Name: Muhammad Saif

Registration # MB-093065

Date: 08-11-2010

Course: Business Law

Section: 03

Description: Note on Free Consent

Free consent and its effects

Coercion
Undue influence
Fraud (section 17)
Fraud and its effects
Misrepresentation
Mistake and its effects

Consent (section 13) (approval/assent/agreement)

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

Free Consent (section 14) (free assent/agreement)

“Consent is said to be free when it is not caused by coercion, fraud, misrepresentation,
undue influence and mistake”.

Coercion (section 15) (compulsion/intimidation/force/unwillingness)

“Coercion is the committing or threatening to commit, any act forbidden by the Pakistan
Penal Code, 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 a
agreement”.
1. Committing offence (obtaining or attempt to obtain the consent through an act
forbidden by P.P.C)
2. Unlawful detaining or threatening to detain (to obtain the consent of a person to enter
into an agreement)
3. Threat against any third party (i.e. in which the concerning aggrieved person has
property or some interest)
4. Presence of Pakistan Penal Code (is immaterial, presence/non-presence makes no
difference)

Effects of Coercion
1. The contact becomes void able at the option of the aggrieved person/party, the
aggrieved party/person has two options
a. may compel the other party for specific performance (if deems fit)
b. may set a side the contract.
2. Section 64, if the aggrieved party decides to set aside the contract he must restore any
benefits received by him under such contract.

Undue influence (section 16.1) (undue use of power/authority/control)

1. Position to dominate (one of the two parties must be in position to dominate the other
party, i.e. having a superior authority over the other)
2. Undue advantage (person having the superior authority must obtain an undue
advantage with the use of his power)
a. case if mental distress (it is easy to compel a person having temporary/permanent
defective mental capacity to enter into a contract even on terms against himself, so it is a
void able contract on the option of defective person)
b. real or apparent authority (the relation between the dominant and dominee can either
be of real type or the apparent type, i.e. a police officer and a criminal, a doctor and his
poor patient)
c. fiduciary relation (dominance due to the natural love and affection, mutual trust and
confidence)

Burden of Proof (no one carries the burden of proof, only the status of the parties may
prove the existence of the undue influence)

Distinction between coercion and undue influence

Coercion || Undue Influence
To do any act not involving the free will, under the pressure of the other party || Acting
under the dominance of a person misusing his superior authority Forbidden by P.P.C ||
No particular provision in P.P.C Consent is obtained through an offence and compel the
other to enter into a contract || Consent is obtained by dominating the free will of the
other party Physical pressure can be applied to attain the consent || Ethical/moral pressure
is posed to attain the assent Can be applied by any one either by the contracting parties or
by someone outsider || Only the contracting parties do so to do or to threaten to do an
illegal act || The act done by the dominant party is unfair not illegal, The aggrieved party
is bound to return any benefit which he received due to execution of contract || The court
the aggrieved party refund the benefit if he received under the contract.

Fraud (section 17) (Intentional/premeditated Misrepresentation)

Knowingly conveying a wrong statement to someone, believing it to be untrue/false
about a particular subject matter to deceive or induce. Mainly with intention to deceive
the other,
“Fraud means and includes any of the following acts committed by a party to a contract,
or with his connivance or by his agent with intent to deceive or to induce another party
thereto or his agent, to enter into a 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.

Explanation (silence whether fraud): Mere silence as to facts likely to affect the
willingness of a person to enter into a contract is not fraud, unless the circumstances of
the case are such that, regard being had to them, it is the duty of the person keeping
silence to speak, or unless his silence is, in itself, equivalent to speech.
Causes of Fraud
1. False statement about fact
2. Active concealment of fact
3. Promise made without intention to perform
4. Aim to deceive the other
5. Any act or omission

Essentials of Fraud
1. A false statement or active concealment of material fact
2. Acted upon by the party misled and deceived
3. Committed before the conclusion of the contract
4. With the intention to deceive or induce the other
5. Statement made with the knowledge of falsehood of the statement
6. Statement believed to be true by the other party
7. The aggrieved party must suffer some loss
8. The other must have been deceived by the fraudulent conduct of the first party

Effects of Fraud
1. Avoid the contract (the consent was obtained through fraudulent silence, and it couldbe
discovered through ordinary diligence)
2. Affirm the contract (the contract can be affirmed for the execution)
3. Notice of the intention (loss of opinion on account of affirmation/avoidance, if no
notice is served)
4. Sue for damages (can sue only in case if the rights are available)
a. no third party has acquired the rights/possession
b. no affirmation declared, when the fraud came to knowledge
c. parties can be restored to their original position

Circumstances for the loss of rights

a. party alleged of fraud could discover the fraud through ordinary diligence
b. the ignorance of fraud/misrepresentation caused the consent
c. after the information of misrepresentation/fraud no intention was showed to
avoid/accept the contract

Burden of Proof (lies on the party claiming/pleading on the grounds of fraud)

Misrepresentation (section 18) (Unintentional Lying)

Unknowingly conveying a wrong statement to some one, believing it to be true about a
particular subject-matter is said to be misrepresentation.
Section 18, Contract Act 1872 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, or
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, or
3. Causing, however innocently, a party to an agreement, to make a mistake is to the
substance of the thing which is the subject of the agreement”

Essentials:
1. the representation must be made innocently with an intention that it shall be believed to
be true
2. representation statement must be false
3. at the time of contract the false representation must be believed to be true by parties
4. no intention of the parties to deceive each other
5. it must occur before the execution of the contract
6. the parties must have acted according to the false information
7. the other party should suffer a lose de to the execution of the (misrepresented) contract