Free consent is one of the essential element of a valid contract. According to section 14,” Consent is said to be free when it is not caused by (a) coercion or (b) undue influence or (c) fraud or (d) misrepresentation, or (e) mistake.[1] In simple words, consent is said to be not free when it is caused by coercion, misrepresentation, mistake, fraud and undue influence.
1. Effect of coercion on the formation of a contract
Meaning – Coercion means forcibly compelling a person to enter into a contract. According to section 15 of the Indian Contract act, 1872,” Coercion means the committing or threatening to detain, any property to the prejudice of any person to enter into any agreement.”[2]
Effect – where the consent is obtained by coercion, the contract is voidable at the option of the party whose consent was so obtained. The burden of proof is upon the aggrieved party to prove that his consent was not free. It is upon the aggrieved party to decide whether to set aside the contract or to perform the contract.
2. Effect of undue influence on formation of a contract
Meaning – According to Section 16(1) of the Indian contract act, 1872, “a contract is said to be induced by undue influence where the relations subsisting between the parties are such that one of them is in position to dominate the will of the other, and uses that position to obtain an unfair advantage over the other.” A person is said to be in a position to dominate the will of another:[3]
- Where he holds a real or apparent authority over other.
- Where he stands in a fiduciary relation to the other. i.e. relation of mutual trust.
- 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.
Effect – When consent to a contract is obtained by undue influence, the contract is voidable at the option of the party whose consent was so caused.
3. Effect of fraud on formation of contract
Meaning – the term fraud included all acts committed by a person with an intention to deceive another person. According to section 17, “Fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent:
(1) The suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
(2) The active concealment of a fact by one having knowledge or belief of the fact;
(3) A promise made without any intention of performing it;
(4) Any other act fitted to deceive;
(5) Any such act or omission as the law specially declares to be fraudulent.”[4]
Effects –
1. Suit for damages can be filed.
2. The aggrieved party can insist on performance of contract.
3. Contract can be rescinded by the aggrieved party but he cannot do so in the following cases-
- Where the party was aware of fraud and took benefit;
- Where the silence amounts to fraud and aggrieved party has means of discovering the truth;
- Where the parties cannot be restored to their original position;
4. Effect of misrepresentation on contract
Meaning – According to section 18 “Misrepresentation” means and includes –
(1) 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 true;
(2) Any breach of duty which, without an intent to deceive, gains an advantage of the person committing it, or any one claiming under him, by misleading another to his prejudice, or to the prejudice of any one claiming under him;
(3) 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.
Effect – The aggrieved party can rescind the contract or insist the other party to perform the contract.[5]
5. Effect of mistake on contract
Meaning – mistake means erroneous belief concerning something. It may be of law or fact. Mistake of law may be of mistake as to Indian law or mistake as to foreign law.
Effect of mistake as to Indian law – The contract is not voidable because everyone is supposed to know the law of the country.
Effect of mistake as to foreign country – The contract is void if both the parties are under a mistake as to a foreign law because one cannot be expected to known the law of other country.
[1] Section 14 of Indian contract act, 1872
[2] Section 15 of Indian contract act, 1872.
[3] Section 16 of Indian contract act, 1872.
[4] Section 17 of Indian contract act, 1872.
[5] Section 18 of Indian contract act, 1872.
