Page 62 - DMGT102_MERCANTILE_LAWS_I

Mercantile Laws-I

Notes 4.9 Summary

z Coercion is (i) the committing or threatening to commit any act forbidden by the Indian
Penal Code or (ii) 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. [s.15].
z When consent to an agreement is caused by coercion the agreement is voidable at the
option of the party whose consent was so obtained. Thus, the aggrieved party can have the
contract set aside if he so desires otherwise the contract is a valid one. However, a person,
to whom money has been paid or anything delivered under coercion, must repay or return
it to the other party (s.72).
z A contract is said to be induced by undue influence 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.
z The burden of proving that the contract is not induced by undue influence lies on the party

who is in a position to dominate the will of the other. Thus, in cases (above given) where
undue infl uence is presumed the onus of proof lies on parent, guardian, doctor, spiritual
guru, lawyer, trustee. On the other hand, in relationships where undue influence is not

presumed the party alleging undue influence must prove that it existed.
z The representation or assertion alleged to be false must be of a fact. A mere expression of

opinion, puffery or flourishing description does not constitute fraud.
z The representation or statement must have been made (a) knowingly or (b) without belief
in its truth or (c) recklessly, carelessly whether it be true or false. In (a) and (b), there
seems to be no difficulty since fraud is proved when it is shown that a false representation

has been made knowingly or without belief in its truth. However, with regard to reckless
misstatement it may appear difficult to say whether it amounts to fraud because the person

making such statement does not himself definitely know that the statement is false. But if

we carefully look into it we find that it does amount to fraud. Though the person making
it is not sure of the truth of the statement yet he represents to the other party as if he is
absolutely certain about its truth.
z The representation, statement, or assertion must have been made with the intention of
inducing the other party to act upon it. For fraud to exist the intention of misstating the
facts must be to cause the other party to enter into an agreement.

z The case of misrepresentation may be classified into the following three groups: (i) 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. (ii) Any breach of duty which
without an intent to deceive gives an advantage to the person committing it (or anyone
claiming under him) by misleading another to his prejudice or to the prejudice of anyone
claiming under him. (iii) Causing however innocently a party to an agreement to make a
mistake as to the substance of a thing which is the subject of the agreement.
z There is a unilateral mistake where only one party to a contract is under a mistake as to a
matter of fact. Generally speaking, such a contract is not invalid. Thus, where a person due
to his own negligence or lack of reasonable care does not ascertain what he is contracting
about, he must bear the consequences.

4.10 Keywords

Misrepresentation: It is also known as simple misrepresentation whereas fraud is known as
fraudulent misrepresentation.

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