Let’s start with an example where you own land in a small town, and your Uncle tells you to sell it to him for a price way below the market price. Though you don’t want to, the Uncle threatens you of causing bodily harm to one of your loved ones, or tells you that if you do not sell the property now, the authorities are going to acquire the same at a much lower price or Uncle tells you that the laws require someone living in the town could own that land. If you agree to any of the propositions, would it be free consent in Indian Contract? Were you actually in a position to calculate the benefits and losses to be incurred by such a deal? To make a valid contract, it is important that both the parties are on the same page agreeing to the same set of conditions without any confusion, out of free will. To check whether there is a free will is of utmost importance, and has been decoded here in this blog. Let’s have a look at what constitutes consent without any external factors affecting the same.
What is Free Consent in Law of Contract?
The Indian Contract Act deals with and states all about contracts in India, starting with an offer and its acceptance, obviating the difference between agreement and contract, then delineating the legalities of when a contract may be enforced. It may be noted that free consent is a must for a valid contract. Hence, let’s go step-by-step of the topic and understand what free consent in Indian Contract Act is all about.
What is Consent?
Before jumping upon what constitutes free consent in Indian Contract, 1872, it is better to know what makes up consent for the same. As per Section 13 of the Act, it is when two or more people agree upon the same thing in the same sense, that they are said to consent. In simple words, when both people are on the same line regarding terms and conditions of a contract and agree upon the same, they are said to have consented to it. When consent is in question, “same thing” and “same sense” is the aspect to be scrutinised to understand whether both the parties consented. For example, if X offers to sell ‘10 glasses’ to Y for Rs 10,000, doubts may arise on whether the thing here is one for correcting eyesight, solid material used for making doors/windows, or the tumbler that we use to drink water or any other liquid. This is where consent to the same thing in the same manner matters.
What is Free Consent under section 14 of the Contract Act?
Where there is consent between parties regarding a set of terms and conditions, it should be free consent. It means that the person should have freely agreed to the same and not be affected by external factors. As per Section 14 of Indian Contract Act, consent is free when it is not caused by coercion/undue influence/fraud/misrepresentation/mistake. To have a better understanding, it is crucial to understand the factors which affect free consent.
What are the factors affecting free consent?
The factors which affect free consent under Indian Contract Act have been discussed and defined under Sections 15, 16, 17, 18, 20, 21 and 22 of the 1872 Act. They have been explained below for a better understanding:
Coercion
As per Section 15 of the Contract Act, coercion is “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.” The Indian Penal Code mentioned here has been replaced by the Bharatiya Nyaya Sanhita, 2023. To make it simple to understand, let’s take help from X and Y.
- If X commits a criminal act with the intention to cause Y to enter into an agreement; or
- If X threatens to commit a criminal act to make Y enter into an agreement; or
- If X unlawfully detains Y or any property belonging to Y to prejudice Y and cause Y to sign a contract; or
- If X threatens to unlawfully detain Y or any of Y’s property to prejudice Y, in order to make Y enter a contract.
Explanation to Section 15 of the Contract Act makes it immaterial if the IPC, or BNS for that matter, is not in force at the place where the person was coerced for entering the contract.
Undue Influence
If understood by the words, ‘undue’ means more than necessary or reasonable, and ‘influence’ means the power to affect/control/change something. As defined under Section 16 of the Act, a contract is induced by undue influence when the parties are related in such a way that one can dominate the decision of another and use such position for an unfair advantage. Such a position can be understood when people are in fiduciary relations (eg, doctor-patient, spouse, employer-employee, agent-principal, etc.) or contract with a person who is a minor/mentally ill/ under bodily distress.
When a person’s decision can be influenced by another, free consent is out of question. In such a scenario, the person may not be able to independently calculate the pros and cons of entering a contract, and end up being influenced by the person in authority or fiduciary relationship. Thereby, undue influence becomes one of the factors which affects the free consent of the party to contract.
Fraud
The term “fraud” which acts as one of the factors affecting free consent has been defined under Section 17 of the Indian Contract Act, 1872. When a person deceives another in order to induce the other to enter a contract, while suggesting something which is untrue, or concealing some crucial facts, or making a promise without any intention to perform, or any other act to deceive the person into contracting, or any other act which has been declared to be fraudulent as per the applicable laws. In other words, whenever there is concealment of facts, or stated facts which are untrue or there is no intent to perform an act, it is called fraud, and there is no free consent to the contract.
Misrepresentation
As defined under Section 18 of the Indian Contract Act, positive assertion of facts/information which is not true, while the other person believes it to be true, is misrepresentation. A breach of duty thereby misleading another to prejudice is also misrepresentation. In fact, someone making another to make an agreement, while being mistaken of the subject of agreement, is also misrepresentation. A contract which is entered into as a result of misrepresentation lacks free consent.
Mistake
Regarding mistake in a contract, there are three provisions dealing with the same. * *
- Section 20 of the Contract Act deals with mistake as to matter of fact. It states that if both the parties to contract are mistaken regarding a fact which is essential to the agreement, such an agreement is void.
- Section 21 deals with mistakes as to law. It states that a contract is not voidable if caused by mistake of law in force in India. However, one having mistake of law outside India, it is to be construed as a mistake of fact.
- Section 22 of the Act states about contracts caused by mistake of fact on part of one party. So, if one party is mistaken about a certain fact, while the other one was clear about the same, the contract is not voidable and has to be duly performed by both.
Here, it can be concluded that a mistake of fact makes the contract voidable when both are mistaken, and not when one of the parties is mistaken about the fact. However, when there is a mistake of law, the contract is not voidable and applicable laws are respected and followed in such cases.
What happens if free consent in a contract is missing?
Free consent is among the essential conditions of a valid contract. Thus, when there is absence of free consent of one of the parties to contract, the contract is voidable at the option of party who did not give free consent to the contract. In other words, a contract is voidable when there is no free consent. However, there is an important aspect of who can seek a contract to be declared void through the Court – the party who did not give free consent? Or the party who gave free consent but the other one was under coercion/undue influence/fraud/misrepresentation/mistake. It may be noted that the one who was wronged in the name of consent is the rightful party to initiate action against a voidable contract. It cannot be the case that X first coerces Y to enter a contract, then X states before the Court that there was no free consent on part of Y, since X had coerced Y to enter the contract.
