LAW ON FREE CONSENT AND CONSEQUENCES OF CONTRACT CAUSED BY COERCION, UNDUE INFLUENCE OR FRAUD

PRELIMINARY NOTE:

“Consensus Ad Idem” — Meeting of minds is the essence of consent.

The consent in an agreement must be free—without coercion, undue influence, fraud, misrepresentation, and mistake. However, where the agreement is caused without free consent, it shall be voidable at the option of one party; but where the consent is caused by mistake, the agreement is void.

 

RELEVANT PROVISION AND LAW:

Chapter 2 and Sections 13–22 of the Contract Act, 1872

 

MEANING OF CONSENT: (Section 13)

Two or more persons are said to consent when they agree upon the same thing in the same sense.

 

WHAT IS FREE CONSENT: (Section 14)

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

• (1) Coercion, or
• (2) Undue Influence, or
• (3) Fraud, or
• (4) Misrepresentation, or
• (5) Mistake.

 

EXPOSITION OF THE LAW ON FREE CONSENT:

Now I will discuss in detail the factors in which an agreement without free consent renders the contract void or voidable at the option of one party.

 

1. COERCION (Section 15)

"Coercion" is the committing, or threatening to commit, any act forbidden by the Penal Code, or the unlawful detaining or threatening to detain any property, to the prejudice of any person whatsoever, with the intention of causing any person to enter into an agreement.

Explanation: It is immaterial whether the Penal Code is or is not in force in the place where the coercion is employed.

 

2. UNDUE INFLUENCE (Section 16)

(1) A contract is said to be induced by undue influence where the relationship between the parties is such that one party is in a position to dominate the will of the other and uses that position to obtain an unfair advantage.

(2) A person is deemed to be in a position to dominate the will of another:

• a) where he holds a real or apparent authority or stands in a fiduciary relation to the other; or
• b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.

(3) When the transaction appears to be unconscionable, the burden of proof lies on the person who was in a position to dominate the will of the other.

 

3. FRAUD (Section 17)

"Fraud" includes any of the following acts committed by a party to a contract (or his agent), with intent to deceive another party or to induce him to enter into the contract:

1. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true.

2. The active concealment of a fact by one having knowledge or belief of the fact.

3. A promise made without any intention of performing it.

4. Any other act fitted to deceive.

5. Any act or omission which the law specifically declares to be fraudulent.

Explanation: Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the law imposes a duty to speak, or unless silence is equivalent to speech.

 

4. MISREPRESENTATION (Section 18)

"Misrepresentation" includes:

1. 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.

2. Any breach of duty which, without intent to deceive, gains an advantage to the person committing it by misleading another.

3. Causing, however innocently, a party to make a mistake as to the substance of the subject matter of the agreement.

 

5. MISTAKE

a) Bilateral Mistake as to Fact (Section 20)

Where both parties are under a mistake as to a matter of fact essential to the agreement, the agreement is void.

Explanation: An erroneous opinion as to the value of the subject matter is not considered a mistake of fact.

Examples:

• A agrees to sell goods on a ship assumed to be en route, but it had already sunk. The agreement is void.

• A agrees to buy a horse that was already dead at the time of the agreement. The agreement is void.

b) Unilateral Mistake as to Fact (Section 22)

A contract is not voidable merely because one party was under a mistake as to a matter of fact.

c) Mistake as to Law (Section 21)

A contract is not voidable because it was caused by a mistake as to any law in force in Pakistan. However, a mistake as to a foreign law is treated as a mistake of fact.

Illustration:
A and B contract based on an erroneous belief regarding the law of limitation in Bangladesh. The contract is not voidable.

Principle: “Ignorance of law is no excuse.”

 

CONSEQUENCES OF CONTRACT CAUSED BY COERCION, UNDUE INFLUENCE OR FRAUD (Sections 19 & 19-A)

If consent is caused by coercion, fraud, or misrepresentation, the contract is voidable at the option of the aggrieved party.

• The aggrieved party may rescind the contract or insist on performance as if the misrepresentation were true.

• Exception: If the party had the means of discovering the truth with ordinary diligence, the contract is not voidable.

• Fraud or misrepresentation that did not cause consent does not render the contract voidable.

 

POWER TO SET ASIDE CONTRACT INDUCED BY UNDUE INFLUENCE (Section 19-A)

If consent is caused by undue influence, the contract is voidable.
The Court may set aside such a contract either:

• Absolutely, or

• On such terms and conditions as it considers just, especially if the aggrieved party received any benefit under the contract.

 

CONCLUSION:

Free consent is the cornerstone of a valid contract. The presence of coercion, undue influence, fraud, misrepresentation, or mistake undermines the freedom of will necessary for a binding agreement. The Contract Act, 1872, through its detailed provisions in Sections 13 to 22, ensures that only those agreements formed with genuine and informed consent are legally enforceable. Contracts formed without such consent are either void or voidable, depending on the nature of the defect. The law also offers remedies such as rescission or enforcement with compensation, thereby promoting fairness and preventing unjust enrichment. Understanding these principles is essential to safeguard the rights and interests of parties to a contract.