Unit –
1: Indian Contract Act
Meaning
of Contract and Its essentials or (“All
contracts are agreements, but all agreements are not contracts.” [Essentials of
a Valid Contract] or “A Contract is an agreement enforceable by Law”)
Section
2 (h) defines ‘Contract’ as an agreement enforceable by law. If we analyse the definition it has two
components viz.
1. An agreement between two or more
persons "To Do" or "Not to Do" something.
2. An enforceability of such an
agreement at law i.e. personal rights and personal obligations created and
defined by agreement must be recognized by law.
Section
2 (e) defines ‘agreement’ as “every promise and set of promises forming
consideration for each other”. For a contract to be enforceable by law there
must be an agreement which should be enforceable by law. To be enforceable, the
agreement must be coupled with obligation. Obligation is a legal duty to do or
abstain from doing what one promised to do or abstain from doing. All contracts are agreements but for
agreement to be a contract it has to be legally enforceable.
Section10
of the Act provide “All agreements are contracts if they are made by the free
consent of the parties competent to contract for lawful object & are not
hereby expressly declared void.”
An agreement in order to become a
contract must be enforceable by law. Agreements, which do not fulfill the
essential requirements of a contract, are not enforceable. Thus when an agreement enables a person to
compel another to do something or not to do something it is called a contract.
Thus all contracts are agreements but all agreements are not contracts. In order to become a valid contract an
agreement must posses the following essential elements:
a)
Offer
& Acceptance: There must be two parties to an agreement
i.e. one making the offer & other party accepting it. Acceptance of must be
unconditional & absolute. A part of an offer cannot be accepted. The terms
of an offer must be definite. The acceptance must be in the mode as prescribed
& must be communicated. The acceptor of an offer must accept it in the same
way & same sense & at the same time as offered by the offeror i.e.
there must be consensus ad idem.
b)
Intention
to create legal relationship: When two parties enter into a contract their
intention must be to create legal relationship. If there is no such intention
between the parties, there is no contract between them. Agreements of a social
or domestic nature to do not constitute contracts.
c)
Lawful
consideration: An agreement to be enforceable by law must be supported by
consideration. “Consideration” means an advantage or benefit which one party
receives from another. It is the essence of bargain. The agreement is legally
enforceable only when both parties give something or get something in return.
An agreement to do something without getting anything in return is not a
contract. Contract must be in cash or kind.
d)
Capacity
to Contract-Competency: The parties competent to contract must be
capable of contracting i.e. they must be of the age of majority, they must be
of sound mind & they must not be disqualified from contracting by any law
to which they are subject to. An
agreement with minors, lunatics, drunkards, etc. is not contract & does not
get a legal title.
e)
Free
Consent: It is necessary between the contracting parties to have a free
& genuine consent to an agreement. The consent of parties is said to be
free when the contracting parties are of the same mind on the materials of a
contract. They must mean the same thing at the same time the parties must not
enter into a contract under undue influence, coercion, misrepresentation etc.
If these flaws are present in an agreement it does not become a contract.
f)
Lawful
object: The object of an agreement must be lawful. It should not be
illegal, immoral or it should not oppose public policy. If an agreement suffers
from a legal flaw with respect to object it is not enforceable by law & so
it is not a contract.
g)
Agreement
not declared void: For an agreement to be a contract it is
necessary for the agreement must not be expressly declared void by any law in
force in the country.
h)
Possibility
& Certainty of performance: The terms of an agreement must not be
vague or indefinite. It should be certain. The agreement must be to do a thing
which is possible. For e.g. an agreement to sell a car for Rs. 100/- if sun
does not rise tomorrow. This agreement is impossible & so not enforceable
by law.
Thus, agreement is the genus of which
contract is the specie.
Types of Contracts
A contract
is of various types which are given below:
a) VALID CONTRACT: Valid contract is that which is enforceable at law. It
creates legal obligations between the parties. It enables one party to compel
another party to do something or not to do something. In case of valid contract
all the parties to the contract are legally responsible for the performance of
a contract. If one party breaks the contract other has right to be enforced
through the court.
Example: Mr. A proposes sell his
one acre land to Mr. B for one lac and the parties are capable to do the
contract by law. So this contract is valid. If Mr. A fails to deliver the land
to Mr. B can sue him in the court for the delivery of land. On other hand if
Mr. B fails to make the payment, Mr. A can sue him for the recovery of payment.
b) VOID CONTRACT: "An agreement not enforceable at law is a void contract".
Originally it is a valid contract but due to certain reasons it becomes void
after its formation. A void contract cannot be enforced by either party. In this case the
parties are not legally responsible to fulfill the contract. If any party has
received any benefit is bound to return. This contract takes place when consent
of one of the parties is not free.
Features of Void Contract:
a. It is not enforceable by law.
b. It creates no legal rights.
c. It creates no obligations on any party.
d. An agreement which is against the public policy or against
any law is also void.
e. Under this contract no compensation can be paid to any
party.
Cases where the contracts specifically
declared to be void under the Indian Contract Act:
1)
Agreement made by incompetent person, for e.g. minor, a person of unsound mind
2)
Agreement made under mutual mistake as to matter of fact essential to the
agreement.
3)
Agreement made under mistake as to a law not enforce in India.
4)
Agreement, the consideration or object of which is unlawful in part or in full.
5)
Agreement made without consideration.
6)
Agreement in restraint of marriage: Every agreement in restraint of the
marriage of any person other than the minor is void. Every adult person has a
right to get married and that to have a right to exercise his choice.
7)
Agreement in restraint of trade: Every agreement by which anyone is restraint
from exercising a lawful profession, trade or business of any kind is to that
extent void.
8)
Agreement in restraint of legal proceedings: Every agreement which restricts,
whether wholly or partly, the enforcing of rights in a court of law or every
agreement limiting the time allowed by Law of Limitation shall be void. Every
individual has a right to sue in any court and enforce his rights within the
time allowed by the limitation act. The following are the exceptions to this
rule:
(a)
An agreement to refer any dispute to arbitration is permissible.
(b)
An agreement restricting the right of other party to sue in a particular court
is permissible.
9)
Agreement, the meaning of which is uncertain.
10)
Agreements by way of wager.
11)
Agreements contingent on an uncertain future event, if the event becomes
impossible.
12)
Agreements contingent on an impossible event.
13)
Agreements to do the impossible act.
14)
Agreements to do an act which subsequently becomes impossible.
c)
VOIDABLE CONTRACT: An agreement,
which is enforceable by law at the option of one more of the parties, but not
at the option of the other (s), is a voidable contract.
For example: - Mr. A, at knife - point, asks B
to sell his scooter for Rs. 50. Mr. B gives consent. The agreement is voidable
at the option of B, whose consent is not free.
Features of Voidable Contract
a)
It is a contract, which is enforceable by law
at the option of one or more parties thereof, but not at the option of others.
b)
A voidable contract takes its full and proper
legal effect unless it is disputed and set aside by the person entitled to do
so.
c)
A contract may be voidable since very
beginning or may subsequently become voidable.
d)
A voidable contract gives right to the
aggrieved party to rescind the contract and claim the damages, etc in certain
cases.
e)
A voidable
contract does not affect the collateral transactions.
4) Unenforceable
Contract: An unenforceable contract is that contract which cannot be
enforced in courts due to some technical defect, such as absence of
writing, payment of inadequate stamp duty etc.
5) Illegal
Contract: An illegal agreement is one the object of which is: a)
Fraudulent b) against the provisions of any law c) causes an injury or damage
to any person or his property d) immoral or opposed to public policy.
6) Express
Contract: In express contracts, the terms are stated in writing expressly.
7) Implied
Contract: An implied contract is one which is the result of the conduct of
the parties. For example when a person boards a public bus or drinks a cup of
tea in a restaurant there is an implied contract and he has to pay the charges
for it.
8) Executed
Contract: An executed contract is that contract in which both the parties
to the contract have performed their respective promises.
9) Executory
Contract: An Executory contract is that contract in which both the parties
to it have yet to perform their promises.
10) Unilateral
Contract: A unilateral contract is that contract in which only one party
is required to perform his obligation.
11) Bilateral
Contract: A bilateral contract is one in which both the parties are
required to perform their obligations.
Difference
between Void and Voidable Contract
1)
Definition: When a contract ceases to be enforceable at law, it becomes void
contract. Voidable contract is a contract which is enforceable by law at the
option of one or more parties thereof, but not at the option of others.
2)
Status: A void contract cannot create any legal rights. It is a total nullity.
A voidable contract takes its full and proper legal effect unless it is
disputed and set aside by the person entitled to do so.
3)
Nature: A void contract is valid when it is made. But subsequently it becomes
void due to one reason or the other. A contract may be voidable since very
beginning, or may subsequently become voidable.
4)
Rights: A void contract is valid when it is made. But subsequently it becomes
void due to one reason or the other. A voidable contract gives rights to the
aggrieved party to rescind the contract, and claim the damages, etc. in certain
cases.
5)
Effect: When a contract is void because of illegality, its collateral
transactions also becomes void. A voidable contract does not affect the
collateral transactions.
Consideration
and Its Essentials
Section
2 (d) of Indian Contract Act, 1872, defines consideration as “When at the
desire of the promisor the promise or any other person has done or abstained
from doing or does or abstains from doing something, such act abstinence or
promise is called a consideration for the promisor.”
Consideration
is based on the term ‘quid-pro-quo’ which
means ‘something in return’. When
a person makes a promise to other, he does so with an intention to get some
benefit from him. This act to do or to refrain from doing something is known as
consideration.
Consideration
is an advantage or benefit which moves from one party to another. It is the
essence of bargain. It is the reciprocal promise i.e. to do something or
abstain from doing something in return of a promise. It is necessary for an
agreement to be enforceable by law. In consideration both the parties give
something & get something in return. It may be in cash or kind.
The following are the rules related to
the consideration
(i) Consideration must move at the
desire of promisor. If it is done at the instance of a third
party without the desire of the promisor, it is not consideration. Act done at
the desire of a third party is not a consideration. Act must be done
voluntarily at the desire of the promisor.
(ii) It may move from the Promisee or
any other person in the Indian Law so that a stranger to the
consideration may maintain a suit. A consideration may move from the promise or
any other person. Consideration from a third party is a valid consideration.
Under English Law, however, consideration must move from the Promisee only.
(iii) Consideration may be past,
present or future. The words used in Section 2(d) are “has done
or abstained from doing (past), or does or abstains from doing (present), or
promises to do or to abstain from doing (future) something” This means
consideration may be past, present or future.
(iv) There must be mutuality in
consideration.
(v) It must be real & not
illusory, infinite or vague. Although consideration need not be adequate,
it must be real, competent and of some value in the eye of law. Physical
impossibility, legal impossibility, uncertain consideration & illusory
consideration.
(vi)
Consideration must not be unlawful, illegal, immoral or opposed to
public policy. The consideration given for an agreement must not be unlawful.
Where it is unlawful, the courts do not allow an action on the agreement.
(vii) Consideration need not be
adequate. Consideration as already explained means “something in return”.
This “something given”. The law simply provides that a contract should be
supported by consideration. So long as consideration exists, the courts are not
concerned as to its adequacy, provided it is of some value. “The adequacy of
the consideration is for the parties to consider at the time of making the
agreement, not for the court when it is sought to be enforced.”
Exceptions to the rule ‘No
consideration no contract’
The
general rule is that an agreement made without consideration is void. Section
25 deals with the exceptions to this rule. In such cases the agreements are
enforceable even though they are made without consideration. These cases are:
a) Love and Affection [Section 25(1)]: Where an
agreement is expressed in writing and registered under the law for the time
being in force for the registration of documents and is made on account of
natural love and affection between the parties standing in a near relation to
each other, it is enforceable even if there is no consideration.
For
e.g. F, for natural love and
affection, promises to give his son A,
Rs. 1 Lac. F puts this promise
in writing and registers it. This is a contract.
b) Compensation for voluntary services
[Section 25(2)]: A promise to compensate wholly or part a person, who has already
voluntarily done something for the promisor, is enforceable, even though
without consideration. A promise to pay for a past voluntary service is
binding.
For
e.g. A says to B’ At the risk of your life you saved me from a serious
accident. I promise to pay you Rs.1, 000.” There is a contract between A and B
even though there is no consideration.
c) Promise to pay a time barred debt
[Section 25(3)]: A promise by a debtor to pay a time barred debt is enforceable
provided it is made in writing and is signed by the debtor or by his agent
generally or specifically authorized in that behalf. The debt must be such “of
which the creditor might have enforced payment but for the law for limitation of
suits”
For
e.g. D owes C Rs.1, 000 but the debt is barred by the Limitation Act. D signs a
written promise to pay C Rs.500 on account of the debt. This is a valid
contract.
d) Agency (Section 185): No
consideration is necessary to create an agency.
e) Completed Gift (Explanation 1 to
Section 25): The rule ‘No consideration no contract’ does not apply to
completed gifts. This rule shall not affect the validity, as between donor and
donee, of any gift actually made.
Contingent
Contract
According
to the Contract Act a contingent contract is one whose performance us
uncertain. The performance of the contract which comes under this category
depends on the happening or non- happening of certain uncertain-events. On the
other hand, an ordinary or absolute contract is such where performance is
certain or absolute in itself and not dependent on the happening or
non-happening of an event. A contingent contract is defined as a contract to do
or not to do something, if some event, collateral to such contract, does or
does not happen (sec. 31).
Example
(A)
A contracts to pay Rs. 50,000 if B’s house is destroyed by five. This is a
contingent contract as the performance depends on the happening of an event.
(B)
A asks B to give loan to M and promises that he (A) will repay the loan if M
does not return it in time.
Characteristics
of a Contingent Contract: A Contingent Contract must have three
essential characteristics. There are:
(1)
The performance of the contract depends on the happening or non-happening
of a certain event in future. This dependence on a probable future event
distinguishes a contingent contract from an ordinary contract.
(2)
This event must be uncertain, that means happening or non-happening of
the future event is not certain, i.e., it may or may not happen. If the event
is hundred percent sure to happen, and the contract in that case has to be
performed any way, such a contract is not called a contingent contract.
(3)
The event must be collateral or incident to the contract. Therefore,
contracts of indemnity, guarantee and insurance are the most common instances
of a contingent contract.
Rules
regarding contingent contracts: To enforce the performance of a
contingent contract the following rules have to be followed:
1.
Where the performance of a contingent depends on the happening of an uncertain
future event, it cannot be enforced till the event takes place. And if the
happening of the event becomes impossible, such contracts become void (sec.
32). Example- A contracts to sell B a piece of land if he (A) wins
the legal case involving that piece of land. A loses the case. The contract
becomes void.
2.
Where the performance of a contingent contract depends on the non-happening of
a future event, the contract can be enforced if the happening becomes
impossible (sec. 33). Example- A agrees to sell his house to B if Y
dies. This contract cannot be enforced till Y is alive.
3.
If the contract is dependent on the manner in which a person will act at an
unspecified time, the event shall be considered to become impossible when such
person does anything which makes it impossible that he should so act within any
definite time or otherwise than under further contingencies (sec. 34).
4.
Contingent contract to do or not to do anything, if a specified uncertain event
happens within a fixed time, becomes void if the event does not happen and the
time expires or its happening becomes impossible before the time expires [sec.
35(1)].
5.
Contingent contract to do or not to do anything, if a specific event does not
happen within a specified time, may be enforced when the time so specified
expires and such event does not happen, or before the time so specified it
becomes certain that such event will not happen [sec. 35(1)].
6.
Contingent agreements to do or not to do any thing, if an impossible event
happens, are void, whether or not the fact is known to the parties at the time
when it is made (sec. 36).
Quasi
Contract
It
means a contract which lacks one or more of the essentials of a contract. In a
contract, a promisor voluntarily undertakes an obligation in favour of the
promisee. When a similar obligation is imposed by law upon a person for the
benefit of another even in the absence of a contract. Such contracts are the
quasi-contracts. Quasi contract are declared by law as valid contracts on the
basis of principles of equity i.e.
no person shall be allowed to enrich
himself at the expense of another the legal obligations of parties remains
same.
Nature
of Quasi contracts:
a)
A
quasi contract does not arise from any formal agreement but is imposed by law.
b)
Every
quasi contract based upon the principle of equity and good
conscience.
c)
A
quasi contract is always a right to money and generally though not always to a
liquidated sum of money.
d)
A
suit for its breach may be filed in the same way as in case of a complete
contract.
e)
The
right grouted to a party under a quasi contract is not available to him against
the whole world but against particular person(s) only.
f)
A
suit for breach of a quasi contract may be filed in the same way as in case of
an ordinary contract
g)
Although
there is no contract between the parties under a quasi contract, yet they are
put in the same position as if he were a contract between them.
Types of Quasi Contracts
a) Claim for necessaries supplied to
persons incapable of contracting (Sec. 68): If a person, incapable of entering
into a contract, or anyone whom he is legally bound to support, is supplied by
another person, with necessaries suited to his condition in life, the person
who has furnished such supplies is entitled to be reimbursed from the property
of such incapable person.
b) Right to recover money paid for
another person (Section 69): A person who has paid a sum of money which
another is obliged to pay, is entitled to be reimbursed by that other person
provided the payment has been made by him to protect his own interest.
c) Obligation of a person enjoying
benefits of non-gratuitous act (Section 70): Where, a person does some act or
delivers something lawfully to another person with the intention of receiving
payments for the same, in such a case, the other person is bound to make
payment if he accepts such services or goods or enjoys their benefit.
d) Responsibility of a finder of goods
(Sec.71): A person who finds goods belonging to another and takes them
into his custody is subject to the same responsibility as a bailee. Therefore,
he is required:
Ø
to take proper care of the thing found as his
own goods
Ø
not to appropriate it to his own use,
Ø
to restore it to the owner when the owner is
traced.
Right of
finder
Ø
Finder is entitled to retain it against whole
world.
Ø
Finder has lien for express incurred in
preserving goods & finding true owner.
Ø
However he cannot file suit for recovery of
this money.
Ø
It he can claim recovered. If it was offered.
Ø
If true owners refuses to pay lawful charge he
May Sale.
a)
When goods are of perishable nature.
b)
When lawful charge amount to two third of its
values or more.
e) Liability for money paid or thing
delivered by mistake or under coercion (Sec. 72): A person
to whom money has been paid, or anything delivered, by mistake or under
coercion must repay or return it.
In
each of the above cases, contractual liability is the creation of law and does
not depend upon any mutual agreement between the parties.
Meaning
of Discharge of a Contract
Discharge of a contract means termination of the contractual
relations between the parties to a contract. A contract is said to be
discharged when the rights and obligations of the parties under the contract
come to an end.
Modes of discharge of a contract: A Contract
is said to be discharged when the rights and obligations created by it come to
an end. A contract may be discharged in the following modes:-
1.
Discharge
by performance: Discharge by performance takes place when the parties to a
contract fulfill their obligations arising under the contract within the time
and in the manner prescribed. Performance may be actual performance or
attempted performance.
2.
Discharge
by Agreement or Consent: A Contract comes into existence by an
agreement and it may be discharged also by an agreement. The following are
modes of discharge of a contract by an agreement:
a)
By Waiver:
Waiver
takes place when the parties to a contract agree that they shall no longer be
bound by the contract. For e.g. A an actor promised to make a guest performance
in the film made by B. Later B forbids A from making the guest appearance. B is
discharged of his obligation.
b)
By
Novation: Novation occurs when a we contract is substituted for an
existing contract, either between the same parties or between different
parties, the consideration being the discharge of old contract, mutually. E.g.:
A is indebted to B & C to C. By mutual agreement B’s debt to C & B’s
loan to A are cancelled & C accepts as his debtor.
c)
By
Rescission: Rescission of a contract takes place when all or some of the
terms of the contract are cancelled. It may occur by mutual consent or where
one party fails in the performance of his obligations, the other party may
rescind the contract.
d)
By
alteration: Alteration of a contract may take place when one or more of the
terms of the contract is/are altered by mutual consent of the parties to the
contract.
e)
By
Remission: Remission means acceptance of a lesser fulfillment of the promise
made, E.g. Acceptance of a lesser sum than what was contracted for, in
discharge of the whole of the debt.
f)
By Merger: Merger
takes place when an inferior right accruing to a party under a contract merges
into a superior right accruing to the same party under the same or some other contract.
For e.g. P holds a property under a lease. He later buys the property. His
rights as a lessee merge into his rights as an owner.
3.
Discharge
by impossibility of performance: If a contract contains an undertaking
to perform impossibility, it is void
ab initio. As per Section 56, impossibility of performance may fall into
either of the following categories –
(i) Impossibility existing at the time
formation of the contract: This is known as pre-contractual
impossibility. The fact of impossibility may be:
a)
Known to the parties: Both the
parties are aware or know that the contract is to perform an impossible act.
For e.g. A agrees with B to put life into dead wife of B, the agreement is
void.
b)
Unknown to the parties: Both the
parties are unaware of the impossibility. The contract could be on the ground
of mutual mistake of fact. For e.g. contract to sell his house at Andaman to B.
Both the parties are in Mumbai and are unknown to the fact that the house is
actually washed away due to Tsunami.
(ii)
Impossibility arising subsequent to the
formation of the contract: Where impossibility of performance of the
contract is caused by circumstances beyond the control of the parties, the
parties are discharged from further performance of the obligation arising under
the contract.
4.
Discharge
by lapse of time: The
Limitation Act, 1963 lays down certain specified periods within which different
contracts are to be performed and be enforceable. If a party to a contract does
not perform, action can be taken only within the time specified by the Act.
Failing which the contract is terminated by lapse of time. For e.g. A sold a
gold chain to B on credit without any period of credit, the payment must be
made or the suit to recover it, must be instituted within three years from the
date of delivery of the instrument.
5.
Discharge
by Operation of Law: A contract may be discharged independently of
the wished of the parties i.e. by operation of law. This includes discharge:
a)
By death: In
contract involving personal skill or ability, the contract is terminated on the
death of the promisor. In other contracts the rights and liabilities of a
deceased person pass on to the legal representatives of the deceased person.
b)
By
insolvency: When a person is declared insolvent, he is discharged from all
liabilities incurred prior to such declaration.
c)
By
unauthorized material alteration of the terms of a written agreement: Any
material alteration made by a party to the contract, without the prior
permission of the other party, the innocent party is discharged.
d)
By rights
and liabilities becoming vested in the same person: When the
rights and liabilities under a contract vests in the same person.
6.
Discharge
by Breach of Contract: A breach of contract occurs when a party
thereto without lawful excuse does not fulfill his contractual obligation or by
his own act makes it impossible that he should perform his obligation under it.
A breach to a contract occurs in two ways:-
a)
Actual
Breach: When a party fails, or neglects or refuses or does not attempt to
perform his obligation at the time fixed for performance, it results in actual
breach of contract. For e.g. A promises to deliver 100 packs of ice-cream to B
on his wedding day. A does not deliver the packs on that day. A has committed
actual breach of the contract.
b)
Anticipatory
Breach: Anticipatory Breach is a breach before the time of the
performance of the contract has arrived. This may take place either by the
promisor doing an act which makes the performance of his promise impossible or
by the promisor, in way showing his intention not to perform it.
Free
Consent
Section
13 defines consent as “Two or more persons are said to consent when they agree
upon the same thing in the same sense.” Consent of the party’s means, the
parties to a contract must mean the same thing in the same sense. It means ‘Consensus ad idem’. For e.g. A have
2 cars – Maruti 800 and Maruti Zen. A offers to sell the Maruti 800 while B
accepts the offer thinking the car to be sold is Maruti Zen. Here there is no
consent.
Free
consent refers to consent which has been rendered by free will of the parties
i.e. consent is voluntary. Section 10 of the Act, specifically states that a
contract is valid and enforceable if it is made with the free consent of the
parties.
Section
14 defines ‘Free Consent’ as – Consent is said to be free consent when it is
not caused by –
(i)
Coercion, as defined in Section 15, or
(ii)
Undue influence, as defined in Section 16, or
(iii)
Fraud as defined in Section 17, or
(iv)
Misrepresentation as defined in Section 18, or
(i) Coercion: When a
person is compelled to enter into a contract by the use of force by the other
party or under a threat, ‘coercion’ is said to have been employed. Section 15 of the Indian Contract Act, 1872
defines coercion as – “committing or threatening to commit, any act forbidden
by the Indian 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 an agreement.”
Coercion
includes fear, physical compulsion and menace of the goods. For e.g. A threatens to shoot B if B does not
release A from the debt which he owed. B releases A under the threat. The release
has been brought about by coercion and therefore voidable at the option of B.
(ii) Undue influence: Undue
influence is the term used to demonstrate unfair use of one’s position or
power. There is once party who is in a dominant position, while the other party
is in a sub-ordinate position. The dominant party exercising its influence over
the subordinate party and getting an unfair advantage. Unlike Coercion where
there is physical pressure, in undue influence, there is mental pressure.
Section
16 defines as – “ Where the relations subsisting between the parties are such
that one of the parties is in a position to dominate the will of the other and
uses that position to obtain an unfair advantage over the other.”
(iii) Fraud: Fraud
means cheating. It is intentionally stating something untrue as true. Section
17 defines Fraud as “Fraud means and included any of the following acts
committed by a party to a contract or with his connivance, or his agent, which
intent to decided another party thereto or his agent, or to induce him to enter
into a contract.”
(iv) Misrepresentation: Section18
defines misrepresentation as – “a false representation a fact made innocently
or non disclosure of a material fact without any intention to deceive the other
party.”The essential features of misrepresentation are
(i)
Party to the contract making misrepresentation – The false statement must be by
the party to the contract or by his agent or by his connivance. Further it must
be addressed to the party who is misled. If not address to the party who has
been misled it will not be misrepresentation.
(ii)
False representation – The statement made by the party must be false, but the
person making statement must honestly believe it to be true.
(iii)
Representation as to fact – it is very important that the false statement made
must be of material facts. A mere expression of once opinion is not statement
of facts.
(iv)
Object – The representation must be made with the view to inducing the other
party to enter into a contract but having no intention to deceive the other.
(v)
Actually acted upon – The innocent party must have actually acted on the basis
of the statement which turns out to be false.
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