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Free consent/ voidable

contract
Saroj Ghimire, LL.M
Lecture 7
 A contract is valid only when it is the result of
the free consent of all the parties to it.
 It is essential to the creation of a contract that
the parties are ad idem, i.e. they agree upon
the same thing in the same sense at the same
time and their consent is free and real.
 Nepalese Contract Act 2000 doesn't define the
term free consent.
 Indian Contract Act 1872, Section 10 says," all
agreements are contracts if they are
made by the free consent of parties".
What is Consent?

 It means acquiescence or act of assenting


of an offer. Two or more persons are said
to consent when they agree upon the
same thing in the same sense. Consent
involves a union of the wills and an accord
in the minds of the parties. When the
parties agree upon the same thing in the
same sense, they have consensus ad
idem. For a valid contract the parties
must be ad idem.
In the case of Bala Debi Vs. Majumdar,
AIR(1956)Cal.575,
 An illiterate woman executed a deed of gift in favor
of her nephew under the impression that she was
executing a deed (act) authorizing her nephew to
manage her lands. The evidence showed that the
women never intended to execute such a deed of
gift, nor was the deed ever read or explained to her.
The court held that the deed was void and
inoperative. In this case the consent of the woman
altogether absent. Had she known the true position,
she would not have signed the document.

What is Free Consent?

 Consent is said to be free consent if it is


not caused by Coercion, Undue influence,
Fraud, Misrepresentation in other words,
where there is consent, i.e., where it is
caused by Coercion, Undue influence,
Fraud, Misrepresentation the contract is
said to be the absence of free consent.
For example,
 A is forced to sign a cheque at the point
of pistol. A knows what he is signing but
his consent is not free. The contract in this
case is void able at the option of the
parties. The consent in this case is not
altogether missing. It is there but it is not
free or the will of the party is not there.
Significance of free consent
 Contract is private legislation. Terms are made by
themselves. Parties have autonomy to bind
themselves. So its importance is there to respect
the contractual independency of the parties.
 To promote the reasonable transaction between
the parties
 To respect the parties consensus
 To protect the parties incase they entered into
the contract with out their consent.
Voidable contract:

 The contract where parties consent is not taken freely


are voidable contract. In case of voidable contract the
aggrieved party is in the position to make that contract
void. If he remains silent the contract will be valid.
 It depends upon him only. Where as in the case of
void contract they are void from the beginning even if
the parties are agreed.
 Blacks Law dictionary defines, “ A contract that can be
affirmed or rejected at the option of the parties; a
contract is void as to the wrongdoer but not void as to
the party wronged, unless the party treats\ it as void
The elements by which a contract
lacks free consent
 Coercion:
 The word coerce mean forcing or threatening
somebody to do some thing. When the person is
compelled to enter into a contract by the use of force
by the other party or under a threat," coercion" is said
to be employed.
 In life, including the life of commerce and finance,
many acts are done under pressure, sometimes
overwhelming pressure, so that one can say that the
actor had no choice to act”. Barton v Armstrong, 1976
 Coercion is the committing or threatening
to commit, any act, or the unlawful
detaining or threatening to detain, any
property, to the prejudice of any person
whatever, with the intention of causing
any person to enter into an agreement. In
this situation the consent of the parties
are not free.
 Section 14(1) (a) of Nepalese Contract
Act2000 defines Coercion as," A person shall be
deemed to have indulged in coercion if he, with
the objective of compelling any person to accept
any contract against his will,
 withholds or threatens to withhold his property or
 issues a threat to his life, body or prestige, or
 takes or threatens to take any other action in
contravention of current law.
Section 15 of Indian Contract Act 1872

 The committing or threatening to commit


any act forbidden by the Indian penal C
ode or unlawful detaining or threatening
to detain any property to the prejudice of
any person whatever, with the intention of
causing any person to enter in to an
agreement.
objective is to compel any person to accept
any contract against his will.

 Ranganayakamma vs. Alwarsetti, A girl of 13 was


made to agree, by threatening, to adopt a boy by her
husband's relative who prevented the removal of the
dead body of her husband until she consented to the
adoption. The court held that the agreement to adopt
was not binding.

 13 Madras 214 (1889)


By Withholding or threatening to
withhold his property.
 Muthia v. Muthu Karuppa where an agent
refused to hand over the account books of
a business to the new agent unless the
principal released him from all liabilities.
The principal had to give a release deed
as demanded. Held, the release deed was
given under coercion.
 (1927) 50 Madras, 214
By issuing a threat to life, body or
prestige or
 By threatening to take any other action in
contravention of current law.
 Threat to commit suicide is coercion in India.
 In case of Chikhan Ammiraju v. Seshma, the court
held that any contract madeunder the threat to
commit suicide is voidable under the ground of
coercion. In this case A hindu man induced his wife
and son to execute a release in favour of his
brother in respect of certain properties which they
claimed as their own. It was held by the majority
judge that threat of sucide amounted to coercion,
therefore, voidable.
Consequences of Coercion:

 A contract brought by coercion is voidable


at the option of the party whose consent
was so caused. The aggrieved party can
have the contract set aside or he can
refuse to perform it and take defense of
coercion if the other party sought to
enforce it.
Undue influence
Section 4 (b)
"Undue influence" means
influence exercised by a person
upon another person who is
under his influence or is
amenable to his wishes with the
intention of deriving some undue
advantage for personal benefit or
to fulfill selfish interests.
Special relationships are:
 Happens in special relationship:
 In special relationship and in case of
inequality of bargaining power, there is
presumption that the transaction is the
consequence of undue influence
 For example, Parent and child, Guardian
and ward, Religious adviser and follower,
 Doctor and patient’, Lawyerand client
 Where there is such special relationship,
the stronger party must show that undue
influence was not exerted
Misrepresentation
 What is representation?
 A representation is a
statement made by one party
to the other, before or at the
time of contracting, with
regard to some existing fact or
to some past event, which is
one of the causes inducing the
contract.
 Ifsuch representation is untrue
and the other party relying on this
entered into the contract, then
the party who has been deceived
may make the contract void.
 Such an untrue statement is
called a misrepresentation.
Rules relating to misrepresentation
 1. The statement must be one of fact:
 In negotiating a contract, all sorts of
statements are made.
 But all don’t form facts. They may be;
 Mere sales puffs:
 For eg: ‘the best drink of the world’
 In Dimmock v Hallett, it was held that a
statement that land was fertile and
improvable was not actionable as a
misrepresentation
Expressions of opinion
 These are not actionable, because they are not
statements of fact.
 For eg; I intend to do
 In my opinion
 I think
 In my view
 As far as I know
In Bisset v Wilkinson (1927),
 The vendor of previously ungrazed land in
New Zealand stated that it would be able
to support 2,000 ship. This turned out to
be untrue.
 It was held that the statement was only
an expression of opinion and, as such,
was not actionable; the purchaser knew
that the vendor had no expertise.
Anderson v Pacific Fire Insurance
Co. Ltd (1872),
 A shopping company effecting an
insurance policy wrote to the company
and stated that in the ships master’s
opinion a certain anchorage was good.
The vessel was later lost at that
anchorage.
 Held: the letter was not a representation
of fact, but merely of opinion.
 The statement must induce the
contract:
 If a false statement is made to which the
other party pays no attention, or which
does not in any way influence him, then
this does not affect the validity of the
contract.
The statement must induce the
contract means:
 The statement must have been made by one
party to the contract to the other, and not by a
third party,
 The statement must have been addressed to the
person claiming to have been misled,
 The person claiming to have been misled must
have been aware of the statement, and
 The person claiming to have been misled must
have relied on the statement.
The statement must addressed to
the contracting party
 Unless the untrue statement was either
made to the other party or it was made to
another person in the knowledge and with
the intent that that person should pass it
on to the other party, it does not affect
the validity of the contract.
 The statement must be untrue:
Contract concluded by fraud
 Making a false representation
knowingly
 Without belief in truth
 A false representation of a fact which
is material
Fraud
 Following acts to deceive the other party:
 Making false statement or representation
knowingly
 Concelament of material fact
 Believing not to be true
 A promise made without intention of
performing it
 Any other act of fraud
Vokes vs Arthur Murray,
 Inc. where Murray began teaching peoples how to
dance. At that time, dancing was becoming
increasingly popular among young people, because
so many people were shocked by the new Jazz
dancing.
 Vokes, a widow without family, wished to become "
an accomplished Dancer" and to find new interest in
life went to Murray's school of dancing where she
receives elaborate praise from her instructor for her
grace, poise, and potential as an excellent dancer.
 The instructor sold her eight half hour
dance lessons for $15.50 each, to be
utilized with in one calendar month.
Subsequently over a period of 16 months,
Vokes brought a total fourteen dance
courses which amounted to 2302 hours
for a total cash $31090.45. When it
become clear to vokes that she did not, in
fact, have potential to be an excellent
dancer, she filed against him alleging
fraudulent misrepresentation.
 The court held that there was fraudulent
misrepresentation by Murray saying that
she was improving in her dancing ability,
that she had excellent potential, that she
was responding to the instructions in
dancing grace, and that they were
developing her into beautiful dancer,
whereas in truth and in fact she did not
develop in her dancing ability, she had no
dance aptitude and in fact had difficulty in
hearing the musical beat.

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