What is Consent and Free Consent Under Indian Contract Act

What is Consent and Free Consent

Free Consent

What is consent?

Indian Contract Act, 1872 mainly deals with the provisions related to contracting and is a parent law from which many other civil laws over time have evolved; for example Family Law, Transfer of Property Act etc. The main provisions of Indian Contract Act deals with different kinds of contract and conditions of a valid contract, free consent and components of free consent and determinants of contract.

Section 13 of Indian Contract Act, 1872 (ICA) defines consent as, “when two parties entered into the contract there should agree upon the same thing in the same manner”. There should be a meeting of minds between the two parties. If there is no consensus ad idem- meeting of minds; on the material terms of the contract, then such contact would be considered void.

In Raffles v. Wichelhaus ((1864) 2 Hurl & C 906), the parties entered into a contract for the supply of cotton, the conditions for which were such that the cotton would be shipped by a ship called “Peerless” leaving from Bombay to the defendant at Liverpool Port. Two ships named Peerless were present, one leaving in October and one in December. The complainant shipped the cotton to the December vessel, but the defendant did not pay, arguing that they assumed the cotton would be delivered to the October vessel. The court dismissed the plaintiff’s suit for breach of contract on the grounds that there was no mutual consensus ad idem on the substantive term of the contract, so there is no contractual contract.

Section 90 under Indian Contract Act, 1872 (ICA) states,” A consent is not such as is intended by any section of this Code, if the consent is given by a person under fear of injury or a misconception of fact, and if the person performing the act knows or has reason to believe that the consent was given as a result of such fear or misconception;

The court held in Deelip Singh @ Dilip Kumar v. State Of Bihar ((2005) 1 SCC 88) that there are two elements of Section 90– the first element notes that in fear of harm or misunderstanding of fact that the person might have consented; and the second element notes that the wrongdoer was aware that under certain conditions, permission was granted.  If all components are established/ proven, it is only then that such consent is not free consent.

  • Consent of insane person– The person who is incapable of understanding the nature and result of the act which he gives his consent;
  • Consent of child– Unless the contrary appears from
  • Consent of child– Unless the contrary appears from the context “if the consent is given by a person who is under twelve years of age.”

For an instance every such consent which is either obtained:

  1. Under any threat, or fear of injury or the act which causes is done under the threat of fear.
  2. by an insane person
  3. By a child under 12 years of age, shall not constitute as consent under the Code.
  4. Fear of injury or misconception of fact

What is Free Consent?

Indian Contract Act 1872: Part II

There must be two parties to a contract, who willingly and knowingly enter in an agreement. But how does the law determine if the parties are both these things? This is where the concept of free consent comes in. Let us learn more about free consent and the elements vitiating free consent.

In the Indian Contract Act, the definition of Consent is given in Section 13, which states that “it is when two or more persons agree upon the same thing and in the same sense”. So the two people must agree to something in the same sense as well.

Let’s say for example A agrees to sell his car to B. A owns three cars and wants to sell the Maruti. B thinks he is buying his Honda. Here A and B have not agreed upon the same thing in the same sense. Hence there is no consent and subsequently no contract.

Meaning of Free Consent:

Free Consent has been defined in Section 14 of the Act. It states that consent is considered free when it is not earned or taken by any of the following:

  • Coercion
  • Undue Influence
  • Fraud
  • Misrepresentation
  • Mistake
  • Elements Vitiating Free Consent

In the case of Central National Bank Ltd v. United Industrial Bank Ltd.(AIR 1954 SC 181), the Supreme Court held:-Section 14 of the Contract Act defines the expression “free consent” and a consent is tree when it is not caused by coercion, under influence, fraud, misrepresentation or mistake. A consent induced by false representation may not be free, but it can, nevertheless be real, and’ ordinarily the effect of fraud or misrepresentation is to render a transaction voidable only and not void.”

Under what condition the consent is not considered as free consent?

Under what condition the consent is not considered as free consent?
Coercion (Section 15)

Coercion means using force to compel a person to enter into a contract. So force or threats are used to obtain the consent of the party under coercion, i.e. it is not free consent. Section 15 of the Act describes coercion as threatening to commit any act, or unlawfully detaining or threatening to detain any property with the intention of causing any person to enter into a contract

For example, A threatens to hurt B if he does not sell his house to A for 5 lakh rupees. Here even if B sells the house to A, it will not be a valid contract since B’s consent was obtained by coercion.

Now the effect of coercion is that it makes the contract voidable. This means the contract is voidable at the option of the party whose consent was not free. So the aggravated party will decide whether to perform the contract or to void the contract. So in the above example, if B still wishes, the contract can go ahead.

Also, if any payment has been made or goods delivered under coercion must be repaid or returned once the contract is void. And the burden of proof proving coercion will be on the party who wants to avoid the contract. So the aggravated party will have to prove the coercion, i.e. prove that his consent was not freely given.

In the case of Kanhaya Lal v. National Bank of India Ltd. ((1913) ILR 40 Cal 598), it has been observed as under:-

“Section 72 of the Contract Act (IX of 1872) is not exhaustive. The meaning of the words “coercion” used in that section is not controlled by the definition in Section 15; but is used in its general and ordinary sense. The definition in Section 15 is expressly inserted for the special object of applying to Section 14, i.e., to define what is the criterion whether an agreement was made by means of a consent extorted by coercion, and does not control the interpretation of “coercion” when the word is used in other surroundings.”

Undue Influence (Section 16)

Section 16 of the Act contains the definition of undue influence. It states that when the relations between the two parties are such that one party is in a position to dominate the other party, and uses such influence to obtain an unfair advantage of the other party it will be undue influence.

The section also further describes how the person can abuse his authority in the following two ways,

When a person holds real or even apparent authority over the other person. Or if he is in a fiduciary relationship with the other personHe makes a contract with a person whose mental capacity is affected by age, illness or distress. The unsoundness of mind can be temporary or permanent

Say for example, A sold his gold watch for only Rs 500/- to his teacher B after his teacher promised him good grades. Here the consent of A (adult) is not freely given, he was under the influence of his teacher.

Now undue influence to be evident the dominant party must have the objective to take advantage of the other party. If influence is wielded to benefit the other party it will not be undue influence. But if consent is not free due to undue influence, the contract becomes voidable at the option of the aggravated party. And the burden of proof will be on the dominant party to prove the absence of influence.

In the case of Mannu Singh v. Umadat Pande ((1890) 12 All. 523), a spiritual advisor convinced the plaintiff to transfer all of his property to him with the promise of securing benefits in the next life. The court held the said contract was deemed to be affected by undue influence.

Fraud (Section 17)

Fraud means deceit by one of the parties, i.e. when one of the parties deliberately makes false statements. So the misrepresentation is done with full knowledge that it is not true, or recklessly without checking for the trueness, this is said to be fraudulent. It absolutely impairs free consent.

Difference: Fraud and Misrepresentation| Contract Act Notes

So according to Section 17,  a fraud is when a party convinces another to enter into an agreement by making statements that aresuggesting a fact that is not true, and he does not believe it to be truethe active concealment of factsa promise made without any intention of performing itany other such act fitted to deceive

Let us take a look at an example. A bought a horse from B. B claims the horse can be used on the farm. Turns out the horse is lame and A cannot use him on his farm. Here B knowingly deceived A and this will amount to fraud.One factor to consider is that the aggravated party should suffer from some actual loss due to the fraud. There is no fraud without damages. Also, the false statement must be a fact, not an opinion. In the above example if B had said his horse is better than C’s this would be an opinion, not a fact. And it would not amount to fraud.

RC Thakkar v. Gujarat HSG Board (AIR 1973 Guj 34), the court held that the cost estimates given by the authorities in the tender notices were held to be fraud because authorities, in real, did not calculated the estimated cost of work, and such material representation knowing to be false, is a fraudulent act.

Misrepresentation (Section 18)

Misrepresentation is also when a party makes a representation that is false, inaccurate, incorrect, etc. The difference here is the misrepresentation is innocent, i.e. not intentional. The party making the statement believes it to be true. Misrepresentation can be of three types:

  • A person makes a positive assertion believing it to be true
  • Any breach of duty gives the person committing it an advantage by misleading another. But the breach of duty is without any intent to deceive
  • When one party causes the other party to make a mistake as to the subject matter of the contract. But this is done innocently and not intentionally.

In the case of Nokhia v. State of Himachal Pradesh(AIR 1985 HP 88), The Court ruled that where permission is granted on the basis of the representation with respect to the paying compensation and such compensation is not rendered for an unreasonably long period, it is obvious that the party never wanted to act on the representation and thus comes under misrepresentation.

3.4.1 Difference in Fraud and Misrepresentation, and Damages under Section 75 Indian Contract Act, 1872

The major difference between fraud and misrepresentation are as under:

  1. Fraud is a deliberate misstatement of a material fact. Misrepresentation is a bonafide representation of misstatement believing it to be true which turns out to be untrue.
  2. Fraud is done to deceive the other party, but Misrepresentation is not done to deceive the other party.
  3. Fraud is defined in Section 17 and misrepresentation is defined in Section 18 of the Indian Contract Act, 1872.
  4. In fraud, the party making representation knows the truth however in misrepresentation, the party making representation does not know the truth.
  5. In fraud, the aggrieved party can claim damages for any loss sustained. On the other hand, in misrepresentation, the aggrieved party cannot claim damages for any loss sustained.

Section-75- A party rightfully rescinding contract is entitled to compensation

A person who rightfully rescinds a contract is entitled to consideration for any damage which he has sustained through the no fulfilment of the contract.

Illustration-
A, a singer, contracts with B, a manager of a theatre, to sing at his theatre for two nights in every week during the next two months, and B engages to pay her 100 rupeesfor each night’s performance. On the sixth night, A willfully absents herself from the theatre, and B, in consequence, rescinds the contracts. B is entitled to claim compensation for the damage which he has sustained through the non-fulfilment of the contract.

Mistake

A mistake is an erroneous belief (at the time of contracting) that certain facts are true. If raised successfully, an allegation of mistake may lead to the contract being declared void ab initio or voidable; but to be effective the mistake must be “operative”. There are three types of contractual mistake: ‘unilateral mistake’, ‘mutual mistake’ and ‘common mistake’. There are two types of mistakes mentioned in Section 20 of the Indian Contract Act, 1872.

  1. Mistake of Fact includes
  2. Unilateral Mistake
  3. Bilateral Mistake – In Case of Bilateral Mistake the agreement entered is void.
  4. Mistake of Law includes
  5. Mistake of Indian Law – In case of Mistake of Indian Law the agreement entered is void.
  6. Mistake of Foreign Law

In the case of Debendra Nath Dutt and Banku Behary Banerjee v. Administrator-General of Bengal ((1906) ILR 33 Cal 713), the Apex Court took into consideration the following argument:- “It is said that the case is governed by Section 20 of the Indian Contract Act, which says that, where both the parties to an agreement, are under a mistake as to a matter of fact essential to the agreement, the agreement is void.”

Determinants of Contracts Influenced by any factor Vutiating Free Consent

A ‘vitiating element of contract’ is the technical term for the things which make a contract void or voidable. Vitiating factors in a contract are those factors the existence of (any of) which will cripple or invalidate the contract. Vitiating elements of contract such as mistake, duress, misrepresentation, undue influence and illegality, are determinants of the validity of a contract.

These are the various factors which can affect the validity of a contract once it has been formed. The implication of which is that the validity of a contract is normally unquestioned when vitiating elements are absent. It is against this background that this essay has examined vitiating elements of contract as source of contractual validity.

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