Free Consent

Category: Bank
Posted on: Monday, September 18, 2017

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Q.1. Define Free consent? When does consent become free? Explain rules regarding free consent.

 Ans.: According to section 10 of the Indian Contract Act, 1872, “All agreements are contract if they are made by the free consent of the parties competent to contract for a lawful consideration and lawful object and are not hereby expressly declared to be void”. Therefore, free consent is the one of the essentials of valid contract. But free consent is composed of two words free + consent. The term free meant without any pressure. Consent means defined under Section 13.

 Two or more persons are said to consent when they agree upon the same thing in the same sense.”

 Free consent is defined under section 14 i.e. consent is said to be free when issues not caused by :

 (1) Coercion, as defined in section 15, or

(2) Undue influence, as defined in section 16, or

(3) Fraud, as defined in section 17, or

(4) Misrepresentation, as defined in section 18, or

(5) Mistake subject to the provision of section 20, 21 and 22.

 Therefore, consent is not free when it has been caused by coercion or undue influence or fraud or misrepresentation and mistake. But if the consent is caused by any one of the first four factors such as coercion, undue influence, fraud and misrepresentation. The agreement is a voidable at the option of the party whose consent was so caused. (Section 19 and 19A). Under such position, the aggrieved party has option to assume the agreement either valid or void. If the contract is caused by mistake of foreign law, the agreement is void under section 20 and 21. Hence, there are two situations i.e. no free consent that is earlier and no consent is as error in consensus. The rules regarding free consent are as follows one by one.

 Coercion : Coercion means and includes the use or threatening to use the physical force against a person or property to compel him to enter him into a contract. According to section 15 of the Indian contract Act, 1872.

 “Coercion is the committing or threatening to commit any act forbidden by the Indian Penal Code or the lawful detaining or threatening to detain, any property, to the  rejudice of any person whatever, with the intention of causing any person to enter into an agreement. “It is immaterial whether IPC is or not enforced in the place where the coercion is employed (Section 15).

 Legal Rules relating to Coercion :

(1) Committing any act forbidden by the IPC i.e. killing or beating another person and interfering in the personal freedom of another person etc.
(2) Threatening to commit any act forbidden by the IPC.

(3) Threats to suicide amounts to coercion.

(4) Unlawful detaining of any property.

(5) Unlawful threatening to detain any property

(6) The act of coercion must have been performed with the intention of causing any person to enter into an agreement.

(7) Coercion may proceed either from the party or from a stranger.

(8) Coercion may be directed against the party or any person.(9) It is not necessary that IPC should be in force at the place where the coercion is applied.

 The effect of coercion is voidable at the desire of the aggrieved party.

 Undue Influence : Instead of physical force ;when mental force is used for getting the consent of the another party, when a dominant party misuses his influence to dominate the will of the weaker party, to get unfair advantage, in a contract is said to be influenced by undue influence. It is defined under Section 16. The legal rules relating to undue influence :

 (1) The relations subsisting between the parties to a contract are such that one of them is in a position to dominate the will of the other due to

 (i) Real or apparent authority.

(ii) In case of fiduciary relation.

(iii) In case of persons under mental or bodily stress.

 (2) The dominating party uses his position to obtain an unfair or undue advantage over the other party.

 Legal effect : Due to undue influence, the agreement becomes voidable at the option of the party whose consent was so caused. The court may set aside any such act under undue influence. A pardanashin woman is also given protection from undue influence.

 Fraud : Fraud is intentional misrepresentation or concealment of material facts of an agreement by any party to or by his agent with an intention to deceive and induce the other party to enter into an agreement. According to Section 17, “fraud means and includes any of the following acts committed to a contract or with his connivance, or by his agent, with an intention to deceive another party thereto or his agent, or to induce him to enter into contract.”

 (i) The suggestion as a fact of that which is not true by one who does not believe it to be true.

(ii) The active concealment of a fact by one having knowledge or belief of the fact.

(iii) A promise made without any intention of performing it,

(iv) Any other act fitted to deceive, and

(v) Any such act or omission as the law specially declares to be fraudulent.

Essential Elements of Fraud :

 (1) There must be a false representation either by words or by spoken words, induce the other party to enter into contract by active concealment of material fact.

(2) It must be done by the party or his agent.

(3) The representation must relate to a fact, the other party has been attracted to act upon the representation leading to fraud.

(4) The representation intentionally done to commit a fraud must have been done before the conclusion of the contract.

(5) The other party must have been deceived by fraud.

 Legal Effects :

(1) Contract becomes voidable at the option of the party defrauded,

(2) The defrauded party can sue for damages suffered or ask for restitution, and

(3) The party can insist for the performance of the contract.

 Misrepresentation: It is innocent and unintentional false statement of fact told by one party to the other during the course of negotiation is called misrepresentation. According to section 18 misrepresentation means and includes :

 (i) 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 is not true.

(ii) 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 any one claiming under him.

(iii) Causing, however, innocently, a party to an agreement to make a mistake as to the substance of the thing which is subject of the agreement.

 Essential Elements of Misrepresentation:

 (i) It must be a misrepresentation of some material fact;

(ii) It must be made before the concerned party enters into a contract.

(iii) It must be innocent or unintentional statement.

(iv) Misrepresentation may be committed by any of the following ways : (a) By positive statement.  (b) By breach of duty.  (c) By causing a mistake by innocent misrepresentation.

 Legal Effect of Misrepresentation : An aggrieved party suffering any loss as a result of misrepresentation can either rescind or avoid the contract altogether or can accept the contract but insist that he will be placed in such position in which he should have been, if the misrepresentation made had been true (section 19).

 Mistake : Mistake is one of the causes because of which the consent is said not to be free. It is a misconception or misimpression or misunderstanding or erroneous belief about something. According to Section 20, “Where both the parties to an agreement are under a mistake as to a matter of fact essential to an agreement, the agreement is void.”

 Mistake may be of two types  – (i) Mistake of Law, and (ii) Mistake of Fact
Mistake of law may be two types : (i) Mistake of law of the land will be enforceable but mistake of foreign law is void  and (ii) Mistake of fact: is as to material fact of the contract.

 Mistake of fact may be of two types : (1) Bilateral Mistake, and (2) Unilateral Mistake

 (1) Bilateral Mistake : Bilateral mistake is mutual mistake by both the parties to agreement and relating to

 (i) Mistake as to subject matter, and

Mistake as the subject matter may be as to identity of subject matter, as to existence of subject matter, quality of the subject matter, quantity of product, as to price, mistake as to title, mistake as to existence of State of affairs and (ii) mistake is to possibility of performance. It may be of two types viz Physical and Legal impossibility.

 (ii) Mistake as to possibility of performance of the contract.
(2) Unilateral Mistake : The unilateral mistake means where one of the parties to a contract is under a mistake. As to the matter of fact, it is unilateral mistake. Such  ontract is not voidable. But under such following conditions, contract of unilateral mistake also becomes void :

 (i) Mistake as to the identity of the party contracted with,

(ii) Mistake as to identity of attributes of contracting party, and

(iii) Mistake as to the nature of the contract.