FYBMS - A 2020-21

Group Presentation By – Roll no.1-5

Shreeya
Subin
Om

SUB: BUSINESS LAW

TOPIC: FREE CONSENT

INTRODUCTION
 An agreement satisfying all the conditions may still not be valid if there is a flaw
in the consent of one or both parties.

 A contract without free consent is voidable act.

 Requirements of ‘free consent’

• There should be consent.

• The consent must be free.

CONSENT
Sec 13 :
 “Two or more parties are said to consent when they agree upon the same
thing in the same sense.”
 The parties to the contract must have the same understanding in regards to the
subject matter of the contract.

• Example : ‘A’ has 2 cars - an Indica & an Indigo. ‘A’ offers to sell the Indica,
while ‘B’ accepts, thinking the car to be sold was Indigo. Here, there is no
consent, as there is no meeting of minds.
FREE CONSENT
Free Consent refers to consent which has been rendered by free will of
the parties i.e consent is voluntary.
A contract is valid and enforceable if it is made with the free consent
of the parties.
‘Free Consent’ – Sec 14
Consent is said to be free when it is not caused by --
1. Coercion – Sec 15
2. Undue Influence – Sec 16
3. Fraud – Sec 17
4. Misrepresentation – Sec 18
5. Mistake - Sec 20, 22.
From the definition, consent of either party if obtained by any one of
the above factors, will result in flaw in the consent.
Coercion
 The term ‘coercion’ means putting a person under fear or forcibly compelling a
person to enter into a contract.

 Coercion - Sec 15 :

“Committing or threatening to commit, any act forbidden by the Indian Penal

Code 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.”
Coercion
Coercion caused due to :

 Committing or threatening to commit any act is forbidden by the Indian Penal

Code.

• Example : ‘X’ calls ‘Y’ to pay Rs 1 crore and threatens to send shooters if not
complied with. Since extortion is not permitted by IPC, it results in Coercion.

• Case study : Ranganayakiammal Vs. Alwar Shetty

A Hindu widow, aged 13 was forced to adopt a boy under threat, that her
husband’s dead body would not be allowed to be removed unless she adopted the
boy. Here, it amounted to coercion by threatening to commit an act.

 Consequences of Coercion :

When a consent to an agreement is obtained by coercion, the agreement is voidable

at the option of the party whose content was so obtained.
Undue Influence
 The term ‘undue influence’ is the unfair use of one’s position or power. It is a
kind of mental coercion.

 Undue Influence – Sec 16 :

“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.”
Undue Influence

 When does Undue Influence occur ?

• Undue Influence occurs when an individual is able to use an advantage to coerce another
party’s decisions resulting in detriment of the weaker party and gain of the more
powerful or influential party.
 Parties in a fiduciary relation -- A relationship of trust & confidence

• Example : Advocate & Client

 Person’s mental capacity -- Affected by reasons of age, illness, mental or bodily distress

• Example : Medical Attendant & Patient

 Real or Apparent Authority -- Person is deemed to be in position to dominate the will of

another.
• Example : Moneylender & Borrower
Undue Influence
 Consequences of Undue Influence :

• The contract is voidable at the instance of the innocent party.

• Aggrieved party may refund the benefit and if it does not opt to set aside the
contract, it works as a valid contract.
Difference between Coercion & Undue Influence
Coercion Undue Influence
• The consent of the aggrieved party • The consent of the aggrieved party
is taken by committing or is obtained by dominating the party
threatening to commit an act by taking an unfair advantage of his
forbidden by IPC. position.

• Physical force is exercised. • Moral force is used.

• Relationship between the parties is • Some sort of relationship must

not necessary. exist.
Fraud
 Fraud means cheating or intentionally stating something untrue as true.

 In fraud, there is misstatement of facts made by one party with the intention to deceive
the other party to the contract.

 Fraud - sec 17:

“ Fraud means and includes any of the acts stated committed by a party to a contract
or with his connivance, or by his agent, with intent to deceive another party thereto or
by his agent, or to induce him to enter into a contact.”
Fraud
 Essentials of Fraud :

• There must be a representation and it must be false.

• Case study – (Peek vs Gurney (1873) L.R. 6 H .L 377)

The prospectus of a company did not refer to the existence of a document

disclosing liabilities which gave impression that the company was prosperous. Held
non-disclosure amounted to fraud.

• Relate to material fact – not opinion

• To constitute fraud, there must be an active concealment of fact.

• Before conclusion of contract – A promise made with any intention of performing

it.

• Other party must have relied and been deceived.

• Case – (Horse Fall vs Thomas 1862, 1 H and Co 90).

Fraud
 Does Silence Amount to Fraud ?

• Ordinarily, a mere silence does not amount to fraud.

 Exceptions :

• It is the duty of the person keeping silence to speak – in fiduciary relations.

• Where silence is equivalent to speech.

• Example : ‘A sells by auction to B, a horse which A knows to be unsound. A says

nothing about the horse’s unsoundness. B says to A – if you do not deny, I shall
assume that the horse is sound. A says nothing. Here A’s silence is equivalent to
speech.’
 Fraud
 Consequences :

• The aggrieved party can rescind the contract.

• Can insist to form the contract and be put in same position, if the
representation had been true.

• May claim damages

Misrepresentation
 Sec 18 -- “It is a false representation of fact made innocently or non-
disclosure of a material fact, without any intention to deceive the other
party”
 Essential Elements :

• There should be a representation of facts – not opinion.

• Representation is untrue.

• The representation induces the other party to enter into a contract.

• The party making representation does not intend to deceive the aggrieved party.

• The innocent party must have acted on the false statement and suffered loss.
Misrepresentation
 Consequence – The contract is voidable at the option of the aggrieved party.

• Example : ‘X says to Y who intends to purchase his land that it produces 50

quintals of wheat per acre. X believes the statement to be true, although he did
not have sufficient grounds for the belief. Later on, it was found that the land
produces only 30 quintals of wheat per acre.’
Difference between Fraud and Misrepresentation
Fraud Misrepresentation
• Fraud is intentional or wilful wrong. • It is an innocent wrong.

• There is intention to deceive the • There is no intention to deceive the

party. party.

• The aggrieved party can rescind the • The aggrieved party can rescind the
contract and can claim damages. contract but cannot claim damages.

.
Mistake
 Mistake is an erroneous belief concerning something or an error of judgement.

 TYPES OF MISTAKES :

 Mistake of Law :

• Mistake of Indian Law : It is no excuse.

• Mistake of Foreign Law : It is taken as mistake of fact.

Mistake
 Mistake of fact : erroneous belief as to facts.

 Bilateral - Sec 20 :

• “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.”

 Bilateral mistake is classified into two:

• As to Subject Matter with regard to – Existence, Quantity, Quality, Price

• As to possibility of performance

 Unilateral - Sec 22 :

• “A contract is not voidable merely because it is caused by one of the parties to it being under
a mistake as to matter of fact.”

 Unilateral mistake leads to the contract being void when – a) Mistake as to the identity of person
and b) Mistake as to nature of contract.
Thank You