Consent and contract enforceability

Consent and contract enforceability

 Introduction:

Individuals operating in the modern business environment must be able to form a contract by taking a rigidly schematic approach to rights, duties and privileges of all the parties involved. those entering the world of business should also know how to evaluate the enforceability of a legally binding agreement and to defend it in court.

 To make sound business decisions regarding contracts, anyone contemplating a career in business should be intimately familiar with laws governing the legal relationship between parties to a contract, as well as decisions of court in the context of contract enforceability.

Coercion, Undue influence, misrepresentation, fraud and mistake among other  may render a seemingly legal contract voidable.

Valid contract:

For a contract to be valid it includes offer, acceptance, intention to create legal relation and consideration.

1. Offer

According to section 2 (a) Of Indian contract act,1872

 when one person signify his willingness to another to do or abstain from doing anything with a view to obtain the assent of that another for such act or abstinence it is an offer.

For example,

 When A says to B he want to sell his car for two lakhs it is an offer. 

•  Offer can be expressed or implied. 

Implied offer:

Implied offer is offer that is made otherwise, than in words.

 For example, when you go to a doctor and here it is implied offer that to diagnose you.

Express offer:

Express offer is offer that is made using words. 

• The elements of valid offer.

1.There must be  at least two parties.

 There have to be at least two parties a person making a proposal and other person agreeing to it . All the persons are included I.e legal persons as well as artificial persons. 

1. Every proposal must be communicated. 

Communication of proposal is mandatory.

 For example,

 A proposes to sell a car to B At a certain price. once B receives the letter ,the proposal communication is complete.

Section 4 of ICA, 1872 says that communication of a proposal is complete when it comes to the awareness of the person to whom it is made.

     3.It must create legal relations

 And offer must be such that when accepted it will result in a valid contract a mere social invitation cannot be regarded as an offer because if such an invitation is accepted it will not give rise to any legal relationship. For example, A invited B For dinner and B accepted the invitation it is a mere social invitation. and A will not be liable if he fails to provide dinner to B. 

     4.It must be certain and definite.

 The terms of the offer must be certain and clear in order to create a valid contract, it must not be ambiguous.

5.It may be specific or general

 the specific offer is an offer that is accepted by any specific or particular person or by any group to whom it is made. Whereas the general offer are accepted by any person.

 Case laws:

Carlill VS  carbolic smoke ball company.

 Lalman Shukla vs Gauri datt. 

1. Acceptance

Section 2(b) of ICA, 1872 defines acceptance as ‘When a person to whom the offer is made signify his ascent there to,offer is said to be accepted.

• Essential elements of acceptance. 

1.Acceptance must be communicated to offer.

2.It should be absolute and unqualified.

3.Acceptance must be in reasonable amount of time.

4.Acceptance must be recommended in the following mode.

Case laws: Adams vs lindsell. 

4.consideration.

Section 2(d) Of Indian contract act defines consideration,

“When, add the desire of the promissor, the promisee or any other person has done or abstained from doing or does or abstinence from doing or promises to do or absence from doing something such act or abstinence or promise is called a consideration for the promise”.

Therefore, every promise or every set of promises forming consideration to each other is an agreement section 2(e).

Consent:

Section 13 of Indian contract act, 1872

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

Free consent:

Section 14 of ICA, 1872

Consent is set to be free when it is not caused by

1.coercion(sec.15) 

2.undue influence (sec. 16)

3.fraud(sec.17).

4.misrepresentation(sec 18).

1.coercion(section15).

It is defined under section 15, coercion is using force or creating circumstances where in the other parties consent is not free. it might be through taking some property, doing something which is an offense under IPC, the purpose of these things is to get other parties consent.

 Techniques of causing coercion. 

Consent is said to be caused by coercion when it is optained

1.Threatening or doing something which is a crime under IPC, or

2.seizing or confining someone. 

And illustration under the first category would be concerned given at the point of knife, or by threatening to injure someone, or by intimidation or by threatening to destroy a man’s property.

2.undue influence (sec.16). 

This is different under section1,

it is using one's position to influence the decision of the other person to his prejudice. there is a subtle difference between fraud and undue influence. The party is able to persuade because of the relation they share or he enjoys a certain degree of confidence of the other person. 

 What amounts to apply undue influence on someone?

 sometimes the parties to an agreement are so related to each other that one of them is able to apply undue influence to the expression of choice, willingness and consent of the other.

 The person who is  in commanding position may use his position and trust that other person responses on him to his advantage. By add vantage we mean to cause the other person to express his assent to the proposal.

 it is the nature of the relationship that is a sin qua non In these types of cases, which enables one party to be at superior position.

 For example, a spiritual guru in a case induced the plaintiff, his devotee, but give him the whole of his property to secure benefits to his soul in the next World. Such consent is set to be obtained by undo influence. The test is to examine this from a prudent man's point of view absence of the nature of the relationship a prudent man would have done the same?

Case law: mahboob khan vs hakim abdul rahim. 

Raghunath prasad sahu vs sarju prasad sahu. 

Moonshe Buzloor Rahim vs shamsoonisa begum. 

3.Misrepresentation.(sec18) 

A contract the consent to which is caused by misrepresentation is voidable at the option of the deceived party. Misrepresentation means the action of giving a false or misleading account of the nature of something this inaccurate information might make the difference with respect to party deciding to enter into an agreement or not entering the agreement.

Misrepresentation means misstatement of fact material to the contract section 18 defines.

The section includes following types of misrepresentation . 

• Unwarranted statements
• Breach of duty
• Inducing mistake about subject matter. 

• Unwarrented statements. 

When someone declares a statement which is relevant to the contract and that statement doesn’t have information which justifies those facts even though he believes to be true is misrepresentation.

 In a Bombay case, for example, the defendant chartered a ship from the plaintiff, who stated that the ship was certainly not more than 2800 tonnage register. As a matter of fact, the ship had never been in Bombay and was wholly unknown to the plaintiffs. she turned out to be of the registered tonnage of more than 3000 tons it was held at the defendant were entitled to avoid the charter party.

 The reason was that defendant asserted regarding the size of the ship and assertion not justified by any information the plaintiff had at the time, and which was not true.

 a statement is said to be warranted by the information of the person making it when he receives the information from a reliable source. It should not be a mere hearsay.

 Where are representation acquires the status of being a term of the contract, and it turns out to be a false, the disadvantaged party may not only avoid the contract but also save for damages for breach.

•  Breach of duty

Any breach of duty which is beneficial to the person committing it by confusing the party to his harm is misrepresentation.

This clause covers all the cases which are called as cases ‘constructive fraud', In which there is no intention to deceive, but where the circumstances are such as to make the party who derives a benefit from the transaction equally answerable in effect as if he had been actuated by motives of fraud  or deciet. 

• Inducing mistake about subject matter

Causing, however innocently, a party to an agreement to make a mistake Of the thing which is the subject of the agreement is also misrepresentation.

 section 18 clause 3 the subject matter is the core of the agreement this has to be of the quality or value which the parties expected at the time of agreement. If one of the parties leads the other, However innocently to make a mistake as to the nature or quality of the subject matter there is misrepresentation.

 For example, the government auctioned certain forest coupes. a part of land was occupied by tenants. The forest department knew this fact but did not disclose it to the purchaser. The contract was held to be vitiated by misrepresentation. the purchaser was allowed to recover damages for loss.

4.Fraud (sec.17) 

According to merriam Webster fraud is defined as “An intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right. The distortion of facts intentionally which are directed towards the other party, in order to receive their assent to the proposal.

Assertion of facts without belief in the truth.

In English law fraud was defined in well known decision of the House of Lords in Derry versus Peek. The judges have observed in this case that “ Fraud is proved when it is shown that a false representation has been made. 

1.knowingly or

2.without belief in its truth, or

3. Recklessly careless whether it be true or false. 

In this case,

 A company prospectus contained a representation that the company had been authorized by a special act of parliament to run trams by steam or mechanical power.the authority to use stem was in the board refused consent and consequently the company was wound up. The plaintiff having brought some shares, sued the directors for fraud. they were not held liable because they honestly believed that one so the parliament had authorized the use of steam,the consent of board was something that was bound to happen. It follows, therefore that the person making a false representation is not guilty of fraud if he honestly believed in truth. Thus, Intentional misrepresentation is of the essence of fraud.

 Active concealment

“Active concealment” Is different from “passive concealment”.Passive concealment means mere silence as to material facts. Active concealment of material fact is a fraud. Except in some cases mention below.

•  duty to speak 
• Where silence is deceptive
• Change of circumstances
• Half truths. 

Conclusion:

 Voluntary consent. It has been argued that businesspersons who often participate in contract negotiations should be keenly aware of key elements of contract enforceability. And argued that contract law will inevitably change to accommodate the requirements of the information age. 

By sayali chormale

Ils law college, pune