• Essential ingredient of a valid agreement• Involves two elements

1.There must be a Consent.– Sec 13, ’two or more persons are said to consent when they

agree upon the same thing in the same sense’.– Involves identity of minds or consensus ad idem– No consensus ad idem among parties, no real consent and

hence not a valid contract.

Free Consent

2.Consent to the terms of the agreement should be Free.• Sec 14,Consent is free when it is not caused by:– Coercion (section 15)– Undue Influence (section 16)– Misrepresentation (section 18)– Fraud (section 17)– Mistake(section 20,21,22)• Absence of a free consent, contract may turn void

depending upon the nature of flaw• consent is caused by any of the 5 elements, no free consent

and voidable at the option of the parties.• Caused by bilateral mistake, agreement is void

and no consent at all.

Contd...

Section 15 of the Contract Act defines ‘Coercion’ as follows:

“ Coercion is the committing or threatening to commit, any

act forbidden by the Indian Penal Code, or the unlawful

detaining or threatening to detain, any property, to the

prejudice If any person whatever, with the intention of

causing any person to enter into an agreement.”

Coercion (Section 15)

• To threaten a criminal or civil prosecution does

not constitute coercion Because it is not an act

forbidden by the Indian Penal Code. But a threat

to file a suit on a false charge constitutes

coercion, for such an act is forbidden by the I.P.C.

Threat to file a suit

• Neither ‘suicide’ nor ‘threat to commit suicide’ is

punishable under the Indian Penal Code; only ‘an

attempt to commit suicide’ is punishable under it.‘a

threat to commit suicide’ was not punishable under the

Indian Penal Code, it must be deemed to be forbidden

by that Code, as ‘an attempt to commit suicide’ was

punishable under Section 309 of that Code.

Threat to commit suicide

• The act or threat must be aimed at the life or

liberty of the other party to the contract or the

members of his family. A threat to destroy or

detain property will not amount to ‘duress.’

Duress

•  A contract brought about by coercion is

voidable at the option of the party whose

consent was so caused.

• This means that the aggrieved party may either

exercise the option to affirm the transaction and

hold the other party bound by it, or repudiate the

transaction by exercising a right of rescission.

Effect of Coercion

• As per Section 64, if the aggrieved party opts to

rescind a voidable contract, he must restore any

benefit received by him under the contract to the

other party from whom received.

• The burden of proof that coercion was used lies

on the party who wants to set aside the contract

on the plea of coercion.

Contd..

• Dealings between the appellant Gobardhan Das and one Gopal Das, the son of the plaintiff-respondent Jai Kishen Das.

• The appellant got Gopal Das to execute a deed of sale of Gopal Das' share in certain ancestral property.

• There were two deeds, one was taken in the name of Gobind Das, a relative of the appellant, and after that there was a further deed executed by Govind Das in the appellant's favour.

• On the 26th November 1896, a complaint was filed before a Magistrate by Gopal Das against Gobardhan Das.

• Gopal Das charged the appellants with offences of criminal breach of trust and cheating under the Indian Penal Code in connection with the execution of the deeds.

Case Law

GOBARDHAN DAS VS. JAI KISHEN DAS (1900)

• On 27th, the Court directed that the case should be sent to the police for investigation.

• It was still under investigation the submission now in question was executed on the 4th December 1896.

• The submission is signed by Jai Kishen Das and the appellant Gobardhan Das.

• The only ground, upon which the validity of the submission was questioned, was that of coercion, or undue influence.

• . It was clear that there was no coercion; and on the evidence it cannot be held that there was undue influence within the meaning of Section 16 of the Contract Act.

• The evidence showed that it embodied the result of a settlement come to by the parties to which both of them consented.

• They signed the award as indicating their acceptance of it, and it had not been proved that the appellant's consent to the settlement was procured by undue influence.

Contd..

“A contract is said to be induced by undue influence where:

i. 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

ii. he uses the position to obtain an unfair advantage over the other.”

Thus, an undue influence may be presumed in the cases of the following relationships:

Doctor and patient Parent and child Guardian and ward Lawyer and client Spiritual Guru and disciple Trustee and beneficiary, and similar other relationships

Undue Influence (Section 16(1))

Undue influence is presumed to exist under the circumstances mentioned above.

In other words, there is no presumption of undue influence in the following circumstances: Husband and wife Master and servant Landlord and tenantCreditor and debtor

Onus (burden) of proof [Section 16 (3)] In cases where there is a presumption of undue

influence the burden of proving that there was no undue influence will lie upon the person who was in a position to dominate the will of the other.

Presumption of Undue Influence

Voidable at the option of aggrieved party and has following two options available to him:

i. He can prefer to have the contract set aside, or else,

ii. He can choose to insist on the performance of the contract by the other party

if a contract procured by undue influence is set aside, the Court has discretion to direct the aggrieved party for refunding the benefit whether in whole or in part or set aside the contract without any direction for refund of benefit.

Effect of undue influence [Section 19 A]

Due to the death of Sanjay Gandhi, the appellant, the respondent and 13 other candidates contested the election.

Rajiv Gandhi (respondent) was declared elected. The appellant filed an election petition under Section 80 of the

Representation of the People Act 1951. questioning the validity of the election of the respondent on a

number of grounds, including the allegations of corrupt practice of undue influence like hiring and procuring of vehicles for carrying voters and obtaining the assistance of Government servants.

The court observed that there was no instance of undue influence It was declared as “Declaration of public policy or a promise of

public action or promise to develop the constituency in general do not interfere with free exercise of electoral rights as the same do not constitute bribery or undue influence”

Case Law

• In criminal law, fraud is intentional deception made for personal gain or to damage another individual.

• Fraud is a crime and a civil law violation, though the specific criminal law definition varies by legal jurisdiction.

Fraud (Section 17)

Five involvement in fraud:a false statement of a material factknowledge on the part of the defendant

that the statement is untrue, intent on the part of the defendant to

deceive the alleged victim, justifiable reliance by the alleged victim

on the statement, and injury to the alleged victim as a result.

Contd..

• Asset misappropriation • Skimming • Disbursement• Expense reimbursement fraud • Payroll fraud • Financial statement fraud• Information misrepresentation

Examples of company Fraud

• Citi bank fraud Key person:Mr. Shivraj Puri relationships manger

with Gurgaon branch of Citibank. He lured investors into a fake scheme with the help

of forged circulars from Securities and Exchange Board of India (SEBI) with a hope to cash on very high interest rates.

Cases

• Ipl scam Key persons: Lalit Modi , IPL Commissioner

Sunanda Pushkar.

Started whe Lalit Modi revealed that Sunanda Pushkar had equity stakes in Rendezvous Sports World (RSW), heading the consortium that owns the Kochi team. It was later disclosed that Pushkar got sweat equity of the value of Rs 70 crore.

Income Tax investigation report into match-fixing angle in the IPL revealed Lalit Modi has interests in three teams.

Cases Contd..

Misrepresentation (Section 18)

“Where a person asserts something which is not true,

though he believes it to be true, his assertion amounts to

misrepresentation.”

According to Section 18 ‘Misrepresentation’ means and

includes 3 ways:

The positive assertion in a manner not warranted by the

information of the person making it, of that which is not

True, Though he believes it to be true.

Contd…

Ex: A tells B, C will join a XYZ company as MD. induces B to purchase shares B purchase shares C didn’t join company A got this information as hearsayIt’s a misrepresentation by A though he believed that the information was true

Any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or any one claiming under him, by misleading another to his prejudice or to the prejudice of any one claiming under him.

Ex: A, before signing a contract B states that the monthly sales of 50,000Negotiation lasted 5 months sales dwindled 5000 per monthA unintentionally keeps quite

Case Law Causing, however innocently, a party to an agreement, to make

a mistake as to the substance of the thing which is the subject of the agreement.

Case Law

[Bonnerman vs White (1861) 142 E. R. 658]

Johnson agrees to buy hops from Blanchard On condition of not using sulphur while growing them. Blanchard tells him no sulphur was used Blanchard had used sulphur 5 out of 300acres B forget that while telling A that no sulphur was used

• An erroneous belief• Types of mistake

Mistake (section 20,21,22)

Mistake

Mistake of law

Mistake of law of the country

Mistake of foreign law

Mistake of fact

Unilateral Bilateral

• Mistake of law• ‘Ignorantia juris non exusat’, not applicable in the cases of

foreign law.• Mistake of fact Bilateral mistake. • Parties misunderstand each other and are at cross purposes• When mistake is of essential fact, the agreement is void ab-

initio Unilateral Mistake• Only one of the contracting parties is mistaken as to a matter

of fact• If mistake is caused by misrepresentation or fraud, contract is

voidable

Types of Mistake

Bilateral Mistake: Raffles v Wichelhaus • Contract to sell 125 bales of Surat cotton to Wichelhaus by

ship “ Peerless”.• The defendant(W) thought that it was the October sailing

and the claimant(R) believed it was the December sailing which had been agreed.

• Contract declared void.• Unilateral Mistake: Hartog v Colin & Shields• Defendants mistakenly offered a large quantity of hare

skins at a certain price per pound whereas they meant to offer them at that price per piece.

• Price was roughly one third of what it should have been. • The judge found in Colin & Shields’ favour ,and rendered

the contract void.

Case laws

• EU: WP29: Free and informed consent at the crux of lawful app data collection.

• Due to lack of transparency in applications on smart devices.

• Disregard of the purpose limitation principle.• Are the key data protection risk identified to

the end users. • 2011 GSMA survey result – 92% are

concerned when applications collect personal data without their consent.

Other Information

• Mere silence without any legal duty to speak will not amount to fraud except where:

• The circumstances of the case are such that regard being had to them, it is the duty of the person keeping silence to speak.

• Silence in itself will be equivalent to speech.• Change of circumstance.• Duty to speak where contracting party responses

trust and confidence. • Peek v/s gurney case – Mis-representation

Contd..

• One of the essential ingredients of a valid agreement is 'Free Consent'.

• Consent is said to be 'free' when it is not caused by:

Coercion (section 15)

Undue Influence (section 16)

Misrepresentation (section 18)

Fraud (section 17)

Mistake(section 20,21,22)• Various case laws describing the same have been brought to light.• There are exceptions to some of these elements as well. • Depending on the severity of the crime, the punishment for coercion,

fraudulency, undue influence etc. may include a liability for a fine and/ or a jail term.

Conclusion