The parties agreed upon the same thing in the same sense at the same time and that

their consent is free and real.

Sec 10 says that

y all agreements are contract if they are made by the

free consent of parties

Meaning of Consent and Free Consent

y Consent act of assenting or acquiescence

Two or more persons are said to consent when they agree upon the same thing in the same sense . Sec 13.

Free Consent
y Consent is said to be free it is not caused by y Coercion y Undue influence y Fraud y Misrepresentation y Mistake When there is no consent no contract. No consensus ad idem there is no contract

Example
An illiterate woman executed a deed of gift in favor of

her nephew under the impression that she was executing a deed authorizing her nephew to manage her lands. The evidence showed that the woman never intended to execute such a deed of gift, nor was the deed ever read or explained to her. Held- the deed was void and inoperative. Bala Debi Vs. S. Majumdar (1956)

Continued.,
y A is forced to sign a promissory note at the point of

pistol. A knows what he is signing but his consent is not free. The contract in this case is voidable at the option of A

Coercion
y When a person is compelled to enter into a contract by

the use of force by the other party or under a threat, coercion is employed. y The threat amounting to coercion need not necessarily proceed from a party to the contract. y It may even from a stranger to the contract.

Coercion is said to caused

y If it is obtained by y Committing or threatening to commit any act forbidden by the Indian Penal Code 1860. ( A threatens to Shoot B if he does not lend Rs. 50000. B lends the amount. The threat amounts to coercion) y Unlawful detaining or threatening to detain any property (Govt. gave threat of attachment against the property of P for the recovery of the fine due form T, the son of P. P paid the fine. Held the contract was induced by coercion)

Continued.,
An agent refused to hand over the books of account to the

new agent unless the principal released him from all liabilities. The principal had to give a release deed as demanded. Held the release deed was given under coercion and was voidable at the option of the principal.

Effect of Coercion
y When consent to an agreement is caused by coercion,

fraud or misrepresentation, the agreement is voidable at the option of the party whose consent was so caused. y According Sec 72 a person to whom money has paid or anything delivered by mistake or under coercion should be retuned. y A warehouse refused to deliver the goods, and threaten them to pay some illegal charge .

Threat to commit Suicide Does it amount to coercion?

y Chikham Amiraju V Seshamma 1917 y Threat to commit suicide amounts to coercion y Duress

English law

Undue Influence
y 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 .

y A person is deemed to be in a position to dominate the

will of other
y Where he holds a real or apparent authority over the

other. y Where he stands in a fiduciary relation (relation of trust and confidence) to the other. y Where he makes a contract with a person whose mental capacity is temporarily of permanently affected

Examples
y A having advanced money to his son, B during his

minority, obtains from B, by misuse of parental influence, a bond for a greater amount than the sum due in respect of the advance. A employs undue influence y A man enfeebled by disease or age, is induced by B s influence over him as his medical attendant, to agree to pay to B an unreasonable sum for his professional services. B employs undue influence.

Continued.,
y A spiritual guru induced his devotee to gift to him the

whole of this property in return of a promise of salvation of the devotee. Held the consent of the devotee was given under undue influence. (Mannu Singh Vs. Umadat Pandey (1890). y A minor female child who had lost her parents was living with her cousin brother who was in position of loco-parent(in the place of parents). A deed was executed by her in favor of latter. Held there was undue inflence. (Niko Devi Vs. Kripa (1989).

Effect of undue influence

y When consent to a contract is obtained by undue

influence, the agreement is a contract voidable at the option of the party whose consent was so obtained. y A money lender advances Rs. 1000 to B an agriculturist, and by undue influence induces B to execute a bond for Rs. 2000 with interest at 6% per month. The court may set the bond aside, ordering B to repay Rs. 1000 with interest as may seem to it just.

Relationships which arise presumption of undue influence

y Parent and child y Guardian and ward y Trustee and beneficiary y Religious adviser and disciple y Doctor and patient y Solicitor and client and y Fianc and fiance

Burden of Proof
y In an action to avoid a contract on the ground of

undue influence, the plaintiff has to establish that

y The other party was in a position to dominate his will y The other party actually used his influence to obtain the

consent y The transaction was unreasonable (the burden of proving such contract is not induced by undue influence lies upon the person in a position to dominate the will of other)

Examples
y An illiterate woman enfeebled by physical and mental

distress with none to advise her, executed a mortgage. Held, the burden is on the mortgagee to prove that the woman fully understood what she was doing. y A applies to a banker for a loan at a time when there is stringency in the money market. The banker declines to make the loan at an unusually high rate of interest. A accepts the loan on these terms. This is a transaction in the ordinary course of business, and the contract is not induced by undue influence.

Contract with pardanashin women

y Any person who enter into a contract with pardanashin

woman has to prove that no undue influence was used and she had free and independent advice, understood the contents of the contract and exercised her free will.

Rebutting the presumption

y Full disclosure of fact y The price was adequate y That the weaker party was in receipt of independent

advice before making the promise.

Difference between Coercion and Undue influence

Coercion Undue influence under Consent is given under the Consent is given threat of offence moral influence Coercion is mainly of physical character. It usually involves violent force. There must be intension of causing any person to enter into an agreement. It involves criminal act

Undue influence is of moral character. It involves mental force. The influencing party uses his position to obtain an unfair advantage. No criminal act is involved.

y Name 3 Sources of business law y Indian Contract Act y Define contract y Any 4 Essentials of valid contract section ? y Classification of contracts y A makes a promise to his son to give him a pocket

money of Rs. 1000 per month. After 2 months A stops making the payment. Whether a legally enforceable contract is created between A and his son? y A promises to pay B Rs.500 if he beats C. B beats C. Can B recover the amount y Which section defines offer? y Legal rules for a valid offer

A representation when wrongly made either innocently or intentionally is a misrepresentation.

y A company s prospectus contained a representation

that it had statutory powers to run tramways by steam provided the consent of a govt. authority was obtained. The directors issued a prospectus stating therein the company has the right to use the steam power. They honestly believed that the permission for the use of steam power would be granted. But the permission was refused. The company was wound up. Is it a misrepresentation or fraud?

Requirements of Misrepresentation
y Misrepresentation of material fact y It must made before the conclusion of the contract y Made to induce the other party y Must be wrong but the person who made believed it to

be true y Made without the intension to deceive the other party y It need not be directly to the plaintiff (misrepresentation means mis-statement of fact or suppression of material facts)

Consequences of Misrepresentation
y Avoid or rescind the contract y Accept the contract and insist that he shall be placed

in the position in which he would have been if the representation made had been true.

Fraud sec 17
y a false representation has been made y Knowingly y Recklessly and y There is a concealment of a material fact y The intension of the party making misrepresentation is to deceive the other party or induce him to enter into a contract
y

Fraud without damage and damage with out fraud

Essential elements of Fraud

y There must be a false representation y The representation must relate to material fact y The representation must be made before the

conclusion of the contract y The representation must be done without belief in its truth y The other party must have been induced to act upon y The other party must have been deceived and subsequently suffered some loss.

Distinction between Fraud and Misrepresentation

y Intension y Belief y Rescission and damages y Discovery of truth

Mistake
y erroneous belief about something . It may be y mistake of law
y y

Mistake of law of the country (ignorance of law no excuse) Mistake of law of foreign country - void Bilateral mistake (sec 20) Unilateral mistake

y mistake of fact
y y

y A applies to a banker for a loan at a time when is

passing through a period of recession. The banker agrees to make the loan only at an unusually high rate of interest. A accepts the loan on these terms. Subsequently A pleads that the contract has been procured by exercising undue influence? Can he succeed?

y B sends an order for various stationery supplies to his

usual supplier, S. But S had sold the business to T. T sends the stationery to B. B upon the discovery of the facts, refuses to accept the stationery. Advise T.