As per Section 13 of the Indian Contract Act 1872, ‘Two or more persons are said to consent when they agree upon the same thing in the same sense’. When the concept of free consent cannot be established a contract can become void. In this article, we look at the concept of free consent and void contracts in detail.
A contract that is void cannot be applied on compulsion by either of the parties. A contract can be declared void on account of the following:
- Formulation of the same by incompetent parties.
- Inclusion of material bilateral mistake or unlawful consideration.
- Lack of consideration on either side.
- Inclusion of an unlawful object.
- Restriction individual to marry or remarry.
- Restriction of the performance of trade.
- Restriction legal processes.
- Specification of uncertain terms.
- Inclusion of a wager, gamble or bet.
- The requirement of an impossible event.
- The Requirement of the performance of an impossible act.
A voidable contract is where one party has the right to enforce or cancel the contract. If a party does not cancel the contract, then it remains as a valid contract and has to be performed like a valid contract. An agreement when found to be caused by coercion, fraud or misrepresentation becomes voidable at the option of the party whose consent was caused. On the other hand, if consent is caused by a bilateral mistake, the agreement becomes void, and there is ‘no consent’.
Applicability of Consent
An agreement is said to have been consented if it does not involve the following:
- Undue influence
‘Coercion is the act of 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, with the intention of causing any person to enter into an agreement’. However, it is insignificant if the Indian Penal Code is or is not in force where coercion is employed. This can be committed by an individual, not particularly by a party to the contract and would be directed against any person.
A contract would be induced by undue influence under the following circumstances:
- If one of the parties is in a position to dominate the will of the other or where he stands in a fiduciary relation to the other.
- If he makes a contract with a person whose mental capacity is temporarily or permanently affected due to age, illness or mental or bodily distress.
- If an individual is in a position to dominate the will of another and hence makes a contract with him, and the transaction appears to be unconscionable.
Misrepresentation is an untrue statement of fact or law that is made by one party to another, where the second party is instigated to make a contract to the former, that results in causing loss to the second party. The following are the different types of misrepresentation.
Fraudulent Misrepresentation: This refers to a false representation that has been made intentionally.
Negligent Misrepresentation: This refers to a representation that is made carelessly.
Innocent Misrepresentation: This refers to a representation that is neither fraudulent nor negligent.
Fraud refers and includes the following acts that are committed by a party to deceive another party:
- The suggestion that is not true by one who does not believe it to be true.
- The active concealment of one having knowledge or belief of the fact.
- A promise that is made without any intention of performing it.
- Any act that is appropriate to deceive.
- Any such act or omission as the law declares to be fraudulent.
Given below are the kinds of frauds that are generally committed.
False Statement: A false statement intentionally made by one of the parties, which is considered to be a fraud.
Active Concealment: The active concealment of a fact by an individual who believes the fact is a fraud.
Intentional non-performance: A promise that is made without any intention to perform it is intentional non-performance.
Deception: Any other facts stated to deceive is called deception.
Fraudulent act or omission: The clause provided under certain acts makes it mandatory to disclose relevant facts. According to Section 55 of the Transfer of Property Act, the seller of immovable property has to reveal to the buyer all the material defects, and any failure in the same leads to fraud.
Is silence a fraud: A general rule is that silence is not a fraud until there is a duty to speak particularly in the fiduciary relationships.
Where silence is a fraud: Under certain circumstances, ‘silence is in itself equivalent to speech’.
Mistake of Fact
Consent cannot be free when an agreement is entered into under a mistake by either of the parties. When both the parties are under a genuine mistake, the particular contract is considered void and can, therefore, be avoided. On the other hand, if any mistake of fact is made by either of the parties and not by both, the defaulting party is prohibited from denying the formation of an agreement on the grounds that he/she was mistaken with respect to the subject matter.