Parties entering into a contract are said to consent when they agree upon the same thing in the same sense. The Indian Contracts Act, 1872 (Act), governs the essential elements of a contract and it dictates that parties entering into a contract should do so with free consent, in India.
Section 14 of the Act defines, ‘Free consent’ as consent free from coercion, undue influence, fraud, misrepresentation and mistake. The article in the following points will delve into these terms, as defined under the Act, that vitiate free consent in a contract.
Party cannot persuade another party to enter into a contract through the use of force or threats. Section 15 of the Act defines Coercion and it reads as, “Coercion” is the committing, or threatening to commit, any act 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.”
It is important to note herein that the act of threatening should not necessarily be an act forbidden by the India Penal Code, it could be any act of threatening. The onus to prove that such an act was not committed in on the party alleged to have committed coercion.
- Undue Influence
When a party using its position of dominance obtains an unfair advantage over the other party and uses such advantage to enter into the contract, such is said to be vitiated by undue influence. Section 16 of the Act defines Undue Influence and it reads as “A contract is said to be induced by “undue influence” where 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 uses that position to obtain an unfair advantage over the other”.
The section further stipulates that the onus to prove that there was no undue influence in entering the contract is on the party against who the use of undue influence has been alleged.
When a party induces the other party to enter into a contract, with a malicious intent to defraud the other party, such contract would be said to be vitiated by fraud. Section 17 of the Act denied Fraud and it reads as, “Fraud” means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent1 , with intent to deceive another party thereto of his agent, 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 such act or omission as the law specially declares to be fraudulent.”
Suggesting untrue facts, concealing facts and making promises without fulfilling them would make the inducement to enter into the contract a fraud. The onus to prove that such fraud and malicious intent did not exist at the time of making the contract is on the party to have alleged to have committed the fraud.
Party cannot enter into a contract with another party on the basis of false or misleading facts and promises. Section 18 of the Act defines Misrepresentation and it reads as, “Misrepresentation” means and 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 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; (3) 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.”
The difference between misrepresentation and fraud would be the lack of malicious intent to induce a party into entering a contract.
Coercion, undue influence, fraud and misrepresentation used to induce another party to enter a contract would make the agreement and/or contact voidable at the option of the party whose consent was so caused. The party whose consent was so caused could approach the court seeking a decree of either rectification or cancellation of contract. It is essential that during the drafting of a contract, the drafter should ensure that the agreement to contract is based on free will and consent, and should particularly customize the clauses of the contract in such a way that it does not prejudice the contract based on free consent.