Free Consent : Law of contract

Free Consent : Law of contract

Free consent is the consent which is freely given. Section 14[1] of the Indian Contract Act, 1872, describes free consent as a consent which is not caused by, coercion, undue influence, fraud, misrepresentation, mistake. The concept of free consent is based on the principle of consensus-ad-idem which means meeting of minds. When two parties agree on the same thing with same understanding, it is known as consensus-ad-idem.[2]

Coercion in Free Consent

Section 15[3] of the Indian Contract Act, 1872 defines coercion as committing or threating to commit any act which is forbidden by The Indian Penal Code[4]. Coercion is caused when there is a physical threat applied on a person to perform an act.

If it is found that an agreement is made under coercion, the contract rescinds and both the parties are released from their obligation to perform the contract.

Does threat to commit suicide amount to coercion?

Threat to commit suicide does not amount to coercion but in the case of Chikkam Ammiraju And Ors. vs Chikkam Seshamma And Anr[5], where husband threatened to commit suicide if wife and child does not transfer the property to his brother, it was observed by the court that this amounts to coercion on the wife as the wife was prejudiced and it cannot be forbidden by law. But the court also agreed that this Section 15[6], cannot provide relief in this matter as it was a mere prejudice on the person.

Undue Influence in Free Consent

When one party is in a position to dominate the will of other and he uses this position to obtain undue/unfair advantage of other. For undue influence to be present, existence of a relationship is must. A relationship where one person is in a position to dominate the will of other.

Assumption of Undue Influence-

  1. Where he holds a real or apparent authority over other.
  2. When one party stands in a fiduciary relationship to the other.
  3. Where a person makes a contract with someone who is temporarily or permanently mentally ill

List of presumptions of a fiduciary relationship-

  • Parent and Child
  • Doctor and Patient
  • Gaudian and Ward
  • Solicitor and Client
  • Religious Advisor and Gurus
  • Trusty and Beneficiary

*Burden of Proof is on aggrieved party in normal situations but if there is a presumption of undue influence, the burden will shift.

*If an agreement is caused under undue influence, it is up to the party whose consent was taken, to make it valid or void.

Also Read : The Search for balance between Judicial Accountability and Judicial Independence in the Indian context 

Contracts with Parda-nashin Women

Parda-nashin woman is the one who observes complete sacculation because of the particular custom of the community to which she belongs.

If a person enters into a contract with a parda-nashin woman it is presumed to be induced by undue influence, because she is secluded from the society and has no idea of her rights.

The law throws a special clock of protection around these women, thus, any person who enters into a contract with her, has to strictly prove that there was no undue influence and that she has free and independent advice, understood the contents of contract and exercised her free will.

Difference between Coercion and Undue Influence

Coercion Undue Influence
In Coercion there is a physical threat. The is no physical threat in Undue Influence.
Existence of a relationship is required here. There is always a relationship in undue influence, where one party is in a dominating position.

 

Fraud under Free Consent

Defined in Section 17[7] of the Indian Contract Act, Fraud means any action that includes Active Concealment of Material Facts, Intentional Non-Performance, Intentional False Statement. The contract made through fraud is a voidable contract and party with whom fraud is done can revoke the contract and is entitle to receive compensation for the damages caused due to the fraudulent contract.

 

Does silence amount to fraud?

No, silence does not amount to fraud, unless there is a duty to speak. For instance, if a shopkeeper gives a good to the buyer to inspect it before buying and the buyer after inspecting it does not ask any question, then it will not be considered as fraud. But if the buyer askes for a confirmation about the wellness of the good and the shopkeeper remains silent, the silence will amount to speech and this will be considered as fraud.

In the case of Jaswant Rai v Abnash Kaur[8], it was held by the court that the vendor had committed fraud as he concealed the material facts about the good and sold the defective good.

List where silence equals to speech-

  • Contract of Utmost Faith
    1. Insurance
    2. Sale of Immovable Property
    3. Marriage
  • Contract of Partnership
  • Contract of Guarantee
  • Change in facts before conclusion of the contract
  • Required by the law
  • Contract of fiduciary relationship

Misrepresentation in Free Consent

Misrepresentation is defined under the Section 18[9] of the Indian Contract Act. It is the unintentional false statement without intension to deceive. It is the breach of duty which is caused without any intention to deceive. If a party makes a misrepresentation of facts to the other party, it has to prove that it believed the misrepresented fact to be true.

Also read: Abortion: An Account of Struggle

Exceptions to Fraud and Misrepresentation

There are certain situations where, even though there is Fraud or Misrepresentation caused, the contract is still valid. Section 19[10] takes about the Exceptions to Fraud and Misrepresentation.

Exception 1: If the aggrieved party gives consent in ignorance of fraud or misrepresentation.

The contract becomes valid if the party with whom fraud or misrepresentation is caused gives its consent ignoring the fraud or misrepresentation. Example- ‘A’ wants to join a guitar class. He goes to a guitar class where he is told by the receptionist that the class will be held from 7pm-8pm and Mr. Chatterjee will be the teacher.

Now, ‘A’ enrols for the class because he finds the time the class suitable. When he arrives for the class rather than Mr. Chatterjee Mr. Banerjee takes the class. ‘A’ ignoring this thing, gives his consent to attend the classes.

Here, even though a fraud is conducted with ‘A’, he has given his consent in ignorance of it. Thus, the contract becomes valid.

Exception 2:  If the party after becoming aware of the fraud or misrepresentation affirms or ratifies the contract.

The contract becomes valid if the party with whom fraud or misrepresentation is caused gives his consent after becoming aware of the same. Example- same situation as the above-mentioned example. Now, a friend of ‘A’ joins the class because he wants to learn from Mr. Chatterjee. But when he arrives for the class, he notices Mr. Banerjee teaching. He goes to the receptionist complaining about this where he is told by the receptionist that “learn from Mr. Banerjee for a few days and if you like him continue with him only.” ‘B’ agrees to this.

Although fraud was conducted with ‘B’ but he gave his consent to this which makes the contract valid.

Exception 3: If the party has not rescinded the contract within a reasonable time period.

The contract becomes valid if the party with whom fraud or misrepresentation is caused fails to rescind the contract within the reasonable time period. Example- ‘A’ bought a dress from a shopping mall. After reaching home she finds that the dress is torn from some places and decides to return it. After 2 months of buying that dress, ‘A’ goes to the shopping mall to return it. The shopkeeper declines to take that dress back.

Now, ‘A’ cannot sue the shop for the compensation as she did not rescind the contract within a reasonable time frame.

Exception 4: If the third party in the contract has acquired rights in the subject matter of contract for value and in good faith.  

Example- ‘A’ sells a cell phone to ‘B’. ‘B’ buys it at a less price by doing fraud. After buying the cell phone from ‘A’, ‘B’ sells it to ‘D’.

Now, ‘A’ can’t rescind the contract as a third party, here ‘D’, has acquired the rights of the subject matter. ‘A’ could only rescind the contract when the phone was with ‘B’.

Exception 5: If the aggrieved party had the means of discovering the truth with ordinary diligence.

This exception is only applicable on misrepresentation. Even if the contract is done under any misrepresentation, the contract can become valid if the aggrieved party had reasonable means of discovering the truth with ordinary diligence. Example- ‘A’ goes to purchase a shirt from a shop. The shopkeeper, under the impression that the shirt does not have any defects, tells ‘A’ the shirt has no damages but ‘A’ can check himself once. ‘A’ does not check the shirt and buys it. After reaching home, ‘A’ finds that the shirt has a small hole in it.

Now, the contract will be termed as a valid one as even though there was a misrepresentation, ‘A’ had the means to check the shirt and discover the truth with ordinary diligence himself.

 

Anushka Hanotiya

(Co-Founder, The Legal State)

[1] Section 14, The Indian Contract Act, 1872

[2] https://legal-dictionary.thefreedictionary.com/Consensus+ad+idem

[3] Section 15, The Indian Contract Act, 1872

[4] Indian Penal Code, 1860

[5] (1917) 32 MLJ 494

[6] Section 15, The Indian Contract Act, 1872

[7] Section 17, The Indian Contract Act, 1872.

[8] Jaswant Rai v. Abnash Kaur, ILR 1974 Delhi 689

[9] Section 18, The Indian Contract Act, 1872

[10] Section 19, The Indian Contract Act, 1872

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