Contracts in India are regulated by the Indian Contract Act, 1872. The Act
provides that no contract shall be made without both the parties being fully
committed and willing to get the contract legally made. And thus the concept of
free consent becomes very significant. Section 12 of the Indian Contract Act
explicitly mentions the existence of free consent
of both competent
parties in order to make a contract legally enforceable and binding.
According to Section 13 of the Indian Contract Act, two persons are said to
consent when they agree upon the same thing in the same sense. Section 14 is the
primary section that this paper will focus on.
Section 14 defines free consent by stating that 'consent is said to be free
when it is not caused by:
- Coercion, as defined under Section 15
- Undue Influence, as defined in section 16, or
- Fraud, as defined in section 17, or
- Misrepresentation, as defined in section 18, or
- Mistake, subject to the provisions of sections 20, 21, and 22.
Consent is said to be so caused when it would not have been given but for the
existence of such coercion, undue influence, fraud, misrepresentation, or
The Latin phrase consensus-ad-idem
is the essence of these acts, meaning
that there should be meeting of the minds
of the parties to the contract. Without
the consent of both parties being free, the purpose of a contract being a
two-way deal is defeated. A contract made out of free consent protects the
validity of an agreement, thus providing the parties a protecting shield. It
provides the parties to withstand their autonomous power to frame their running
policy or principle.
Concept of consent
Section 13 of the Indian Contract Act states that consent only exists when the
parties to a contract agree upon the same thing in the same sense
or meeting of the minds must lie at the root of all contracts made
under the law. This concept was elaborated in the cases of Raffles vs. Wichelhaus (1864) and Smith vs. Hughes (1871)
. The cases in a nutshell:
Raffles vs. Wichelhaus (1864)
Often addressed as the Peerless case
, this case is a leading case in
English contract law. Parties came into the contract for the delivery of cotton.
The terms were such that the cotton would be delivered to the defendants at the
Liverpool port by the ship named Peerless
, departing from Bombay.
two ships named Peerless departing from Bombay and arriving at Liverpool. It was
later discovered that the defendant and claimant had two different ships in mind
when they had entered into the contract. Justices ruled that there was no
existence of consensus-ad-idem and therefore the contract became void.
Smith vs. Hughes
In this case, the Queen's Bench decided that even if there was no explicit
expression of assent by a party, but he or she conducts himself or herself in
such manner that a reasonable man would believe him assenting to the terms
proposed by the promisee, he/she would be bound by the contract as if he had
expressly entered into the contract.
Kinds of violations of Free Consent
According to the Indian Contract Act, 1872, the free consent of parties to a
contract is not obtained if it is adulterated by:
is defined in Section 15 of the Indian Contract Act. It is the act
of committing, or threatening to commit, any act forbidden by the Indian Penal
Code (1860) 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. It is also immaterial whether the Indian
Penal Code is or is not in force in the place where the coercion is
employed. Coercion means forcing an individual to enter into a contract. When
intimidation or threats are used to gain the party's consent, it does not
qualify as free consent. Coercion may involve the actual infliction of physical
and psychological harm in order to enhance the credibility of a threat. The
threat of further harm too can lead to the threatened person's cooperation or
Consent is said to be caused by coercion when it is obtained by
threatening or pressuring the subject by either of the following techniques:
- Committing or threatening to commit any act forbidden by the Indian
Penal Code: A person can only be held for coercion if he threatens to commit
an act that is forbidden by the IPC and uses that threat in order to attain the consent
of the plaintiff. If a person attains consent by threatening to do something
that is legal according to the IPC, he cannot be held for coercion.
In Ranganayakamma vs. Alwar Setti (1889)
The question before the Madras High Court was regarding the validity of the
adoption of a minor aged 13 years, by his widowed mother. On the death of her
husband, the husband's 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, as she was coerced into doing so.
- Unlawfully detaining or threatening to detain any property: Consent can
be said to be caused by coercion if it is induced by illegal confining or
threatening to hold a legal property of the plaintiff, by the defendant.
Essar Steel Ltd vs. Union of India (2006)
A company entered into a contract with a Government company Gas Authority of
India Limited (GAIL), for purchase of gas. The buyer company constructed the
pipeline for the carriage of gas and was also responsible for its maintenance.
GAIL demanded from the company transportation charges.
The demand was also found
to be against the price structure fixed by the Government. It was held that GAIL
was acting against the Government pricing order. It was held that GAIL was
employing coercion, and was withholding a lawful property of the buyer company
(the gas bought). GAIL was not allowed to charge extra transportation charges.
Threat to commit suicide as coercion
The case of Ammiraju vs. Seshamma (1917)
is the case primarily dealing with the
question of threat to commit suicide amounting to suicide. It was seen that
there was a threat by the husband to commit suicide, and he demanded his wife to
release property in name of his brother. It was seen that the wife was
prejudiced and it can't be forbidden by law. So here the threat to commit
suicide by the husband amounts to coercion on the wife. The Indian Contract Act
however cannot provide relief in such cases.
Section 16 of the Indian Contract Act puts forward the concept of undue
influence in contract law:
- 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 dominate the will of the other and uses that position to
obtain an unfair advantage over the other.
- 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�where he holds a real or apparent authority over the other or where
he stands in a fiduciary relation to the other; or 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.
- Where a person who is in a position to dominate the will of another
enters into a contract with him and the transaction appears, on the face of
it or on 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.
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 dominate the will of the other and uses that position to obtain an unfair
advantage over the other. The elements to constitute coercion are � the
existence of a position of authority, trust, and confidence of a party over
another, and the use of unfair persuasion by the party with the authority.
Real or Apparent authority:
A person in authority is definitely able to dominate the will of the person over
whom the authority is held. The authority may be real or apparent. The
expression "apparent authority" would include cases in which a person has no
real authority, but is able to approach the other with a show or color of
authority. For example, an Income Tax Officer in relation to his assessee.
Fiduciary relations are of several kinds. Indeed every relationship of trust and
confidence is a fiduciary relationship. And confidence is at the base of
innumerable transactions of mankind. This category is, therefore, a very wide
one. It includes the relationship of solicitor and client, spiritual adviser and
his devotee, doctor and patient. As in Mannu Singh v Umadat Pande, a guru
influenced his disciple to take his property in gift by promising to secure
benefits to him in the next world. The court set the gift aside as it was not
formed with free consent.
The burden of proving that undue influence had been employed in gaining the
consent of the plaintiff lies on the plaintiff itself. The person who files a
plaint alleging that his consent was attained using undue influence must prove
that the defendant was not only in a position to dominate his will, but also
used that positing in gaining an unfair advantage. The mere presence of a party
to a contract in a dominant position does not relieve the other party of his
liabilities under undue influence. But according to Clause 3 of the Section, in
cases where the contract prima facie appears unconscionable, the burden of
proving that consent wasn't attained using undue influence lies on the party in
a dominant position.
According to Section 17 of the Indian Contract Act, '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:
- 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
- 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.
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.
In English law "fraud
" was defined in the well-known decision of the
House of Lords in Derry vs. Peek, in which it was ruled that fraud includes the
components as, a false representation made:
Derry vs. Peek
- Knowingly, or
- Without belief in its truth, or
- Recklessly careless whether it be true or false.
A company's prospectus contained a piece of information that the company had
been authorized by a special Act of Parliament to run trams by steam or
mechanical power. The authority to use steam was subject to the approval of the
Board of Trade, but no mention was made of this. The Board refused consent and
consequently the company was wound up. The plaintiff, having bought some shares,
sued the directors for fraud. But they were held not liable. They were not
guilty of fraud as they honestly believed that once the Parliament had
authorized the use of steam, the consent of the Board was not required.
Active concealment of facts
"Active concealment" is something different from mere "passive concealment".
Passive concealment means mere silence as to material facts essential to a case.
The expression "any other act fitted to deceive" naturally means any act which
is done with the obvious intention of committing fraud.
Hingawwa vs. Byrappa Shiddappa Hireknrabar
The husband persuaded his illiterate wife to sign certain documents telling her
that by those papers, he was going to mortgage her two lands to pay off his
debts and in fact mortgaged four lands belonging to her. This was an act done
with the intention of deceiving her.
Mere silence as to material facts is no fraud unless it is the duty of the
person keeping silent, to speak.
A contracting party is under no obligation to disclose the entire truth to the
other party or to furnish him the whole information pertaining to the case in
his possession, affecting the subject-matter of the contract. A seller who puts
forth an unsound horse for sale, but says nothing about its quality, commits no
fraud. Duty to speak arises where one contracting party reposes trust and
confidence in the other.
A father, for example, selling a horse to his son must
tell him if the horse is unsound, as the son is likely to rely upon his
father. In the absence of any such relationship there is no duty to speak and
mere silence even if it amounts to misrepresentation, will be no fraud.
As defined by Section 18 of the Indian Contract Act, �Misrepresentation
means and includes:
- 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
A statement is said to be warranted when it is received from a trustworthy
source. Unwarranted statements are statements that are not necessarily true with
respect to the information that the speaker has.
Mohunlal vs. Gungaji Cotton Mills
A person (say A) told the plaintiff that a person (say D) would be the director
of a company. 'A' had obtained this information not from 'D' directly, but from
another person, called 'L'. The information proved untrue.
- Any breach of duty which, without intent to deceive, gains an advantage
to the person committing it, or anyone claiming under him; by misleading
another to his prejudice, or to the prejudice of anyone claiming under him.
Such cases in courts of equity are stated as cases of 'constructive fraud'; in such cases,
there is no intention to deceive, but the circumstances of the cases are such
that they make the party which derives a benefit from the transaction,
answerable as if he had acted with intent to cause fraud or deceit.
Oriental Bank vs. John Fleming
The plaintiff was given the impression by the defendant that a deed contained
nothing but formal matters already settled between them. The plaintiff, having
no time to read the contents of a deed signed it. The deed, however, contained a
release in favor of the defendants. The Court set aside the agreement for the
consent had been taken by misrepresentation.
- Inducing mistake with respect to the subject matter: 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.
Illustration: 'A' told 'B' that his radio is in good condition, because of the
confidence he had in 'A', 'B' bought the radio from him. The radio did not work
properly after some time, 'B' thought he was misled by 'A', but 'A' believed his
radio was in good condition and had no intention of deceiving him. So, here
misrepresentation is in the part of 'A', because he did not know that the radio
is not working properly.
A contract the consent to which is induced by misrepresentation is voidable at
the option of the deceived party. Misrepresentation means misstatement of a fact
material to the contract.
There are three primary types of misrepresentation:
Fraudulent representation: where a false representation has been made knowingly, or without belief in
its truth, or recklessly as to its truth. Fraudulent misrepresentation will
happen when an untrue representation is made and the party making the
representation knew it was false or was reckless as to whether it was
correct or incorrect.
Negligent misrepresentation: representation made carelessly and in breach of duty owed by a party, to the
other, to take reasonable care that the representation is accurate. A
declaration is made by one contracting party to another negligently or
without reasonable grounds for believing its truth.
Innocent misrepresentation: Misrepresentation made completely without fault or intent to deceive, is
described as an innocent misrepresentation. It is a representation that is
neither fraudulent nor negligent.
The remedies for misrepresentation are rescission and/or damages. For fraudulent
and negligent misrepresentation the plaintiff may claim rescission and damages.
For innocent misrepresentation, the court has the discretion to award damages in
lieu of rescission.
Section 20 of the Indian Contract Act states, that 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. A mistake does not defeat consent but misleads the party
such that the consent can no longer be considered free.
Explanation: An erroneous opinion as to the value of a thing that forms the
subject matter of the agreement is not to be deemed as a mistake of fact.
Illustration: 'A' agrees to buy a cow from 'B', but it turns out that the cow
was dead at the time of the deal, although the fact was not known to any party.
The arrangement is considered invalid.
The concept of mistake as stated in Section 20 is
supplemented under two other sections � Section 21 and Section 22.
Mistake of law: The Latin maxim 'ignorantia juris non excusat' means that
ignorance of the law is no excuse. Section 21 of the Indian Contract Act states
that a contract cannot be said to be voidable due to the mistake of the parties
in understanding any laws that are in force in India. Hence the parties to the
contract cannot claim relief on the grounds that they were unaware of the Indian
Copper vs. Phibbs (1867)A nephew leased a fishery from his uncle. His uncle died. When the lease came up
for renewal the nephew renewed the lease from his aunt. It later transpired that
the uncle had given the nephew a life tenancy in his will. The lease was held to
be voidable for mistake as the nephew was already had beneficial ownership right
in the fishery. It was held that a mistake as to the general ownership or right
stands on the same footing as a mistake of law and therefore was declared void.
- Mistake of fact: The Latin maxim 'Ignorantia Facti Excusat' means that
ignorance of fact can be an excuse under the law. Under Section 20 of the Indian
Contract Act, 1872, a contract is said to be void when both the parties to the
agreement are under a mistake as to a matter of fact. A mistake of fact can be
one-way or both ways.
Bilateral mistake: Section 20 of the Indian Contract Act defines bilateral
mistakes under the law.
Section 20 will only apply when three conditions are
- The mistake must be committed by both the parties, that is, the mistake
must be mutual.
- The mistake must be regarding some fact.
- It must relate to a fact which is essential to the contract.
Therefore if the mistake is made regarding the existence of the subject matter
or a fact essential to the contract, it would be a void contract since there
is no consensus ad idem
Gallaway vs. Gallaway
This was a case of both the parties were under the mistake that they were
married. The two of them agreed to separate and thus made an agreement. Then it
was found out that the man's first wife was still alive which was actually
unknown to both of them. The court held that the separation deed was void. It
was on the grounds that the agreement had been done on the belief that they were
married to each other, but turned out otherwise with the first wife being
Unilateral mistake: Section 22 of the Indian Contract Act says that a contract
cannot be said to be voidable just because one of the parties to the contract
was under a mistake as to a matter of fact concerned to the contract. Therefore
a unilateral mistake does not affect the validity of the contract and cannot be
a ground for setting aside the contract in the court of law.
Ayekpam Angahl Singh and Another vs. Union Of India and Ors.
The plaintiff, in this case, was the highest bidder in a fishery auction. The
rent was 40,000 per year and the said rights were auctioned for three years. The
plaintiff sought that he assumed the rent amount to be for all three years
together. Thus, he claimed that he was under the same mistake. Since the
mistake, in this case, was unilateral, the contract couldn't be avoided.
Voidability of agreements without free consent
When consent to an agreement is caused by coercion, fraud, or misrepresentation,
the agreement is a contract voidable at the option of the party whose consent
was so caused. A party to a contract, whose consent was caused by fraud or
misrepresentation, may, if he thinks fit, insist that the contract shall be
performed and that he shall be put on the position in which he would have been
if the representations made had been true. The exception to this is 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
- A, intending to deceive B, falsely represents that five hundred bails of
indigo are made annually at A's factory, and thereby induces B to buy the
factory. The contract is voidable at the option of B.
- A, by a misrepresentation, leads B erroneously to believe that five
hundred bails of indigo are made annually at A's factory. B examines the
accounts of the factory, which show that only four hundred bails of indigo
have been made. Nevertheless, B buys the factory. The contract is not voidable on account of A's
Free Consent is absolutely important to make an agreement with a valid contract.
The importance of free consent cannot be stressed enough. The Party's consent
must be free and voluntary. It is necessary to give consent to the contract
without any pressure or delusions. It is essential that the parties' consent is
free, as this may affect the contract's validity. If the consent has been
obtained or caused by coercion, undue influence, fraud, misrepresentation, or
mistake, then the aggrieved person has the right to void the agreement.
- Advocatekhoj publication on voidability of contracts.
- ipleader publication by Soma Mohanty of KIIT School of Law.
- ipleader publication by Avni Kaushik on the concept of free consent in
Indian Contract Act.
- LexForti Legal News Network
Award Winning Article Is Written By: Mr.Sayandeep Chakraborty
Authentication No: MA107423989612-15-0321
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