. (Grifdth v
Esymsr)
ii) Legal impossibility: An agreement is void if it provides that
something shall be done which cannot legally be done.

Unilateral Mistake

The term 'unilateral mistake' means where only one party to the
agreement is under a mistake. Generally, a unilateral mistake does not
make the agreement void. According to Section 22, 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. If a man due to his own negligence
or lack of reasonable care does not ascertain what he is contracting about,
he must bear the consequences. For example, A sold oats to B by sample
and thinking that they were old oats, purchased them. In fact, the oats
were new. It was held that B was bound by the contract, (Smith v.
Hughes). In some cases, however, a unilateral mistake may be
fundamental and may affect the character of the contract. In such a
situation, the agreement is void. In the following cases, even though the
mistake is unilateral, the agreement is void.

Mistake as to the identity of the person contracted with

Mistake as to the identity of the person violates a contract. For example,

where A intends to contract only with B, but enters into a contract with C
believing him to be B, the contract is void.
It should be noted that a mistake about the identity of the contracting party
will render the contract void only if
i) the identity of the party is of material importance to the agreement,
and
ii) the other party knows that he is not intended to be a party to the
agreement.
The following cases illustrate this point. In the case of Cindy v Lindsay,
one Blenkiron, knowing that Blenkiron & Co., were the reputed customers
of Lindsay & Co placed an order with Lindsay & Co. by imitating the
signature of Blenkiron. The goods were then sold to Cindy, an innocent
buyer. In a suit by Lindsay & Co. against Cindy for recovery of goods, it
was held that as Lindsay never intended to contract with Blenkiron, there
was no contract between them and as such even an innocent buyer
(Cindy) did not get a good title. Hence, Cindy must return the goods or
make payments of price. In the case of Lake v. Sirnmons, a woman by
falsely misrepresenting her to be the wife of a well known Baron (a
millionaire) obtained two pearl necklaces from a firm of jewelers on the
pretext of showing them to her husband before buying. She pledged them
with a broker, who in good faith paid her some amount. It was held that
there was no contract between the jeweler and the woman and an
innocent buyer or a broker did not get a good title.The broker must return
the necklaces to the jeweler.

Mistake as to the nature of the contract

A contract is void when one of the party, without any fault of his own,
makes a mistake as to the very nature of the contract. Thus, when a
person is induced to sign a written document containing a contract
fundamentally different in nature from what he thinks he is signing, the
contract shall be void. In the case of Foster v. Mackinnon, an old illiterate
man was induced to sign a bill of exchange, by means of a false
representation that it was a mere guarantee. Held, he is not liable for the
bill as he never intended to sign a bill of exchange.

Effect of Mistake

While discussing various types of mistakes, the effect of each type of

mistake has been clearly stated. it can now be summarized as follows:

i) 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.
ii) In most cases of unilateral mistake, the contract is not void. But,
where unilateral mistake defeats the true consent of the parties, the
agreement is treated as void.
iii) Any person who has received any advantage under such agreement,
he is bound to restore it, or to make compensation for it, to the person
from whom he had received it.
iv) A person to whom money has been paid or anything delivered by
mistake must repay or