Principles of Law of Contracts

Free Consent- Need and Definition

Free Consent under Indian Contract Act, 1872

INTRODUCTION
According to Section 10, one of the elements of a valid contract is free consent. The parties' agreement
means that they both understand the same thing in the same way. There must be no misunderstanding
between the parties regarding the contract's subject matter. According to Section 13 of the Indian
Contract Act, two or more persons are said to consent when they agree on the same thing in the same
sense. Consent thus entails the identity of minds in relation to the subject matter of the contract. This
is known as 'consensus-ad-idem' in English law.

FREE CONSENT
It is not enough for a contract to be valid if both parties agree. The consent should also be free, in the
sense that it was given freely by the parties without the use of pressure or force. Section 10 of the
Contract Act expressly states that all agreements are contracts if they are entered into with the parties'
free consent. According to Section 14 of the Act, consent is said to be free when it is not compelled by
any third party.
(i) coercion, or
(ii) undue influence, or
(iii) fraud, or
(iv) misrepresentation, or
(v) mistake.
When one party's consent is not free, the contract is deemed voidable at the option of the party whose
consent was not free. If, on the other hand, the consent was obtained by mistake on the part of both
parties, the contract is considered null and void.
COERCION
If a person commits or threatens to commit an act prohibited by the Indian Penal Code in order to
obtain the other person's consent to an agreement, the consent is obtained through coercion. Coercion
is defined as "forcing or threatening someone to give his consent."
Coercion Essentials:
a) Committing or threatening to commit any act prohibited by the Indian Penal Code; or
b) Illegally detaining or threatening to detain any property to the hindrance of any person.
c) In order to induce any person to enter into an agreement.

UNDUE INFLUENCE
When one party is in a position to exert undue influence over the will of others and actually abuses that
power, the contract becomes voidable. Only when all three of the following conditions are met is the
situation deemed to be 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 term 'undue' refers to something that is unnecessary, unwarranted, or more than is required.
'Influence' means persuading another's mind by 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 could
be a blood relationship or another type of relationship, such as a fiduciary or trust-based relationship.
It may also occur when the parties are in a relationship of trust or dependence, allowing one of them to
exert influence over the other that is perfectly natural and proper in and of itself, but has the potential
to be abused.

FRAUD
According to Section 17 of the Indian Contract Act of 1872, "FRAUD" refers to and includes any of
the following acts committed by a party to a contract, or by his agent, with the intent to deceive
another party to the contract, or to induce him to enter into the contract:
• The suggestion as fact of something that is not true by someone who does not believe it to be true.
• Active concealment of a fact – also known as suppresio veri or suppression of a fact.
• A promise made with no intention of keeping it
• Any other act designed to deceive;
• Any act or omission expressly declared by law to be fraudulent.

Essentials of Fraud:
. A false statement of fact should be made by someone who does not believe the statement is true,
. The statement should be made with the wrongful intention of deceiving another party
. Inducing him to enter into the contract on that basis.

MISREPRESENTATION
The term representation refers to 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 to the contract, with the intent
of inducing the other party to enter into the contract. When a representation is made incorrectly,
whether inadvertently or intentionally, it is referred to as 'misrepresentation.' Fraud occurs when an
incorrect representation is made knowingly with the intent of deceiving the other party. However, it is
referred to as ' misrepresentation' when it is made inadvertently, that is, without any intent to deceive
the other party. In such a case, the party making the incorrect representation genuinely believes it to be
true.
For example, A tells B that his car gets 18 kilometres per litre of gasoline while being sold to him. This
is something A believes. B discovers later that the car only gets 15 kilometres per litre of fuel. A has
made a mistake here.

Essentials of Misrepresentation:
1. The representation should be made innocently, with the intention of deceiving the other party and
with the best of intentions.
2. Misrepresentation of facts relevant to the contract is required. A statement of facts is not simply an
expression of one's opinion.
3. While the representation must be false, the person making it must honestly believe it to be true.
4. The representation must be made with the intent of inducing the other party to enter into a
contract, and the other party must have relied on the representation's faith. If a party had the means to
discover the truth with ordinary diligence, he cannot complain of misrepresentation.
5. The false representation must have been made by one of the contracting parties to the misled party.
It is not misrepresentation if it is not addressed to the party who is misled.

MISTAKE
A mistake can be defined as an incorrect belief about something. When an agreement is made by
mistake, there is no consent and the agreement is null and void. Mistakes can be classified into two
types:
● Mistakes of facts
● Mistakes of law

Mistakes of facts (Section 20):

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

Bilateral mistake:
Bilateral mistake of fact occurs when both parties to an agreement make a factual error that is critical to
the agreement. There is no agreement in such a situation because there is no consent. Section 20 of the
Act states that if both parties to an agreement are mistaken about an essential fact of the agreement, the
agreement is null and void.

Unilateral mistake:
The term "unilateral mistake" refers to a situation in which only one party to an agreement is at fault.
In most cases, a unilateral error does not render the agreement null and void. A contract is not voidable
simply because one of the parties to it made a factual error, according to Section 22. If a man fails to
ascertain what he is contracting about due to his own negligence or lack of reasonable care, he is
obligated to bear the consequences.
Mistake of law (Section 21):
Mistake of law can be further classified into (a) mistake of Indian law, and (b) mistake of foreign
law.

Mistake of Indian law:

The general rule is that an error in the law of the land is not an excuse. Section 21 states that a contract
is not voidable because it was made in violation of any law in force in India. Because everyone is
expected to know the law of the country, and if a person does not know the law of his country, he must
face the consequences.

Mistake of foreign law:

A person is expected to know his own country's laws, but not the laws of other countries. As a result,
the rule that 'ignorance of the law is no excuse' does not apply to foreign law. A blunder in foreign law
is treated as a factual blunder.

Effect of Mistake:
1) When both parties to an agreement make a mistake about a fact essential to the agreement, the
agreement is null and void.
2) In most cases of unilateral error, the contract is not void. However, where a unilateral error defeats
the parties' true consent, the agreement is deemed null and void.
3) Anyone who has benefited from such an agreement is obligated to return or compensate the person
from whom he benefited.
4) A person who has received money or something by mistake must repay or return it.

CONCLUSION
To reach an agreement with a legally binding contract, free consent is required. It is impossible to
overstate the importance of free consent. The consent of the Party must be uncomplicated and
unforced. The contract must be signed without any pressure or delusions.
CASES
Raffles vs. Wichelhaus (1864)
In Ranganayakamma vs. Alwar Setti (1889)
Derry vs. Peek
Hingawwa vs. Byrappa Shiddappa Hirek Rabar
Mohunlal vs. Gungaji Cotton Mills
Gallaway vs. Gallaway

SOURCES
Free Consent in Contracts and its components (legalserviceindia.com)
Free Consent Essential for Contracting - Law Times Journal
Free Consent under Indian Contract Act, 1872 – Legal Study Material