Free Consent under the Indian Contract Act, 1872: Everything you need to know

To call a contract valid, the parties must consent to it freely and voluntarily. The principle of consensus-ad-idem is followed meaning the contracting parties must mean something in the same sense.  The contracting parties must have an identical understanding in regards to the contents of the contract.

In contract law in India, the meaning 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 the same thing in the same sense as well. Just giving consent is not enough for a contract to be enforceable. The consent given must be free and voluntary.

The definition of free consent is provided under Section 14 of the Indian Contract Act is Consent that is free from Coercion, Undue Influence, Fraud, Misrepresentation or Mistake. Consent is said to be so caused when it would have been given in the absence of such factors. The aim of this concept is to make sure that decision of the contracting parties was clear since the contract’s inception. Therefore consent given under coercion, undue influence, fraud, misrepresentation or mistake has the potential to invalidate the contract.  

For instance, Ankita agrees to sell his car to Bhavya. Ankita is the owner of two cars and wishes to sell the Swift.  Bhavya thinks he is purchasing the Audi. Here Ankita and Bhavya have not agreed upon the same thing in the same sense. Therefore there is no contract for there is no consent.

Two parties A and B entered into a contract for sale for 125 bales of cotton arriving from Bombay by a ship named “Peerless”. There were two ships with the same name and while party A had one ship in mind, Party B had the other ship in mind. It was held by the court that both the parties were not ad idem and therefore the contract was void.

Actual consent may be expressed through words or actions, or silence or inaction when the situation is so that the silence or inaction is intended to give consent; it is not always essential to communicate actual consent to the contracting party.

For example, while paying at a grocery store, the clerk at the counter may ask you if you would like to provide your contact number so that the grocery store can expand its marketing base. Providing your contact number would be a very clear, direct way of giving the clerk your express consent. 

Apparent consent exists when a person’s actions or words, silence or inaction, would be understood by a reasonable person as intended to give consent. However, a genuine but irrational belief that the other person is consenting to a contract does not constitute apparent consent.

For example, when a LIC agent helps a person in getting a loan sanctioned on behalf of the company, he acts on the authority conferred to him by the company. A reasonable person would understand that the very nature of an agent’s job implies that consent is given to contact the customers.

The contracting parties might agree upon something in the same sense. However, just giving consent does not suffice, consent must also be given freely for the purpose of constituting a valid contract.

1. In the absence of consent, a contract is considered to be void.
2. When there is consent but it is not free, the contract is called to be voidable at the will of the aggrieved party.

As per section 14 of the Indian Contract Act, 1872, consent is said to be free in the absence of

(1) Coercion (Section 15)

(2) Undue Influence (section 16)

(3) Fraud (section 17)

(4) Misrepresentation (section 18)

(5) Mistake (sections 20,21,22)

If consent is given under any of the above circumstances, the contract is considered voidable at the will of the aggrieved party, as in accordance with section 19 of the Indian Contract Act, 1872.

Thus to constitute a contract which is valid in nature, the important element is free consent.

Now, a contract must have been entered into in the absence of:

1. Coercion

In accordance with the Indian Contract Act, 1872, coercion means:

“‘Coercion’ is the committing, or threatening to commit, any act is forbidden by the Indian Penal Code (45 of 1860) 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.”

A considerable factor is that it is not always the situation that the Indian Penal Code is applicable at the place the consent was obtained. A very crucial part of the law is the phrase “to the prejudice of any person whatever” which means the coercion could be directed against the prejudice of any person and not just the party to the contract. Interestingly, parties apart from the contracting parties can also cause coercion. Even a third party to the contract can cause coercion to obtain the consent, as was seen in the case of Ranganayakamma v. Alwar Setti  (1889)[2] , where a widow was the victim of coercion for she was coerced into adopting a boy, and was not allowed to remove her husband’s corpse till the adoption was executed.

It is upon the party whose consent was allegedly coerced to prove that the consent so obtained from the aggrieved party was through coercion. When consent of a party was obtained through coercion, the contract becomes voidable at the will of the aggrieved party.

Chikkam Ammiraju and Ors. v. Chikkam Seshamma and Anr (1917) [3], 

Madras High Court upheld that threat to commit suicide also amounts to coercion and the aggrieved party has the right to pull out of the contract. In the present case, the husband threatened his wife and son that he shall commit suicide if they did not execute a sale deed in favour of his younger brother. They executed the deed but later filed a plea of coercion later. Since the very act of committing suicide is forbidden under the IPC the act of the husband was found to be illegal and the consent so obtained was found to be obtained through coercion.

2. Undue Influence

When the situation is such that one of the contracting parties is in a dominating position and it uses its position to gain an unjust advantage, then the consent is said to have been a result of undue influence.  Now, the Act of 1872 also provides instances where a person can dominate the will of another. These instances are:

1. Where one party has an actual or implied authority over the other party.
2. When one party has a relationship based on trust – a fiduciary relationship – with the other.
3. When one party enters into a contract with another of unsound mind.  

In the cases where undue influence is alleged, it is upon the party which allegedly was in a position to dominate the will of the other to prove that the consent was not obtained through undue influence.

When the situation is such that the consent was obtained through undue influence, the contract becomes voidable on the option of the aggrieved party.

As per section 16(2) of the Indian Contract Act 1872, a person is said to have a dominant position when

1. The person is involved in a relationship involving trust and has real authority.
2. The person is involved in a contract with a person whose mental capacity is permanently or temporarily affected due to age, illness or mental or bodily distress.

Illustration

Anant induces his colleague Ajay to transfer to his bank account a certain amount if he wants his kids to be safe. Anant, fearing the safety of his kids, does as instructed. Ajay is said to have employed undue influence over Anant.

Important questions for consideration by the court for dealing with undue influence 

1. Whether a person of righteous mind will enter into such a contract.
2. Whether the person had a sound mind while entering into such a contract.
3. Whether the matter was such that required legal advice or not.
4. Whether the person giving a gift had the intention of giving originating from himself and not due to the influence of others.

Lingo Bhimrao Naik v. Dattatrya Shripad Jamadagni [4] case

A mother was alleged to use undue influence on his adopted son when he reached the age of majority to ratify the gift deeds regarding non-watan property made to her daughters and caused obstruction in letting him consult his natural father. The court held that the adoptive mother used her position of authority to dominate his son gain an unfair advantage in getting the gift deeds ratified. Also, as the adoptive son was unaware of his legal rights, the matter was set aside 

3. Fraud

Fraud is a fallacious representation of facts presented with the ill intent of cheating the other party. Fraud is proved when false representation has been made-

1.Knowingly

2.Without belief in its truth

3. Recklessly whether or not true

As per Section 17, a fraud is when one party convinces another party to enter into an agreement by

1. Suggesting a false fact to be true (Suggestio falsi)

2. Actively concealing facts while having the complete knowledge of such facts (Suppresio veri)

3.Making a promise made without any intention of performing it.

4. Performing any other such act with the intention to cheat.

5.When the court finds an act to be fraudulent.

In accordance with Section 17(1), to constitute fraud, there should be a false statement of fact. To express an opinion does not constitute fraud.

Just being silent about elements which can affect the willingness of a person to enter into a contract does not amount to fraud, but if there is a duty to speak upon the person who is keeping silent, then it becomes a fraud. Example of such cases is contracts of utmost good faith where full disclosure is expected.

In cases of fraud, it is upon the party who alleges fraud to prove it. The party has to prove the circumstances which can lead to the existence of fraud. Merely mentioning fraud while pleading is not enough. A crucial point of consideration is that if the party who has been the alleged victim of fraud had the opportunity or means to find out the truth with ordinary care, then the contract is not held to be void.

Bimla Bai vs Shankarlal (AIR 1959) [5], 

A father called his illegitimate son as “son” for the purpose of fixing his marriage. It was held that the father knowingly hid the illegitimacy of the son with the intention of cheating the parents of the bride which amounts to fraud.

4. Misrepresentation

In accordance with section 18 of the Indian Contract Act, misrepresentation can be divided into three types –

1. When a statement of fact is made which is false but is believed to be true.
2. When the person making the false statement performs breach of duty, and by doing so gains unjust advantage even though such wasn’t the intention of the party.
3. When one contracting party behaves in an innocent manner which leads the other party to commit mistake(s) with regards to the contents of the contract.

The common point between the three types is that misrepresentation is understood to be an innocent mistake done without the intention to do so.

The burden of proof lies on the party alleging misrepresentation to avoid the contract to prove that misrepresentation was used to obtain the consent. When consent was obtained through misrepresentation, it becomes voidable at the option of the aggrieved party.

Bisset v Wilkinson [1927][6], 

The plaintiff purchased two blocks of land for the from the defendant to practise sheep farming. During negotiations, the defendant said that if the place was worked properly, it would carry 2,000 sheep. The plaintiff bought the place believing that it would carry 2,000 sheep. Both parties were aware that the defendant had not carried on sheep-farming on the land. In an action for misrepresentation, the trial judge said that in the case, the statement of the defendant regarding the carrying capacity of the land could not be taken as anything but a mere expression of opinion and not a fact since both parties were aware that the defendant did not practise sheep farming. The Privy Council concurred with the view of the trial court and held that in the absence of fraud, the purchaser does not have the right to rescind the contract.

Illustration – Deepak said that his computer is in good condition and Ankit bought the computer from him because of the trust he had in Deepak. After some time the computer did not work properly and Ankit thought she was misled but Deepak believed that his computer was in good condition and had no intent to cheat.

5. Mistake

a. Mistake of Law

When legal provisions are the subject matter of misunderstanding between contracting parties, it is referred to as Mistake of Law. Now, the party can be confused regarding the law of the home land or law of a foreign land. In the cases where any contracting party pleads no knowledge of the laws of the home land, the contract cannot be avoided for such an excuse is not considered to be valid. However, if the subject matter of confusion is foreign laws, the contracting party can be excused from the contract in the case of lack of knowledge of such laws.

b. Mistake of Fact

When the subject matter of misapprehension are the clauses or terms of the contract, it is said to be a mistake of fact. The misunderstanding can be on the part of one party or both.

Bilateral Mistake: When a matter of fact is the subject matter of misunderstanding for both the contracting parties, the agreement is said to be void.                          

Unilateral Mistake: When a matter of fact is the subject matter of misunderstanding for one of the contracting parties, the agreement stands to be valid.  Only when the party is mistaken about the parties to agreement or nature of the transaction, the agreement becomes void.

Dularia Devi v. Janardan Singh(1990)[7],

The plaintiff was an illiterate woman who wanted to gift her properties to her daughter. The defendants took her thumb prints on two documents which she believed were documents in her daughter’s favour, but the second document was in favour of the defendants who were supposed to only execute the deed. She later filed a suit for the sale deed’s cancellation and it was held that for the woman was clueless about the second document’s nature, it was held to be void.

Exceptions

1) Private Rights of Property- A party is thought to be unable to fully know the private rights of the other party, therefore it is excusable.

2) Mistake as to any foreign law is considered to be treated like a mistake of fact and is considered excusable since knowledge of foreign laws is not necessary.

Free Consent is mandatory to make an agreement a valid contract. The importance of free consent cannot be stressed enough. Such consent must be free and voluntary in nature, without any sort of pressure. If the consent to the agreement was obtained or induced by coercion, undue influence, fraud, misrepresentation or mistake, then it has the potential to make the agreement void.

[1]  (1964) 2 H&C 906

[2] (1890) ILR 13 Mad 214

[3] 1916 MWN 368

[4] AIR 1938 Bom 97

[5] AIR 1959 MP 8

[6] [1927] AC 183

[7] AIR 1990 SC 1173