In our daily life, we enter into a contract knowingly or unknowingly. We make agreements or promises for performing it in the near future or after a fixed period of time. In India contract is governed under the Indian Contract Act, 1872, which sets terms and conditions under which a contract should be entered. As per section 23 of the Indian Contract Act, 1872, the legal object and consideration are given where a person can enter or make a contract with others.
As per section 2(h) of the Indian Contract Act, 1872, an agreement which is enforceable by law is contract, this section makes it a valid contract because it is acceptable by the law. However, the necessary element for entering into a valid contract is consent which is defined under section 13 of the Act, which says that when two or more persons agrees upon the contract in the same sense as it is contested then it is said that there is consent from parties forming the contract.
What are the conditions under which consent will not be considered as free consent?
As per section 14 of the Indian Contract Act, 1872[i], consent will be considered free only when it is not hampered by the following:
Coercion
It is defined under section 15 of the Act. Coercion means threating or forcing someone to enter into a contract that is unlawful under section 45 of the Indian Penal Code, 1860. It is not necessary to use any physical force, through causing mental fear, coercion can be established. For instance, someone threatens to commit suicide if he does not accept his offer, then coercion can be established.
However, if any contract is not entered by the person’s free consent. Then, in this case, the acceptor can seek relief under section 72 of the Act. This section says that if anything is paid or delivered under coercion then the person to whom it is delivered of paid have to return it as if there is a quasi-contract them. The liability to prove innocence is upon the offeror, who makes an offer to enter into an agreement.
Undue Influence
It is defined under section 16 of the Act. The consent is said to be induced by undue influence where the person with whom an agreement is entered is related and is in dominion position which means who has a formal or an informal authority over the person and uses such a position to enter into an agreement. And as per section 16(2), if a person whose mental capacity is affected due to age or illness. Then in both these situations, undue influence can be established.
It is also said that in both situations one person is in a stronger position and they do not stand in equal footing. As per section 16(3), the burden of proof lies upon the one who is in a dominion position. For instance, A, who is an old man is asked by B to pay him an unreasonable amount for his professional service, it lies upon B to prove that the contract is acted willfully without the use of undue influence.
Fraud
Is defined under section 17 of the Indian Contract Act, 1872, which is an act committed by a party or his agent to contract with an intention to deceive another contracting party. It amounts to fraud when the followings are present:
a. When the contracting party lies about the fact which he himself is aware of.
b. When the contracting party actively conceals about the fact about which he has knowledge or belief.
c. When the contracting party promises other party without any intention of performing it.
d. When the contracting party does any act which is fitted to deceive.
e. When any fraud is committed under any law, the person who committed fraud will be held liable under this act too.
However, under explanation part of the given section, it is clearly mentioned that when the person does not have any duty to speak it will not amount to fraud unless and until, there is a term mentioned in a contract that silence will be treated equivalent to speech. For instance, A sells, by auction, to B, a horse which A knows to be unsound. A says nothing about the unsoundness of horse to B. This will not amount to fraud.
Misrepresentation
It is defined under section 18 of the Indian Contract Act, 1872 in the following:
a. When the contracting party makes a statement about which they are also not aware, here they have a belief that the subject matter is present. For instance, A who is selling his horse to B enters into a contract, but later it was found that the horse was dead at the time of contract was formed. This also amounts to mistake as a matter of fact under section 20 of the Act.
b. When the contracting party breaches his duty without an intention to deceive and such breach makes him gain profit or by misleading the other party as per his preconceived notation.
c. When the contracting party innocently causes a mistake about the subject matter of the agreement.
What are the remedies available for entering into a contract without free consent?
When a contract is formed without the free consent of other party then the contracting party whose consent is not obtained so can seek remedy under the following:
- When a contracting party enters into a contract due to coercion, fraud or misrepresentation, such contracts are voidable at the option of the party whose consent is obtained so under section 19 of the Act.
- When a contracting party enters into a contract by undue influence, the contract is voidable at the option of the party whose contract is obtained so under section 19A of the Act.
- Under section 64 of the Indian Contract Act, 1872 the parties who chose for non-performance of the contract, they can recover all the benefits that are incurred by them. And also under sections 29 and 30 of the Specific Relief Act, 1963[ii], the recovery for all the benefits that will be received from both of the parties and compensated if any damages are incurred.
What if parties chose the performance of the contract?
When in the court of the law it is proved that he/she has entered into a contract without free consent in that case also court gives the option to the contracting party whose consent was obtained so for performance or non- performance of the contract. As it is unlawful to contract without consent.
If contracting parties choose for non-performance of the contract then all the benefits that are incurred by both the parties, have to be returned and it will be treated as if it is a quasi-contract. However, if contracting parties choose for the performance of the contract in the court of law then the contract which was formed so can go further with it in the sense it was contracted.
For instance, A, who fraudulently sold his land to B, by stating that the location where land is prime area location but as soon as B accepted offer and paid the amount of land, he later discovered that the location was not as specified by A. In this situation, he can seek remedy from court for non-performance but if he, A, choose for performance then he can perform the contract as it was contracted.
Conclusion
As per the Indian Contract Act, 1872, contracts which are performed due to coercion, undue influence, fraud, and misrepresentation is a voidable contract as the contracting parties have an option for performance or nonperformance of the contract. It is illegal to form any contract without the consent of both parties in the same sense.
Edited by Pushpamrita Roy
Approved & Published – Sakshi Raje
Reference
[i]The Indian Contract Act, 1872.
[ii] The Specific Relief Act, 1963.
