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Coercion

Section15

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Definition Section 15

Coercion is committing or threatening to

commit, any act forbidden by the IPC, or

the unlawful detaining, or threatening todetain, any property, to the prejudice of any

person whatever, with the intention of

causing any person to enter into an

agreement.

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CoercionRenganayakamma v. Alwar Chetty (1889).

Amiraju v. Seshamma (1917).

Under English law the concept ofDuress isthere which is narrower than Coercion inIndian law.

It is immaterial whether the IPC is or is notin force in the place where the coercion isemployed.

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Coercion andD

uressCoercion need notproceed from a partyto contract or be

immediately directedagainst person againstwhom the coercion isto be exercised.

Coercion can beagainst the propertyalso.

Duress must proceedfrom the party to thecontract in the nature

of immediate violenceagainst the life orliberty of the otherparty or his family

members.Detaining propertywill not be Duress.

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Modern Trends

Inequality of bargaining power isconsidered to be valid ground for avoiding a

contract on proof that the terms were veryharsh and unreasonable.

Economic Duress is a ground to avoid acontract.

D & C Builders Ltd. v. Rees (1966).Pao On v. Lau Yiu Long (1980).

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Undue Influence

Section 16

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Undue Influence, S. 16Moral coercion.

Also known as Equitable Fraud.

Presumption of undue influence applieswhere two parties are in a fiduciaryrelationship.

In such a relationship the influence isacquired and abused by one of the partiestherein.

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Presumption of Undue InfluencePresumption of undue influence in fiduciary

relationship can be rebutted by the party by

proving that the act of entering into contract was

the act of free and independent mind.

Where no fiduciary relationship exist the party

shall prove that one of the parties acquired an

influence over the will of the other and produced acontract which otherwise would not have made.

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Section 16Allcard v. Skinner (1887).

Wajid Khan v. Ewaz Ali (1891).

Sub section (1) essentials

One party in a position to dominate the will

of another, and

He uses that position to obtain an unfairadvantage over the other.

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S.16, Sub-sec.(2) Presumption of

Undue InfluenceA person is deemed to be in a position to dominate

the will of another if

He holds real or apparent authority over the other,or where he stands in a fiduciary relationship with

that other, or

Where he enters into a contract with a person

whose mental capacity is temporarily orpermanently affected by reason of age, illness, or

mental or bodily distress.

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Burden of ProofS. 16, Sub-Sec. (3), talks about the burden ofproof.

If a person is in a position to dominate the will ofanother, and

If the transaction appears, on the face of to or onthe evidence adduced to be unconscionable,

Burden of proving that there was no undueinfluence exercised while entering into contract.

Subhas Chandra v. Ganga Prasad (1967).

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Raghunath Prasad V. Sarju

Prasad (1924)Three things are determined by the Court before

deciding a case of undue influence.

Relation between the parties is such that one partyis in a position to dominate the will of other,

That undue influence was exercised by such a

party, and

Burden of proof shifts on the person in thedominating position.

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Pardanashin LadyPresumption of undue influence on theperson supporting the deed.

Following things must be proved.That the transaction or deed was explainedto her,

That she understood it, and

That she deliberately and of her own freewill entered into the transaction.

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Unconscionable BargainsWhere in the circumstances of a case, it is shown

that though there was no fiduciary relationship

existing between two parties yet one of them was

stronger enough to dominate the will of another,

court may, in its discretion, declare the contract as

void.

Ill. (c) S. 16, a contract of a creditor with alreadyindebted debtor is on the face of it is

unconscionable and so may be declared to be void.

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Misrepresentation

Section 18

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N

ature of RepresentationInnocent or intentional.

Representations made may be intended to

be a term in the contract or not a term in thecontract.

This term may be a Condition or Warranty

if embodied in the contract.

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M

isrepresentationMisrepresentation is a ground to avoid the

contract and is not actionable for damages.

It must be made without any intention todeceive another party.

Misrepresentation is innocent when it is

made by a person in relation to matter offact believing it to be true.

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M

isrepresentationIn order to avoid a contract on ground ofmisrepresentation 3 things must be proved.

There should be a representation orassertion.

Such misrepresentation must relate to amatter of fact which has become untrue.

Such misrepresentation must have beenmaterial in influencing the contract.

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S. 18, C. (1)There must be a representation or positive

assertion,

Assertion in a manner not warranted by theinformation of person making it, and

Information which is not true, though

person making it believes it to be true.

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Representation or AssertionIt may be express, by words spoken or written, orimplied, by acts or conduct.

As a general rule silence does not amount to

misrepresentation unless,

Contract is one ofuberreimae fidei,

Where fiduciary relationship exists between twoparties,

Where silence as to some fact distorts a positiverepresentation.

S. 18 Cl. (2).

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Representation As to a FactEvery person is presumed to know the Law of theland and so misrepresentation as to a matter of lawis not an excuse

Fact and Promise Misrepresentation, to entitle aperson to avoid a contract, must be of an existingfact and not a mere promise in future, unless it isshown that, the promise formed the basis or part

of the contract so as to induce a contract. e.g. acontract entered into on the basis that a certainperson A is going to be the director of acompany.

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Representation As to a FactFact and opinion. a statement of opinion is

not actionable. But if such opinion is

deliberately made a statement of fact, it willbe a considered to be a statement of fact.

Fact and puffery mere statement of puff is

not considered to be a misrepresentation.

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Representation to Be False and

UntrueRepresentation should have become untrue.

If true when made and the becomes false,

before the other party could act upon it, theduty is casted upon the person who made

the representation to communicate the

change of circumstances to other party.With v. OFlanagan (1936).

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Representation to Be False and

UntrueA statement even though literally true may

be a misrepresentation if it implies the

additional facts which are themselves false.Curtis v. Chemical Cleaning and Dyeing

Co. Ltd. (1951).

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Misrepresentation Material in

Influencing ContractWhere a representation is not a term in

contract but has induced the party to enter

into a contract the contract is voidable at theoption of the influenced party.

Bannerman v. White (1861).

Redgrave v. Hurd (1885).Bellotti v. Chequers Developments (1936).

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ExceptionsMisrepresentation cannot influence or

induce a transaction where the plaintiff

Never knew of its existence.Did not allow it to affect his judgment.

Was aware of the falsity.

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Fraud

Section 17

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Fraud S. 17Derry v. Peek (1887).

Fraud is proved when it is shown that a

false representation is been made Knowingly, or

Without belief in its truth, or

Recklessly careless whether it be rue orfalse.

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Taylor v. Ashton (1843)Five essential elements are laid down

There must be a representation,

It must be of a fact,It must be made with the knowledge that itis false or without belief in its truth,

It must be to induce another to act uponassertion,

The person acting must be damnified.

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Suppression of FactsTo constitute a fraud thee must be an

assertion of something false within the

knowledge of the party asserting it or thesuppression of that which is true and which

it was his duty to disclose.

Peek v. Gurney (1873).

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Active Concealment

Industrious concealmentor aggressiveconcealment.

As a general rule seller is not bound to disclose the

defects in the goods to the purchaser.

But if he does something which has a effect ofconcealing the facts the contract can be avoided.

There is a duty imposed on the seller that he shallinform about the latent defects in the goods whichhe is aware of.

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Essentials of Fraud

The representation must be of a fact as seenin misrepresentation.

The element of knowledge of falsehood orwant of belief distinguishes fraud frommisrepresentation.

The mental state of a person when making a

representation may be one of the followingfive kinds. (discussed in the next slide.)

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Mental State to Determine Fraud

Representation made with a belief in itstruth based on proper and sufficientgrounds.

Representation made with an honest beliefin its truth, but not based on proper andsufficient grounds.

Derry v. Peek (1887). Legal FraudorFraud in law.

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Mental State to Determine Fraud

Representation made recklessly or carelesslywithout any regard whether it be true or false.

UnitedMotor Finance v. RomerDan (1937).

S. 17 (3) a promise made without any intention ofperforming it.

Representation made knowing it to be false, butwithout any intention to deceive.

Polhill v. Walter (1832).Motive is immaterial.

Representation made knowing it to be false, andwith an intent to deceive.

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Inducing the Act

Representation must be such as to induce

another person to enter into the transaction.

It requires There must be an inducement in fact.

The representation must be material and

important in inducing the other party toenter the transaction.

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Inducing the Act

If a party wants to assert that the plaintiff

was not induced by the misrepresentation,

he must prove that the other party in facthad a knowledge of the truth.

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Means ofDiscovery

If means of discovering of truth are made

available to the representee but if he does not avail

them then the knowledge should be imputed to

him.

But the party cannot take a defense that the other

party might have discovered the truth by

reasonable diligence instead of relying on therepresentation made.

There is no fraud without damage.

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Misrepresentation and Fraud

In representing, nointention to deceive isthere.

Not a tort.

Generally no damages areawarded.

The fact that therepresentee had the means

of discovering the truth byordinary diligence would

preclude him fromavoiding contract.

In representing there is

an intention to

deceive.

Fraud in itself is a tort.

Damages are always

recoverable in fraud.

It is not the same incase of fraud.

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Remedies forMistake,

Misrepresentation, Fraud

If consent of one of the parties is caused by

any of above means then,

The party can successfully defend an actionof damages for breach of contract.

The party can successfully defend an action

for specific performance of contract.The party can rescind the contract.

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Cancellation and Rectification

In case of a mistake the contract is void andnullity.

The court only declares such a contract as nullity

and thereby cancellation of the contract.S. 31 33 of Specific Relief Act.

Court may order rectification of the instrument ifit is drawn up differently from what was been

contracted by the parties.

S. 26 of Specific Relief Act.

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S. 31 of Specific Relief Act

S. 31 of the Act gives a power to the Court to

declare a contract as void at the request of the

party who has a right to declare it void.

It also lays down that the court shall, if the

instrument is registered under Indian Registration

Act, send a copy of its decree to the officer in

whose office it is registered and he shall notedown the fact of cancellation of the instrument in

his register.

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S. 32 & 33 of Specific Relief Act

It gives a power to the court of law to declare a

contract partially void and may enforce the rest of

it.

If any instrument is so declared to be void by the

court, at the request of one of the parties, then

court may order the plaintiff or the defendant to

restore the benefit which he has derived undersuch a contract.

The principle is also extended to the minors.

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Relief provided under S. 33 is based on the

principle ofprotective orpreventivejustice.

Conditions precedent for availing relief

Contract void or voidable against plaintiff,

There is a reasonable apprehension of serious

injury, (determined from circumstances of case)

Case is fit for exercise of Courts discretion togrant the prayer.

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Limitations S. 31 and S. 32

Relief is not as a matter of right.

When parties are inpari delicto, and fraud isalleged as a ground for cancellation, court may

refuse the relief.S. 32 is applicable only when the rights andobligations contained under the instrument areseparable and distinct.

Limitation period prescribed under IndianLimitation Act, 1953, is three years from thedate when the fact entitling plaintiff to cancel theinstrument.

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If any instrument either by fraud or mutual

mistake, does not disclose the true intention of the

parties, court may order the rectification of

instrument.

Instrument is defined in S. 2(14) of Indian Stamp

Act, (II of 1899), as every document by which any

right or liability is or purports to be created,transferred, limited, extended, extinguished, or

recorded.

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Rectification can be granted only if it isspecifically claimed by the party.

Granting rectification is purely adiscretionary power of the court.

Essentials to be proved

Existence of mutual mistake or fraud, and

That the instrument on that account did nottruly express the intention of the parties.

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A separate suit may be instituted for

rectification of contract or it may be done in

the course of a suit in which any rightarising under the instrument is in issue.

The rectification shall be granted by the

court, as far as possible, without prejudice

to any third party rights acquired

bonafidely.

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Contents of S. 26

Either party or his representative in interest may

institute a suit to have the instrument rectified, or

Plaintiff may, in any suit in which any right

arising under the instrument is in issue, claim in

his pleading that the instrument shall be rectified,

or

A defendant in any such case may plead for suchrectification.

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Rescission S. 27 & S. 28 of

Specific Relief Act

Section 27

The relief of rescission can be given to a

person on whom the burden of the contractis imposed by means of fraud or illegality orsomething equivalent which makes thecontract void or voidable.

He may ask the court to declare the contractas not binding on him.

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Rescission may be allowed where

Contract is voidable or terminable by the

plaintiff, orContract is unlawful for causes not apparenton its face and the defendant is more to beblamed for it.

The relief is available is subject toimportant limits laid down in Sub Section 2.

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When Rescission Cannot Be

Granted

Affirmation of contract by the plaintiff.

Where rescission is not possible because theposition of parties is so changed that restoration of

status quo is impossible, e.g. consumption ofgoods or reselling.

Intervention of third party rights.

If plaintiff wants to rescind only one of the terms

in contract and it is not severable from the rest ofthe contract.

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Where in a suit the remedy of specificperformance is given to the purchaser or lessee,fails to pay the money within the time prescribed

by the court in such a decree, seller or lessor mayask the court to declare the contract as void byrescinding it.

If such rescission is granted by the court, court

may ask the purchaser or lessee to restore thepossession and even the profit which he has got inthe mean time.

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The court may also ask the seller of lessor to pay

back any earnest money if is been paid by the

other party.

But if the purchaser or lessee pays the ordered

amount within time, then the court may grant a

remedy to them like preparing a proper deed of

sale or lease.

The relief under this section can be granted only in

the suit for a specific performance of the contract.

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Damages for Fraud

For misrepresentation there are no damagesawarded by the court. But after the decision ofDerry v. Peek the legislature laid down two

exceptions for this.Liability of the directors of company formisrepresentation.

Liability of an agent for the acts done by him

outside the scope of authority.Liability, however, based on principle of breach ofwarranty.

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