Voidability Of Agreements In Indian Contracts Act
As per S.15 of the Act, Coercion means doing or threatening to do an act forbidden by IPC or detaining property unlawfully with the intension of compelling the other party enter into an agreement. Coercion may proceed from anybody and be directed to anybody. E.g., if someone forces the other to entera contract by threatening to kill their family, it is coercion.
Ranganyakamma v. Alwar Setti, a Hindu widow was forced to adopt X under the threat that her husband’s corpse would not be allowed to remove unless she adopted X. The adoption was held to be coerced and hence voidable.
As per S.16 of the Act, a contract occurs by undue influence when one party has a dominating relationship with the other party which may affect the will of the inferior party. Eg. Father-Son relationship.
Situations in which the person is in a position to dominate the will of another:
1. Where he holds real or apparent authority over the other,2. Where he stands in a fiduciary relation to the other,3. When he makes a contract with a person whose mental capacity is less (minors, person of unsound mind etc).
According to S.19A, contracts that occur by way of Undue Influence may be set aside on the option of the party whose consent was obtained by undue influence.
Acts committed with the intension to deceive the other party into committing to a contact are considered as fraud under S. 17
Essentials of Fraud:
1. The act must have been committed by a party to the contract or by his agent,2. The act must be a suggestion by one as to a fact which is not true or which he believes is not true or an active concealment of a fact or a promise made without any intension of performing it or any other act with the intension to deceive,3. The act must not only be caused by an intension to deceive but also actually cause deception,4. The deceit must be aimed at the contracting party or his agent,5. As per S.17, mere silence does not amount to fraud. However, there are two conditions under which silence may amount to fraud and they are as follows:• The circumstances are such that the person keep silence has a duty to speak the truth,• Silence in itself is equivalent to speech.
According to S.19 of the Act, Contacts that occur because of Fraud are voidable at the request of the party on who the fraud was committed. However, if the party had enough means to discover the truth with ordinary diligence and did not do so, the contract under fraud/misrepresentation will not be voidable
This is defined under S.18 of the Act and in simple words means to communicate wrong information to a contracting party without intention to deceive them. In this case, the party communicating the wrong information itself believes that the wrong information is actually true. Another way of misrepresentation is when one contracting party, innocently but wrongly so gets an advantage over the other contracting party or leads the other party to a mistake in subject matter of the agreement.
Eg., A learns from X that B would be a director of a company which is about to be formed which is not actually true. A to get M to buy shares in the company tells him that B is going to be the director of the company. M influence by this buys the shares. This is misrepresentation since A did not intend to lie and in fact believed in the truth of a statement which was not actually true and acted upon it.
According to S.19 of the Act, Contacts that occur as a result of Misrepresentation are voidable at the request of the party on who the Misrepresentationwas committed.
➢ Voidability of Agreements caused without Free Consent (S. 19 and 19A):• When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. A party to a contract whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true.• But if the fraud/misrepresentation was not the case of them consent then the contract is not voidable. Also, if the affected party has the means to discovery the truth by ordinary diligence in case of fraud or misrepresentation and they did not do so, then the contract is not voidable.
According to S. 20: Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.
Under S.22, A contract is not void merely because it was caused by one of the parties to it being under a mistake as to a matter of fact.
In the case of Haji Abdul Rahman Alarakha v. The Bombay and Persia Steam Navigation Co., it was upheld that the mistake was not mutual and only on the part of the plaintiff therefore the contract was not void and could be enforced.
Mistake of Law is covered by S.21 of the act which states that: A contract is not voidable because it was caused by a mistake as to any law in force in India; but a mistake as to a law not in force in India has the same effect as a mistake of fact.