FREE CONSENT

{ Charu Srivastava (Assistant Professor)

consent
 Sec 10 consensus ad idem
 Sec 13 defines consent

Apparent or real consent

Consent may not exist:
a) Ambiguity
b) As to the nature of the transaction (Doctrine of non est factum): Mistakes as to
nature of transaction is peculiar to written documents. A person who has put
his name to an instrument of one kind, understanding it to be an instrument of
a wholly different kind, may be entitled, not only to set aside against the other
party on the ground of any fraud or misrepresentation which caused his error,
but to treat it as an absolute nullity, under which no right can be acquired
against him, by anyone.
In Foster v Mackinnon , the defendant was induced to endorse a bill of exchange
which he was told was a guarantee.
 Banku Behari Saha v Krishto Gohindo , where a document
was signed only on the first page, but was not signed on
other pages, the executants having discovered that it was
not in accordance with the terms previously agreed upon,
it was held that the document was a nullity.
Non Est Factum and Estoppel
 A signatory may be estopped by negligence from pleading

non est factum

 One or both parties are under a mistake as to the
 Identify of the other party
 Nature of the transaction

 Different subject matter in mind

Mistake can be unilateral or bilateral

 Sec 20: bilateral mistake : void agreement  subject matter,
its identity, title of the parties etc.
 Explanation to section 20: erroneous opinion as to value of
thing : not a mistake of fact.
 Sec 21: ignorance of law is no excuse, but ignorance of
foreign law is an excuse.

 Sec 22: mistake of one party

 Sec 14 when consent is said to be free.?
 Coercion s. 15 contract is voidable
 Undue influence S. 16 (Sec 19, 19A)
 Fraud S. 17 (Salmond says Error in
 Misrepresentation S. 18 Causa)
 Mistake S. 20,21,22
COERCION (S 15)
 Sec 15
1. Committing or threatening to commit any act forbidden
by IPC
2. Unlawful detaining or threatening to detain the property
of another.
Coercion may be committed against the party or to third
person.
Coercion can be done by a party to a contract or third person.
Duress under English Law.
 Ranganayakamma v alwar (1889) 13 Mad. 214 widow was
forced to adopt.
 Askari mirza b bibi jai kishori (1912) , Is threat to sue
coercion?
 Chikkam amiraju v chikkam seshama AIR1918 Mad 414, is
threat to commit suicide coercion?
 Muthia v karrupan, (1927) 50 Mad. 786 agent refused to
give books of business unless principal releases him of his
liabilities amounts to coercion.
 Ashley v Reynolds (1731) detention of property
 Duress (English law) (was narrower than coercion)
Consists of actual or threatened violence or imprisonment:
the subject of it must be the contracting party himself, his
wife, parent, child or near relative.
Effect of coercion  sec 19 makes it voidable and sec 64
requires him to restore the benefit.
UNDUE INFLUENCE
 Unfair moral pressure
 It is subtle species of fraud whereby mastry is obtained over the mind of the
victim, by insidious approaches.
 Influence is acquired and abused
 Smith v kay (1859) Lord Kingdom pointed that influence abuse is there where
confidence reposed.
 Tate v. Williamson (1886)
 Will every unconscionable, unfair and unreasonable terms amount to undue
influence? (against public policy)
 SC in Ladli Prasad v. Karnal Distillery Co. Ltd. ( 1964)
Section 16 (1)  unconscionable bargain
Section 16 (2) Different forms of influence :where person
deemed to be in a position to dominate will of other
 Real or apparent authority or fiduciary relation
 Where mental capacity is temporarily or permanently affected
by age, illness or mental or bodily distress.

Example legal, spiritual, medical etc adviser and benefit should be

beyond professional remuneration.
Section 16 (3) burden of proof.
 SECTION 16(1)
Smt. Chinnamma v Devanga (1973)  a benefit to third party is
sufficient. In this case UI by office bearers of a society benefiting
the society was held to be sufficient to avoid the contact.
No UI when parties are on equal footing. Transaction in the
ordinary course of business not voidable. (Ills. D)
Shrimati v. Sudhakar (AIR Bom 122)  gift not induced by UI
as the gift deed was made by a illiterate woman, was intelligent
enough to manage her proprieties and was getting agricultural
land cultivated from various persons from time to time for
about two decades.
 SECTION 16 (2) Different Forms of Influence and
Presumption of domination of Will
1. Real or apparent authority
 Police in relation to accused
 Superior in relation to subordinate
 Income tax officer in relation to assesse.
2. fiduciary relation (mutual trust and confidence)
 Parent and child
 Guardian and ward
 Solicitor and client
 Doctor and pateint
 Spiritual advisor and devotee

Court of appeal in Moody v Cox (1917) 2CH 71

 Parties need not be related by blood, marriage etc
 Allicard v skinner (1887) plaintiff unmarried woman
became member of church of England sisterhood.
 Mannu singh v umadat (1890) allahabad HC set aside the
gift by hindu to his spiritual adviser. (to secure benefit to
his soul)
 Ram chander v sital (1948) girl’s paramour stayed in the
same house with her and her father, father gifted all
property. Set aside since fiduciary relationship.
 Wajid khan v ewaz ali (1891) set aside gift executed by old illeterate woman in favor of
her confidential managing agent.
 Similarly gift deed by ailing mother to son was set aside.
 Parents stand in a fiduciary relation with child (abdul malick v mhd. Yousuf (1961) if
gift is made to the parent or guardian soon after the donor attains majority, the
presumption of the parent influence continues.
 Mussajee v hafiz (1906) presumption of UI does not apply in case of mother daughter
relation
 Sarfaraz v ahmad (1944) presumption of UI does not arise in husband and wife relation.
 Tungabai v yeshwant (1945) presumption of UI does arise in husband and wife relation.
 Palanivelu v neelavathi (1937) eldest’s sisters husband in a position to dominate.
 There is no presumption of UI between grandson and grandfather. ( lakshmi v telengal
(1970)
 3. Where mental capacity is temporarily or permanently affected by age,
illness or mental or bodily distress.
Ranee Annapuri v.Swaminatha (1910) 34 Mad. 7  a poor widow in
urgent need of money agreed to 100% rate of interest. It was held that it
was UI. Court reduced it to 24 percent.
However urgent need of money in itself is not sufficient evidence of
mental distress.
Inche Noriah v. Shaik Allie AIR 1929 PC 3, appellant was a feeble old
woman, unable to leave the house, relying entirely upon the respondents
for everything. She gifted all her property to respondent. Court set aside
the deed and also observed that a gift made under such circumstances
which gave rise to the presumption must be set aside unless the donee is
able to satisfy the courts of facts sufficient to rebut the presumption.
 Effects of UI  Sec 19A.The court has discretion to direct the
aggrieved party for giving back the benefit whether in whole or in
part set aside the contract without any direction for refund or
benefit.
 Burden of proof and presumption of UI

The plaintiff has to prove:

a) The other party was in a position to dominate
b) He actually used his position
But in certain cases presumption of UI is raised. Once it is shown that
defendant was in a position to dominate the will of people it will be
presumed that he must have used it. Then the burden will shift on
defendant.
 The presumption is raised in the following cases:
a) Unconscionable bargain
b) Contracts with pardanashin women
Raghunath Prasad v. Sarju AIR 1924 PC 66
Relation between parties that one in a position to dominate
Whether he actually used?
Whether the transaction is unconscionable?
Parties nearly related to each other is no presumption of UI.
 SC in Subhash Chandra v. Ganga Prasad (AIR 1967 SC 878)
“It is a mistake to treat undue influence as having been
established by a proof of the relations of the parties having
been such that the one naturally relied upon the other for
advice, and the other was in a position to dominate the will
of the first in giving it. Upto that point ‘influence’ alone has
been made out. Such influence may be used wisely,
judiciously and helpfully. It must be established that a
person is in a position to obtain unfair advantage for
himself.”
 Therefore as between parties on equal footing , the mere
unconscionableness of the bargain does not create the presumption of
UI. The mere fact that the bargain is a harsh one does not mean UI.
TRANSANCTIONN WITH PARDANASHIN LADY
Who according to the custom of her community lives in seclusion.
(presumption of UI)
Mrs Hodges v delhi and London Bank Ltd. (woman could read and
write urdu, managed her affairs, not UI)
Kali Baksh v. Ram Gopal singh  law protects pardanashi lady , it must
be proved by other party that she understood the nature of transaction.
Two months before her death a widow gifted half of her property to
son of her paramour. Held UI
 Illeterate, sick weak women treated as pardanashi lady. (Knawarani v K.
Raghu (1976)
UNCONSCIONABLE BARGAIN Sec 16(3)
illustration ©
Something which is so much to the advantage of one party and disadvantage
of other that it “shocks the conscience”
This sub section lays down rule of evidence.
Parties not on equal footing unconscionableness of bargain raises the
question of UI. However when parties on equal footing, unconscionableness
of bargain, does not raise the presumption of UI..
In raghunath prasad case, the lender was not in a position to dominate the
will of borrower, although bargain was unconscionable , the burden of proof
did not shift.
 Balkrishan v madan lal (1907) loan of rs 500 at 37percent
per annum rate of interest. Held unconscionable.
 However mere fact that the rate of interest is high does not
by itself place the lender in a dominant position.
(illustration (d) of sec 16)
 Smt takri v smt rama (1984) old illiterate woman gifted her
immovable property to her advocate. Court said fiduciary
relation – UI
 Niko devi v kirpa (1989) illiterate girl gifted her property
to defendant. Held UI.
 SUBMISSIVE WIFE gave her stridhan as security for the
Benefit of husband. Held UI
Subhash v ganga (1967) gift of property to one of grand son.
No UI.
(where there is no relationship shown to exist from which UI
is presumed, that influence must be proved.)
Trial court  dismissed plaintiff’s suit.
High court  presumed that because of age of father his
intelligence and understanding must have deteriorated and
consequently it was for the court to presume that he was
under the influence of younger son Balram at the time of gift.
The donee –defendant preferred the appeal before the SC.
 Supreme court -
Held gift was valid.
Presumption made by High court was wholly wrong.
Court referred to Halsbury law of England “there is no
presumption of UI in the case of a gift to a son, grandson, or
son in law, although made during the donor’s illness and a
few days before his death”
It was noted that HC did not come to a finding that Balram
was in a position to dominate the will of his father. Nor did
court find the transactions was an unconscionable one. The
court made presumptions which were neither warranted by
law nor supported by facts.
 Mst. Kharbuja v. Jangbahadur (1963) 1 SCR 456
In India, burden of proof is upon the person who seeks to
sustain the transaction entered with a purdanashin lady)
 Lakshmi v telengal (AIR 1970 SC 1367)

(Where a person was suffering from a number of ailments

which confined him in a nursing home and from there he made
a deed gifting all his properties to one of his sons to the
exclusion of other, it was held that the presumption of UI was
proper.)
Old gave all his property to only grand son (respondent)
 Difference between persuasion and influence.

 Exploitation of needy (cases between songwriter and

producers)
DIFFERENCE BETWEEN COERCION AND UI
 Coercion –physical force, UI  moral pressure

 No presumption of coercion, but it is in UI

 Criminal liability may arise in coercion but not in UI

 Coercion sec 19, UI sec 19A

FRAUD
 Intentional misrepresentation of a material facts
 Derry v Peek (1889) Lord Herschell, defined fraud as “a false statement made

knowingly, or without belief in its truth or recklessly whether it be true or

false.”
 Sec 17 does not define fraud but enumerates circumstances which gives rise to

fraud.
 Essentials elements of fraud:

1) The act must have been committed by a party to the contract or with his
connivance or by his agent.
Fraud committed by stranger does not vitiate the free consent. Directors are
regarded as agents of a company. Therefore, if false representation is made by
them in the prospectus of the company and a person buys shares directly from
the company on the faith of the prospectus the contract is voidable at the option
of the shareholder.
2) The act constituting fraud must be either of the following:
a) A suggestion as to a fact of that which is not true by one
who does not believe it to be true.
• Thus if a person deliberately makes a false statement of fact
knowingly that it is false or without believing in its truth amounts
to fraud.
• If a false statement is not made deliberately but recklessly
without enquiring whether it is true or false, it will amount to
fraud.
• But if a false statement is made believing it to be true it will not
amount to fraud.
A false suggestion is known as suggetio falsi.
 Derry v. Peek (1889)
FACTS:
• The prospectus of a company contained a statement that the company had been

authorised by a special act of parliament to run trams by steam power. The authority
to use steam was, in fact, subject to the approval of the board of trade, but this was not
mentioned in the prospectus.
• The directors however, honestly believed that once the parliament had authorised the

use of steam, the consent of the board was a mere formality.

• The board of trade did not permit the use of steam to run trams and consequently the

company was wound up.

• The plaintiff who purchased the shares on the basis of the prospectus sued the

directors for fraud. But the directors were held not guilty of fraud.
A mere statement of opinion does not amount to fraud. Commendatory statements such
as advertisements to the effect that soap powder “washes whiter than white” are not
considered as serious misrepresentation of fact.
b) An active concealment of facts by one having knowledge or belief of the
fact. It means that a party takes positive steps to conceal a fact. Which is
material to the transaction. Active concealment of fact is known as
suppressio veri.
c) A promise made without any intention of performing.
Reliance Salt ltd v. Cosmos Enterpises, (2006) 13 SCC 599, It was held that
breach of contract by reason of supply of inferior quality of tea or salt or
delay in supply may render the party responsible for damages for
commission of breach of contract, but, breach of contract alone does not
lead to the conclusion that a fraud has been committed.
Fraud, which vitiates the contract, must have a nexus with the acts of the
parties prior to entering the contract. Subsequent breach of contract of the
party would not vitiate the contract.
d) Any other act fitted to deceive.
e) Any other act or omission as the law specially declares to be fraudulent.
Example :section 55 of transfer of property Act, 1882, the seller of
immovable property is required to disclose to the buyer “any material
defect in the property or in the seller’s title thereto which the seller is, and
the buyer is not, aware, and which the buyer could not with ordinary care
discover”.
Similarly the buyer is required to disclose to the seller “any fact as to the
nature or extent of the seller’s interest in the property of which the buyer is
aware, but of which he has reason to believe that the seller is not aware,
and which materially increase the value of such interest.
The omission to make such disclosures is fraudulent even if the omission be
due to oversight.
3) The act constituting fraud must have been committed with the intention to
deceive the other party.
4) The act must have been induced the other party to enter into a contract. In
mithoolal nayak v. LIC, AIR 1962 SC 814, it was observed that “ a false
representation, whether farudulent or innocent, is merely irrelevant if it has not
induced other party to enter into a contract.
5) The other party must have acted upon the statement and suffered damages.
According to Pollock and Mulla, “an attempt to deceive which has not in fact
deceived the party can have no legal effect on the contract, not because it is not
wrong in the eyes of the law, but because there is not damage.”
For example, if a person in order to sell his unsound horse forges a certificate
and pins it on the door, buyer without reading the certificate buys the horse,
the buyer cannot avoid the contract because he has not been deceived the seller.
 Horstall v. thomas (1862) in this case a person purchased a
cannon, the cannon had a defect, and in order to conceal
the defect, the seller inserted a metal plug into the weak
spot of the gun. The buyer accepted it even without
inspecting it. It was held that as the buyer was not actually
deceived, the attempted fraud having had no operation
upon his mind , he could not avoid the contract on the
ground of fraud.
 Is silence fraud? (mere silence is not fraud) Explanation to section 17.
For example, A sells, by auction to B, a horse which A knows to be
unsound. A says nothing to B about the horse’s unsoundness. This is
not fraud by A.
In contract of sale of goods this principle is known as caveat emptor (let
the buyer beware.) according to this principle, the seller is under no
duty to disclose to the buyers the defects in the articles he is selling.
However there are certain exceptions to the rule of caveat emptor.
In Percival v. wright (1902) it was held that a director of a company
who had inside information that the value of share is likely to go up
was under no duty to disclose this fact to a shareholder whose shares
he purchased.
 Supreme court in Shri Krishna v Kurukshetra University
(1976) 1 SCC 311, if a candidate for a university
examination does not mention the fact of his attendance
shortage in the application, he is not guilty of fraud. The
university cannot cancel his examination.
Exception to section 17:
Makes two exceptions of passive non-disclosure or silence.
They are as follows:
1) Where there is a duty to speak. (uberrima fides)
2) Where silence is equivalent to speech
 The following two more exceptions can be added from the
decided cases:
3) Where there is a change of circumstances
4) Where there is half truth
1. Duty to speak:
These are contracts k/a uberrine fide or utmost good faith. The
duty to disclose arises specially when one of the parties has
absolutely no means to find out the truth. Following are the
examples:
a) Fiduciary relationship (illustration b)
b) Contract of insurance
London Assurance v. Mensal (1879)
The insured did not disclose the fact that several other insurance
companies have declined to insure his life even after asked to do
so. Amounted to fraud and policy can be avoided by company.
c) Contracts to subscribe for shares in companies:
d) Contract of family arrangement
e) Contract for the sale of immovable property
Seller must disclose to the buyer any patent defect in the seller’s
title, of which the seller is aware and the buyer is not aware.
Illustration (c) & (d) to section 19
f) Contract of marriage
Kiran Bala v B.P. Srivastava AIR 1982 MP 242 Girl unsound mind
and annulment of first marriage was considered as fraud.
Haji Ahmad v. Abdul Gani (1937) (mere passive non disclosure of
truth, does not amount to fraud but misrepresentation)
2) Silence equivalent to speech ( illustration c)
3) Change of circumstances.
With v. O’Flanagan, (1930) Ch. 575 CA,
Medical practice $ 2000 a week decrease to $ 5 a week.
4) Half truths
Gluckscin v barues (1900)
Lord McNaughtan observed that “Everybody knows that sometimes
half a truth is no better than a downright falsehood.” thus even
when a person is not bound to disclose a fact, he may be held guilty
of fraud if he volunteers to disclose a state of facts partly. This is so
when the undisclosed part renders the disclosed part false.
 Effects of fraud:
Sec 19: (illustration (a)
Second paragraph of section 19 ( illustration c)
Exception in last paragraph of section 19
 Mithoolal Nayak v. Life Insurance Corporation of India AIR 1962 SC 814
FACTS:
Mahajan was anemic, looked about 55 years of age, had a dilated heart and
his right lung showed indications of an old attack of pneumonia and that
he was totally physically weak.
Mahajan gave second proposal where he did no disclose his fact of being
treated for so many diseases.
1944  Second proposal  Dr kapadia noticed that Mahajan had stated
that he suffered from pneumonia and cholera for four or five years ago. No
mention was made however, of anaemia, asthma etc. he made a declaration
of his good health.
He died in 1946
 LEGAL ISSUES
1) Whether the policy was vitiated by fraudulent
suppression of material facts by Mahajan?
2) Whether the respondent company had issued the policy
with full knowledge of the facts relating to the health of
insured and if so, is it estopped from contesting the
validity of the policy?
3) Whether in any event the appellant assignee of the
policy, is entitled to refund the money he had paid to the
respondent company?
 Decision of the SC :
Mahajan was guilty of fraudulent suppression of material
facts relating to his health and the respondent company was
entitled to avoid the policy under section 54 of the insurance
act, 1938.
Courts will not entertain an action for refund of money,
where, in order to succeed the plaintiff has to prove his own
fraud.
MISREPRESENTATION
 Section 18
 statement of facts made during preliminary bargaining to
induce the other to enter into a contract may be mere
representation not indented to be terms of the contract.
 A false or misleading representation made innocently e.g.
without an intention to deceive the other party, is known as
misrepresentation.
 Where a statement is merely an inducement which the party
making it does not undertake to make good, it is a
representation; and if such a representation is false, it
renders the contract voidable.
 “The seller represents, warrants and undertakes that”
 Representation: "A representation is a statement of fact
which does not amount to a term of the contract but it is one
that the maker of the statement does not guarantee its truth.
This gives rise to no contractual obligation but may amount
to a tort, for example misrepresentation.
Misrepresentation Generally
 Misrepresentation means a false representation. With regard

to contracts, the general principle is that if one party has

induced the other to enter into a contract by misrepresenting,
though innocently, any material fact especially within his
own knowledge, the party misled can avoid the contract
 Fraud and misrepresentation it is the misstatement of facts
which misleads but in fraud the person knows it to be false.
1. Unwarranted statement
 Representation

A representation may be a positive assertion, or may be

implied or even expressed by conduct. Conduct may convey
information as effectively as a positive assertion. 'A nod or a
wink or a shake of the head or a smile, may amount to a
representation if made to induce the other party into believing
a certain state of facts
 Mohanlal v gungagi cotton mills co (1900) A told B, the plaintiff
that C would be director of a company. A had obtained this
information not from C directly but from another person called
D. the information was found to be untrue. Held to be voidable.
 Esso Petroleum Co Ltd v Mardon , a petroleum company
negotiating for a lease of a filling station negligently gave the
prospective tenant over-optimistic estimates of the sale
potential of the filling station, which was based on detailed
evaluation by the petroleum company. The tenant was not in as
good a position as the company to make estimates. It was held
to be liable to the tenant for negligent misrepresentation.
 Commendatory expressions such as advertisements to the
effect that a soap powder 'washed whiter than white' or
that certain brand of cigarettes gives 'lasting satisfaction' are
not considered as serious misrepresentation of fact.
2. BREACH OF DUTY
Covers all cases of constructive frauds, in which there is no
intention to deceive but circumstances are such that one
party gets the benefit and becomes equally answerable in
effect as if he had been actuated by motives of fraud or
deceit.
Vasectomy operations: damages awarded
3) Inducing mistake about the subject matter
Johnson v Crowe (1874) the defendant agreed to sell and deliver to
the plaintiff a boiler at a certain place, the plaintiff having innocently
represented to the defendant that there was a practicable road all the
way. In fact, there was a suspension bridge on the way and the
bridge was not strong enough to bear the weight of the boiler.
Farrand v. Lazarus (2002)
A second hand car dealer attached a disclaimer to the car under sale
stating that the mileage reading was incorrect. The dealer knew the
true mileage but did not disclose it. Court held misrepresentation.
Suppression of vital facts
R. Kylsant (1932)
Company stated that they paid regular dividends. Held
misrepresentation

Of material facts
what will be material will depend upon facts of each case
Educational qualification of spouse is a material fact.
Incapable of bearing a child held to be material fact.

Expression of opinion
Mere expression of opinion not regarded as
misrepresentation but in some cases it may.
 Effect of misrepresentation : section 19
 Difference between Fraud and misrepresentation:
1. Intention
2. Damages  in fraud apart from a contract being
voidable , an action under tort for damages can also lie.
3. In case of fraud, except fraud by silence, defrauding
party cannot set up the defence that the defrauded party
had means to discover the truth or could have done so
with ordinary diligence, but in case of misrepresentation
it would be a great defence. (See Exception to section 19)
 The aggrieved party can rescind or affirm the contract. But
not in the following circumstances:
a) When aggrieved party affirms the contract.
b) When the reasonable time period has elapsed.
c) When third party acquires rights in the subject matter of
the contract.
d) When restitution is not possible.
MISTAKE
 An erroneous belief about something.
 Not defined in the act.
 Sec 20, 21 and 22.
 Thus mistake may be divided into following:
1. Mistake of Law
a) Mistake of Indian Law
b) Mistake of Foreign Law
2. Mistake of fact
c) Bilateral Mistake
d) Unilateral mistake
MISTAKE OF LAW
A) Mistake of Indian Law (Sec 21)
Mistake of law is no excuse. (Read illustration to section 21)
However, relief can be granted where the mistake is so
fundamental as to prevent any real agreement “ upon the
same thing in the same sense” from being formed. Thus if
there is no consensus ad idem it is immaterial of what kind of
mistake was or how it was brought about. (See sec 72 of the
act.)
B) Mistake as to foreign law treated same as mistake of fact.
MISTAKE OF FACT
A) Bilateral mistake as to a matter of fact essential to the
agreement. (Sec 20)
Conditions for application of section 20 are as follows:
a) Both the parties to an agreement are under a mistake of
fact
b) The mistake relates to a matter of fact and
c) The fact about which they are at mistake is essential to
the agreement
(Read illustrations)
 ITC Ltd. v. George Joseph Fernandes, AIR 1989 SC 839
Court differentiated between mutual mistake and common
mistake.
Sec 20 deals with common mistake and not mutual mistake.
 Tarsen Singh v. Sukhminder Singh (1998) 3 SCC 471
(Bigha /Kanals, no contract)
Unilateral mistake is outside the scope of this section.
 Mistake as to a matter of fact essential to the agreement may be
discussed, inter alia, under the following heads:
a) Non existence of the subject matter
A contract entered into on the assumption that the subject matter of the
contract exists at the time of the contract, becomes void if, unknown to the
parties, the subject matter has ceased to exists at the time of the contract or
has never been in existence. For instance a payment of annuity upon the
life of a person who was already dead was held void. Similarly a contract
for the sale of an insurance policy on its being discovered that the assured
was dead at its dead, both parties being in ignorance of that fact, would be
void.
Couturia v. Hastie (1856) corn had become overheated and had to be sold
before contract.
b) Mistake as to the title or rights
Cooper v Phibbs (1867) LR 2 HL 149 a person has told his
nephew, not intending to misrepresent anything, but being in
fact in error, that he ( the uncle) was entitled to a fishery, and
the nephew, after the uncle’s death, acting in the belief of the
truth of what the uncle had told him, entered into an
agreement to rent the fishery from the uncle’s daughters
whereas it actually belonged to the nephew himself.
Subsequently, he sought to avoid the contracts on the ground
of mistake in that he ignorantly thought that it belonged to
the defendants. The house of lords set aside the agreement.
c) Different subject matter in mind.
Raffles v. Wichelhaus ( 1863) 2 H 7 C 906 ( arrival of ship in
October and December, no contract)
d) Mistake as to substance of the matter
Shiekh Bros Ltd v. Ochener (1957) AC 136 (PC)
(Sisal fibre per month, not contract)
Nursingh Das v. Chuttoolal (1923) 50 Cal 615
Land notified for acquisition by government, unknown to
parties, no contract)
Anson observes that , “ It is evident that there is no clear rule
which states that a mistake as to the substance of the thing
contracted for will avoid the contract.
Mistake as to substance as distinguished from mistake as to
quality may avoid the contract. However in Nicholson v.
Smith Marriot (1947) 177 LT 189 K 13, a certain quantity of
table linen and napkins described as “ the authentic property
of charles 1” by the seller were sold by him. The table linen
and napkins were later found to be Georgian. It was held that
there was mutual mistake of both the parties as to the quality
of the subject matter, and hence the agreement was void.
e) Mistaken assumption
Galloway v. Galloway ( 1914) 30 TLR 531
Parties were not legally married, not known to the parties,
plaintiff and defendant entered into a contract for
maintenance, no contract)
DISTINCTION BETWEEN SEC 20 AND SECTION 56
B) UNILATERAL MISTAKE (SEC 22)
HAJI ABDUL REHMAN V THE BOMBAY AND PERSIA
STEAM NAVIGATION CO. (1892) 16 Bom. 561
(Unilateral mistake does not affect the validity of the contract.)
In the instant case P chartered a steamer which was to sail
from Jedda on 10 august, 1892(15 days after Haj). The D had
no such belief and contracted as per engilsh date. P later on
wanted to change date. (there was unilateral mistake in the
instant case but contract was cancelled on desire of both the
parties.)
A.A. Singh v. Union of India, AIR 1970 Mani 16,
Govt sold right of fishery by auction, P offered highest bid
assuming right was given for 3 years whereas it was given
only for 1 year. It was a UM hence contract valid.
EXCEPTIONS:
A contract can be avoided under a unilateral mistake in the
following cases:
a) Mistake as regards the identity of the persons contracted
with or:
b) Mistake as regards the nature of the written document.
a) Mistake as regards the identity of the person contracted with.
A mistake as to identity of the person contracted with makes the
agreement void because if a person intends to contract with a
particular person, another person cannot give himself any right
under it.
Bell v. Lever Brothers Ltd., (1932) AC 161,
In case of mistaken identity, no contract arises and the principle
to be applied is ERROR IN CONSENSUS. The error must be one
of mistaken identity and not as to quality of the other party. In
mistake as to quality of other party rule applied is error in causa.
Boulton v Jones ( 1875) 27 LJ Ex 117
D was a customer of Brocklehurst with whom he had a right
of set of, ordered some goods. P had taken over business of
B, supplied goods without informing about the change of
owner. D refused to pay to Boulton (P). No contract.
Cundy v. Lindsay, (1873) 3 AC 459
One Blenkaran sent papers of orders to Lindsay & Co. Lindsay & Co.
thought they were contracting with Blenkiron situated on the same
road. Wood street. Blenkarn sold the goods to third party M/s
Cundy. Blenkarn did not pay for the goods and Lindsay brought a
suit againts M/s Cundy for unlawful conversion of the handkerchiefs
received by them.
House of Lords held theta there is no contract hence the property in
the goods did not pass to him therefore blenkaran had no right to
sell goods.
Mistake of identity arises when there is a identifiable person with
whom plaintiff intended to contract.
If name assumed is fictitious, then no mistake as to identity.
King’s Norton Metal Co. v. Edridge, Merret & Co. Ltd. CA
( 1897) 14 TLR 98,
A person wallis for the purpose of cheating set up a business
named as Hallam & Co. contracted with P. Wallis sold the
goods to third party.
Court said there is no mistake of identity since the P entered
into contract with the writer of the letter i.e. Wallis but it was
a case of fraud. Had there been separate entity as Hallam &
Co. then it would have been similar to Cundy v. Lindsay.
So mistake as to quality of party and mistake as to the identity of party are
two different things. However, in practice its application has sometimes
not been free from doubt.
Philips v. Brooks Ltd (1919) 2 KB 243,
A man named north went to jwellery shop (P) and asked to sell some
pearls and rings and told P that he was sir george of st. james square. The
P knew about such name and found a reference in the directory permitted
north to take rings . North gave cheque to P. the cheque bounced.
Meanwhile North sold the ring to third party for some amount . P sued D
for recovery of ring or payment of actual amount of ring.
Court said it’s a voidable contract because of fraud and not void contract
since he contracted with the person who was infront of them.
Lake v. Simmons, (1927) AC 487,
A women posing as wife of a wealthy customer made few
purchases from the jeweller. Contract held to be void since
jeweller though he was dealing with wife of wealthy person.
Ingram v. Little (1960) 3 All E.R. 322
Three ladies, joint owners of car, advertised second hand car for
sale. A rouge, introducing himself as Hutchinson offered to buy
it.
Court said it’s a void contract since mistake as to identity of
parties.
Court differentiated it from phillip v brooks on the ground that
in phillip case the sale was conducted so as to pass the property
before rogue made the fraudulent misrepresentation whereas in
ingram case, the rogue made the fraudulent misrepresentation
before the contract was concluded.
Lewis v. Averay ( 1971) 3 All ER 907
Contract with richard who presented himself as film star.
Court said it’s a voidable contract because of fraud and not
void. P intented to contract with the person actually present
before him. The court followed Phillips v brook and
expressed disagreement with Ingram v. Little.
B) Mistake as regards the nature of written document
Makes the contract void. Such mistakes usually occurs when
one of the parties does not disclose the nature of transaction
and fraudulently induces him to sign the same, the other
party signs it under the mistaken belief that he is signing a
document of different nature altogether. In such cases there
is no real agreement as the consent is nullified by mistake.
Thus there is absence of “consent” as required by section 13.
Bala devi v. Shanti Mazumdar, 1956 AIR Cal 575, illerate
woman signed a document believing it to be power of
attorney whereas actually it was a gift deed. Held a void
contract.

Ningawwa v. Byrappa, AIR 1968 SC 956,

Gift deed, husband fraudulently added two more plots held
a voidable contract and not a void one since there was
fraudulent misrepresentation with respect to contents and
not with respect to character of the document.