You might have already studied the essential elements of a contract. Therefore, you know that the free consent of all the parties to a contract is one of the necessary elements of a valid contract as per the requirement of section 10 of the Indian Contract Act.
In this law note, we will discuss the meaning of free consent in contract law. We’ll also better understand consent and free consent with the help of examples.
Meaning of Consent and Free Consent Under Contract Law
Consent and free consent are often misunderstood as similar terms, but both the terms are different under the Indian Contract Act. Let us understand the meaning of consent and free consent one by one.
Meaning of Consent in Law.
Consent occurs when parties mutually agree to form a contract with each other. Consent given under pressure will not be considered valid consent, and therefore the contract will become void.
Further, consent is when two or more individuals agree on the same thing in the same sense. According to section 13 of the Indian Contract Act, the principle of consensus-ad-idem (the meeting of minds) is very important while making a contract. It means that the person who is accepting the offer must accept it in such a way as it was told to him by the offerer without any interpretations or changes.
Example of consent: Z agrees to sell his house to X. Z owns two houses and wants to sell his flat. X thinks he is buying a villa. In this case, Z and X did not agree on the same thing in the same sense. As a result, there is no consent and, therefore, no contract.
Free Consent in Contract Law.
Free consent is defined under section 14 of the Indian Contract Act, 1872. Consent is free when:
- It is free from coercion.
- A contract is not made under undue influence.
- A contract is not made under fraud.
- A contract is not made by misrepresentation.
- A contract is not made by mistake or fact.
Example of free consent: Z was a leader of a political party. He asked X to sell his car as Z’s son liked his car. X agreed to sell due to fear that if he denies, Z can cause harm to his car. Here, X consented to sell his car, but the consent was not free as it was caused by undue influence. Hence, there would be no valid contract between the parties.
Validity of Contract Without Free Consent
Free consent is an essential element for a contract to be valid. Without free consent, a contract becomes voidable at the option of one party. This means if the consent obtained by any of the parties for a contract is not free and is caused by either coercion, undue influence, fraud or misrepresentation, then the party has a right to make the contract voidable at their wish.
Factors Violating Free Consent
Five primary factors that violate free consent in a contract are:
Now, let us study each one of them separately.
1. Coercion in Contract Law. (Section 15)
Coercion is a threat or force used by one party against another to compel him to enter into an agreement. Contracts made under coercion are voidable at the option of either of the parties to contract. Read section 15 of Indian Contract Law.
Illustration: Z threatens to shoot X if X does not let out his house to him. X agrees to do so. The consent has been obtained by coercion.
The act constituting coercion need not necessarily be performed by a party to contract. It may proceed even from a stranger to the contract, and likewise, it may be directed against anybody, not necessarily the contracting party.
Illustration: Z threatens to shoot Y, a friend of X if X does not let out his house to him. X agrees to do so. This is a case where X’s consent was obtained by coercion.
An Act Will Amount to Coercion if the Following Essentials Are Fulfilled:
- There must be a clear utterance of threat.
- The threat should be to do something illegal under the Indian Penal Code.
- It must be uttered to cause the other party to enter into an agreement.
Burden of Proof.
The burden of proof of coercion lies on the party who wants to set aside the contract and make it void. Coercion is also known as duress in English law.
2. Undue Influence in Contract Law. (Section 16)
When one of the parties is in a position to dominate the will of the other and utilises that position to gain an unfair advantage over the other, the contract is said to be induced by undue influence. Read section 16 of Indian Contract Law.
Illustration: Z is a rich landowner and Y a poor farmer. Y has a jersey cow valued at 5,000. If Z uses his authority and forces Y to sell the cow for 2,000, he would be using undue influence.
As per section 16(2), A person is deemed to be in a position to control the will of another under the below-mentioned circumstances:
- Where he holds a real or apparent authority over the other, i.e. relationship between master and servant, Income Tax Officer in relation as assessee.
- When the party stands in a fiduciary relationship, i.e. a relationship of trust and confidence with the other, like the relation between an advocate and client.
- When a person’s mental capacity is temporarily or permanently impaired due to age, sickness, or mental or physical distress, the party enters into a contract with that person. Such a relationship exists, for example, between a doctor and his patient.
However, there are relationships where such information cannot be deemed to be undue influenced, like the relationship between husband and wife or between mother and daughter.
Illustration: Under the undue influence, an elderly man who was ill and feeble was forced to sign a contract to pay an expensive sum to the doctor for his care and treatment. The court will set aside the contract because it was made under undue influence.
3. Fraud in Contract Law. (Section 17)
The term fraud includes all acts committed by a person to deceive another person. Read section 17 of Indian Contract Law.
Fraud under the Indian Contract Act includes:
- A false suggestion as to a fact known to be false or not believed to be true: A false statement made recklessly without inquiring whether it is true or false would amount to fraud.
Illustration: If Z sells a shoe to Y and says that it is made from calf leather while in reality the shoe is made from ordinary leather, Z would be committing fraud, and the contract would be voidable at the option of Y.
- The active concealment of fact: if a person conceals or hides a fact which is material to the contract and he must disclose it, but he doesn’t, it will be a case of fraud.
- A promise made without any intention of performing it.
- Any other fraudulent act was done to deceive someone.
- Any act or omission declared to be fraudulent by law.
Elements of Fraud Under the Indian Contract Act.
- Fraudulent work can be done by a party or his agent.
- The object of the fraudulent act must be to deceive the other party.
- The fraud must be against the party or his agent.
- The other party must have suffered some loss.
Effects of Fraud Under the Indian Contract Act.
A party whose consent to an agreement was caused by fraud has two remedies:
- He may rescind the contract, or
- He may insist that the contract shall be performed in such a way as it would have been performed if the representation would be true.
Illustration: Z fraudulently informs Y that Z’s estate is free from encumbrance. Y, therefore, buys the estate and later comes to know that the estate is subject to a mortgage. Y may opt-out of the contract or insist on it being fulfilled, and Z must repay the mortgage loan.
4. Misrepresentation in Contract Law. (Section 18)
Misrepresentation means false representation made innocently with an honest belief as to its truth by a party without any intention to deceive the other party. Read section 18 of Indian Contract Law.
Illustration: Z intends to sell his cow to Y and says. “My cow is perfectly sound”. Z genuinely believes the cow to be sound, although he does not know that the cow had fallen sick the previous day. Y thereupon buys the cow. There is misrepresentation on the part of Z.
Effects of Misrepresentation in Contract.
When a misrepresentation has been made, the aggrieved party has the following alternatives:
- He may avoid or cancel the contract.
- He may stick to the contract and insist on the misrepresentation being rectified.
5. Mistake in Contract Law. (Sections 20, 21 and 22)
Mistake may be defined as an erroneous belief concerning something. Mistakes may be of two types: Mistake of Law and Mistake of Fact.
A. Mistake of Law (Section 22).
Mistake as to the law is defined in certain categories mentioned below.
- Mistake as to the law of the country: Every person is expected to know the law of the country, and ignorance of the law is no excuse.
- Mistake as to foreign law: A citizen of a country is expected to know the law of his own country, but he is not supposed to know the law of any other country. If a person commits a mistake as to the law of a foreign land, such a mistake may be excusable as it is deemed to be a mistake of fact, and the contract becomes void.
B. Mistake of Fact (Sections 20 and 21).
Mistake of fact is of two types:
- Unilateral Mistake: If the mistake is on the part of one party to the contract as to a matter of fact essential to the contract, the contract remains valid unless the mistake is not the result of fraud or willful misrepresentation on the part of the other party.
Illustration: A wants to sell his car to B for Rs. 2,80,000, but by mistake, he makes an offer for Rs. 2,60,000, which B accepts. A cannot cancel the contract on the ground that he has committed a mistake about the price.
- Bilateral Mistake: When both the parties to a contract are under a mistake as to a matter of fact essential to the contract, it is a case of bilateral mistake, and such contracts are void.