Factors Vitiating Free Consent in Indian Contract Act: UPSC Notes

In contract law free consent is a foundational requirement for the validity of an agreement. As per the Indian Contract Act 1872 a contract is enforceable only when it is made with the free consent of competent parties for a lawful object and consideration. Consent is considered free when it is not obtained through coercion, undue influence, fraud, misrepresentation or mistake. If consent is vitiated by any of these factors the contract becomes voidable at the option of the aggrieved party. Understanding the concept of free consent is essential to determine the enforceability of contracts. The topic factors vitiating free consent is highly relevant for the UPSC Law Optional as it forms a main component of the Indian Contract Act.

What is Free Consent?

Section 14 of the Indian Contract Act, 1872 defines "free consent" as consent that is not influenced by any of the following factors -

• Coercion
• Undue influence
• Fraud
• Misrepresentation
• Mistake

If consent is influenced by any of these elements it is not considered free and the contract becomes voidable at the option of the party whose consent was not freely given.

What is Coercion? Section 15 of Indian Contract Act

As per Section 15 of the Indian Contract Act 1872 consent is said to be caused by coercion when it is obtained through the use of force or threats. This includes -

• Committing or threatening to commit any act prohibited by the Indian Penal Code (Now BNS) or
• Unlawfully detaining or threatening to detain any property or person.

For instance: if 'A' threatens to commit suicide which is a punishable act under the IPC unless 'B' agrees to a contract, the consent is obtained through coercion, making the contract voidable at the option of 'B'

Effect of Coercion

When a contract is formed under coercion it becomes voidable at the option of the aggrieved party. This means the party whose consent was obtained through coercion can choose to cancel the contract thereby releasing both parties from their contractual obligations.

Undue Influence

According to Section 16 of the Indian Contract Act 1872 a contract is said to be induced by undue influence when one party who is in a position to dominate the will of the other uses that position to gain an unfair advantage.

A person is considered capable of dominating another’s will if -

1. They hold real or apparent authority, or share a fiduciary relationship (such as doctor-patient, lawyer-client, etc.) or
2. The other party's mental capacity is compromised due to age, illness or physical or mental distress.

Effect of Undue Influence

When a contract is induced by undue influence it becomes voidable at the discretion of the party whose consent was improperly obtained. In such situations the responsibility lies on the person in the dominant position to prove that the agreement was made without exerting undue influence.

For example: If 'A', who is suffering from an illness, is persuaded by 'B', a medical professional, to pay an unreasonably high fee for treatment, it amounts to undue influence exercised by 'B' over 'A'.

What is Fraud? Section 17 of Indian Contract Act

Fraud refers to any act committed by a person or by their agent on their behalf with the intention to deceive another or to induce them to enter into a contract. The following acts are considered fraudulent under contract law:

1. False Representation: Suggesting a fact as true when the person making the statement does not believe it to be true.
   Example: 'A' sells imitation jewellery to 'B', claiming the polish will last ten years even though he knows it will not.
2. Active Concealment: Deliberately hiding a material fact despite having knowledge of it.
   Example: 'X' sells a bike to 'Y', stating it is in good condition despite knowing it is not.
3. False Promises: Making a promise without any intention of fulfilling it.
   Case Example: In Delhi Development Authority v. Skipper Construction Co. Pvt. Ltd. (2000), the builder accepted bookings exceeding available units and collected money, despite knowing he couldn’t deliver. The court held this as fraud.
4. Deceptive Conduct: Performing any act intended to mislead.
   Example: 'A' tricks his wife into signing a document to mortgage two of her properties but secretly includes four.
5. Legally Declared Fraud: Any act or omission explicitly deemed fraudulent by law such as certain transactions under the Insolvency or Companies Act.

Effect of Fraud

When a contract is formed as a result of fraud, it is voidable at the option of the party that was deceived. The aggrieved party has the right to cancel the contract and seek compensation for any losses suffered.

However, mere silence about a fact does not amount to fraud unless -

1. There is a duty to disclose the information or
2. The silence is equivalent to a statement.
   Example: If 'X' tells 'Y', “If you don’t object, I’ll assume the car is in good condition,” and 'Y' remains silent, that silence amounts to acceptance and may be treated as fraud if the car is not in good condition.

Misrepresentation

Misrepresentation involves a false statement made innocently without intent to deceive that induces another party to enter into a contract. It generally includes the following situations -

1. Innocent False Statement: When someone makes a positive assertion about something without proper knowledge believing it to be true.
   Example: 'A', who has never used his bike, claims it gives a mileage of 50 km/l, unaware that it actually gives 80 km/l.
2. Breach of Duty Leading to Misunderstanding: When a party breaches a duty in a way that benefits them and misleads the other party.
   Example: 'B' assures 'A' that a deed contains only routine terms already agreed upon. Relying on this, 'A' signs without reading, not knowing the deed includes a release in 'B’s' favour.
3. Innocent Inducement into Mistake: When one party unintentionally leads the other into an error regarding the subject matter of the contract.

However, if the aggrieved party had the means to discover the truth through ordinary diligence, they cannot later claim misrepresentation.

Effect of Misrepresentation

If a contract is entered into due to misrepresentation the affected party has the right to cancel the contract. Additionally they can seek compensation and may initiate legal action to be restored to the position they were in prior to entering the contract.

Mistake

When both parties to a contract are mistaken about a fundamental fact related to the subject matter the contract is considered void. However, a simple mistake or incorrect judgment regarding the value of the subject matter does not amount to a legal mistake.

For example: If 'A' purchases a bike believing it to be worth ₹1 lakh and pays that amount, but its actual value is only Rs. 70,000 the contract remains valid. 'A' cannot void the agreement merely because of his own lack of knowledge about the bike’s true value.

The following are the types of Mistake affecting validity of Contract -

• Mistake as to Subject Matter:
• If at the time of the agreement the subject matter no longer exists and both parties are unaware, the agreement is void.
• Example: 'A' agrees to buy 'B’s house', but unknown to both, the house had already collapsed.
• Mistake as to Title or Rights:
• When a person agrees to buy something they already legally own the agreement is void.
• Mistake about Different Subject Matters:
• If each party is thinking of a different subject matter there is no real consent and the contract is void.
• Example: In Tarsem Singh v. Sukhminder Singh (1998) the buyer assumed the price was per bigha while the seller thought it was per kanal. The court held the contract unenforceable.
• Mistake about Nature, Quality or Substance:
• If the subject matter differs significantly from what was believed, the contract is void.
• Example: 'A' sells his farm claiming it yields 40 tonnes but it actually produces only 20 tonnes.
• Mistake as to Possibility of Performance:
• A contract is void if its performance is impossible either physically or legally.
• Physical Impossibility:
• When the subject matter is destroyed or unavailable at the time of the contract performance becomes physically impossible and the contract is void.
• Legal Impossibility:
• If parties to a contract belong to countries that go to war making performance unlawful the contract becomes void due to legal impossibility.

Conclusion

The factors vitiating free consent namely coercion, undue influence, fraud, misrepresentation, and mistake play an important role in determining the validity of a contract under the Indian Contract Act 1872. When consent is not obtained freely due to the influence of any of these elements, the contract becomes either void or voidable at the option of the aggrieved party. Thus, for an agreement to be legally enforceable it must be backed by free and genuine consent of the parties involved.