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Factors Vitiating Free Consent- Coercion and Undue Influence

This Assignment tries to highlight on the two factors which vitiate the free consent in a contract, namely Coercion and Undue Influence. Section 10 of Indian Contract Act tells that consent is an essential requirement of a contract, the same has been highlighted in the Indian Contract Act, 1872 in section 13 which defines Consent and section 14 which defines Free Consent.

The assignment defines the two factors and understands the same with the help of certain case laws and lays down certain crucial elements of the same. Some common confusion among the application of the two factors have also been cleared. And lastly the applicability and the effects of coercion and undue influence have also been stated.

Meaning Of Consent

According to Section thirteen of the Indian Contract Act, Two or more persons are said to consent when they agree upon the same thing in the same sense
The principle of consensus-ad-idem- Meeting up of minds.

Consensus ad idem in contract law means there has been a meeting of the minds of all parties involved and everyone involved has accepted the offered contractual obligations of each party.

Illustration:
A offers to sell his stocks, B accepted it believing it to be his farm stock whereas A’s offer was for his company’s stock in the market. Here both of them agreed on different things, and there is no meeting up of minds.

Free Consent
Section 14 of the Indian Contract Act describes a free consent, it says Consent is said to be free when it is not caused by:
  1. Coercion, as defined by 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 provisions of sections 20, 21 and 22
Apparently these five elements mentioned in section 14 are the factors which if involved in a consent can vitiate it disrupting the whole contract formation. Where consent to an agreement is caused by any above mentioned factors, then the agreement is a contract voidable at the option of the aggrieved party (whose consent was not free) except where it is caused by mistake, as the agreement is void and an void agreement is not enforceable at the option of either party.

Illustration:
A. If the person is induced to sign an agreement by misrepresentation of certain key elements of the agreement, then he may on discovering the truth either can uphold the contract or reject it.

B. If a person consents on an agreement as he mistakenly believed that a fact to be true which was indeed not, then in that case, the agreement stands void.

Coercion- Section 15, Indian Contract Act

Coercion is the committing, or threatening to commit, any act forbidden by the Indian Penal Code (XLV of 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.

Explanation:
It is immaterial whether the Indian Penal Code (45 of 1860) is or is not in force in the place where the coercion is employed.

Illustration:
A, on board an English ship on the high seas, causes B to enter into an agreement by an act amounting to criminal intimidation under the Indian Penal Code (45 of 1860).
A afterwards sues B for breach of contract at Calcutta.

A has employed coercion, although his act is not an offence by the law of England, and although section 506 of the Indian Penal Code (45 of 1860) was not in force at the time when or place where the act was done.

Important Elements
  1. Committing or threatening to commit any act forbidden by the Indian Penal Code.
  2. Unlawfully detaining or threatening to detain any property.

Example
  1. A receives the consent of B by threatening him that he would burn his house if he doesn’t agree to the agreement put forward by him
  2. Detention of property Where an agent, whose services were terminated, detained accounts to obtain his release, the release was induced by coercion

Difference Between Duress And Coercion

  • Coercion is much wider in scope than Duress/Menace (in English law)
  • Unlawful detention is included in coercion but not in Duress
  • Coercion may be committed by any person, not necessarily a party to contract unlike Duress

Important Case Laws
  • [1] Askari Mirza v. Bibi Jai kishori:
    A criminal prosecution was instituted against a person and fearing the result of prosecution, he entered into an agreement in consideration of the other party abandoning the prosecution. It was held that the threat of criminal prosecution is not per se an act forbidden by the Indian Penal Code. Hence, consent is valid. The Privy council also observed that cases brought under particular branch of section 15 of ICA must be of rare occurrence
     
  • [2] Chikham Amiraju v. Chikham Seshamma:
    In this case, a Hindu by the threat of suicide induced his wife and son to execute a release of several properties in favour of his brother which they claimed their own. It was held that the threat of suicide amounts to coercion and the release deed due to the application of section 15 is therefore voidable.

    However there was a difference of opinion related to whether suicide is punishable under IPC, only attempt to suicide is punishable under IPC, Majority consisted of Chief Justice Wallis and Justice Seshagiri believed that the person who commits suicide goes unpunished not because the act is not forbidden but because there is nobody to punish. Dissent was on the ground that unless an act is made punishable it cannot be said to be forbidden.

Effect Of Coercion
When the agreement made is found to be made out of coercion, then the contract would be rescinded or cancelled, due to which both parties are released from their obligation to perform their duties as per the contract.

Burden Of Proof
The burden of proof lies with the party defending the coercion. The burden of proof is heavier on him. This is because pure probability or fear is not a threat. In order to create coercion, a person must show that there was a risk that was prohibited by law and that forced him to enter into a contract that he would not otherwise have

Undue Influence- Section 16, Indian Contract Act

  1. Undue influence defined:
    1. 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.
     
  2. 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:
    1. Where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or
       
    2. 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.
       
  3. 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 the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall be upon the person in a position to dominate the will of the other.
Nothing in the sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872 (1 of 1872)

Illustration
A an old person appoints B as his attendant and B is his nephew as well. B demands a share of his property and A agrees to pay him. In this situation, A is under the undue influence of B.

The principle of undue influence is based on the doctrine of equity.

Established by English Courts talks after unjust enrichment and is applicable in every case where there is the acquirement of influence and its abuse and where there is reposition or betrayal of confidence. Thus, every contract which involves undue influence comes under the ambit of the principle of equity.

Important Elements
  • Either of the parties should be in a state to dominate over other
  • The party who dominates should have taken undue advantage of his position.

Presumption Of Undue Influence
  1. Where one of the parties to a contract is in a position to dominate the will of other and contract is prima facie unconscionable i.e. unfair, the court presumes the existence of undue influence in such cases.

    [3]Subhas Chandra Das Mushib v. Ganga Prasad Mushib:
    It was held merely because the parties were nearly related to each other no presumption of undue influence ca arise, and the circumstance thata a grandfather made a gift of a portion of his properties to his grandson a few years before his death is not on the face of it an unconscionable transaction.
     
  2. Where one of the parties to a contract is a Pardanashin woman, the contract is presumed to be induced by undue influence. In relation to pardanashin women, Bombay High Court made an opinion that a woman becomes pardanashin not because she is in a seclusion of some degree but it means a woman who is totally secluded from the ordinary social intercourse. The protection for pardanashin women is been rooted in the principle of equity and good conscience.

    [4]Mahboob Khan v. Hakim Abdul Rahim:
    Where a Pardanashin and illiterate woman acting under full confidence of the defendant who projected a false impression of the contents of a documents, put this thumb impression on such documents, their comment is vitiated .The matter of Undue influence and fraud was also touched upon, it was observed that undue influence is said to be a subtle piece of fraud whereby mastery is obtained over the mind of the victim, by insidious approaches and seductive artifices.

Parties That Can Be Affected By Undue Influence
  • Real and apparent authority
  • Fiduciary relationship
  • Parent and child
  • Adult child and parent
  • Husband and wife
  • Lawyer and client
  • Doctor and patient
  • Trustee and beneficiary
  • Creditor and debtor
  • Landlord and tenant
  • A person whose mental capacity is low
  • Old age
  • Tender age

Difference Between Coercion And Undue Influence
In coercion relationship between both the parties is not required whereas in Undue Influence the relationship between parties helps in establishing the burden of proof under this section, Coercion is a criminal offence whereas, undue influence is not a criminal offence

Major Case Laws
  • [5]Mannu Singh v Umadat Pande:
    In this case, a spiritual leader induced the plaintiff (his devotee) to gift him the whole property to get benefits of the soul in the next world. It was held that the consent is obtained by undue influence and hence, it is voidable by the person whose consent was so induced. Court also observed that no reasonable person in full possession of his senses and not under unusual influence of some kind or the other do such a thing.
     
  • [6]Williams v Bayley:
    In this case, a son forged the signature of his father on certain promissory notes and paid them into his account. When the truth came to light, the bank manager threatened to prosecute the son. To avert this, father mortgaged his property to the bank manager. House of Lords said that father gave his consent under influence and held the agreement voidable.

Effects Of Undue Influence
Under Section 19A of the Contract Act, an agreement induced by undue influence is voidable at the option of that party whose consent was taken by influencing him/her. Performance of such agreements may be avoided absolutely or on prescribing certain terms and conditions.

Burden Of Proof
If the transaction appears to be unconscionable then the burden of proving that the contract was not induced by undue influence is to lie upon the person who was in a position to dominate the will of other.

Conclusion
Coercion and Undue Influence are the two factors mentioned in section 14 of the Indian Contract Act 1872, which renders the contract voidable at the will of the aggrieved party whose consent has not been obtained freely. Coercion though dealing with the element of threat and force and acts in contrast with the IPC, Undue Influence talks about the dominant position party can influence the consent of the other party.

Coercion has been elaborately defined under section 15 of ICA and Undue influence has been defined under section 16 of ICA. The effect of both of them is that it makes the contract voidable at the will of the aggrieved party though in coercion the burden of proof lies on the aggrieved party, in Undue influence it lies on the party having undue influence over the will of the other party.

References:
  • Contract and Specific Relief, Avtar Singh, Twelfth edition published by EBC

End-Notes:
  1. ILR (1918) 41 Mad 33, 36
  2. AIR (1912) 16 IC 344
  3. AIR 1967 SC 878
  4. AIR 1964 Raj 250
  5. ILR (1888-90) 12 ALL 523
  6. (1866) LR 1 HL 200

    Award Winning Article Is Written By: Ms.Teesha
    Awarded certificate of Excellence
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