Page 63 - DMGT102_MERCANTILE_LAWS_I

Unit 4: Free Consent

Mistake of foreign law: The above maxim – “ignorance of law is no excuse” is inapplicable to Notes
foreign law. The mistake of foreign law is to be treated as a mistake of fact.

Mistake: May be defined as an erroneous belief on the part of the parties to the contract concerning
something pertaining to the contract.
Undue infl uence: Consists in the improper exercise of power over the mind of one of the contracting
parties by the other.

4.11 Self Assessment

Fill in the blanks:
1. For a contract to be valid it is not only necessary that the parties ........................ but also that
they consent freely.
2. ........................ consists in the improper exercise of power over the mind of one of the
contracting parties by the other.

3. An ........................ caused by undue influence is voidable at the option of the party whose
consent was obtained by undue infl uence.
4. In ........................, the rate of interest being high, or that the borrower is in urgent need of
money is not an evidence of undue infl uence.
5. ............................ is also known as simple misrepresentation whereas fraud is known as
fraudulent misrepresentation.
6. The directors of a company are liable in damages ......................... Act, 1956, even for
misstatements, i.e., misrepresentation in the prospectus issued by the company inviting
public for subscription.

4.12 Review Questions

1. “It is not only the consent but free consent of the parties which is necessary for making the
contract binding”. Explain.
2. What is coercion? State its effect on the validity of a contract.

3. What is undue influence? When is it presumed as regards persons in particular
relationships?
4. On whom does lie the burden of proving that contract (i) was, or (ii) was not induced by
undue infl uence?
5. What is fraud? What are the essential elements or conditions necessary for its existence?

6. “An attempt to deceive which does not deceive is no fraud”. Comment.
7. What is “mistake” as it affects the validity of a contract? What are the consequences of a
mistake on contracts?
8. What is meant by ‘unilateral mistake’.

Answers: Self Assessment

1. consent 2. undue infl uence
3. agreement 4. money lending transactions
5. Misrepresentation 6. under s.62 of the Companies

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