Page 34 - DMGT407Corporate and Business Laws

Unit 2: Consent, Indemnity and Guarantee Acts

2.1.2 Free Consent Notes

For a contract to be valid it is not only necessary that the parties consent but also that they
consent freely. Where there is a consent but no free consent the contract is voidable at the option
of the party whose consent was not free. Thus, free consent is one of the essentials of a valid
contract. A consent is said to be free when it is not caused by: (i) coercion, (ii) undue influence,
(iii) fraud, (iv) misrepresentation or (v) mistake.

Self Assessment

Fill in the blanks:
1. When two or more persons agree upon the same thing in the same sense they are said
to……………….
2. For a contract to be valid it is not only necessary that the parties consent but also that they
consent ……….........

2.2 Meaning of Coercion (Ss.15 and 72)

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].

Example: A threatens to kill B (C’s son) if C does not let his house to A and thereupon C
gives his consent. This consent is no consent in the eye of law as the agreement is caused by
coercion.

Threat to commit suicide - Is it coercion? The doubt arises because suicide, though forbidden by
the Indian Penal Code, is for obvious reasons not punishable. A dead person cannot be punished.
But, since s.15 declares that committing or threatening to commit any act forbidden by the
Indian Penal Code is coercion, a threat to commit suicide should obviously be so regarded
(suicide being forbidden).

Example: A obtained a release deed from his wife and son under a threat of committing
suicide. The transaction was set aside on the ground of coercion [Ammiraju v. Seshamma (1917)
41 Mad. 33].
Effect of coercion on the validity of contract (s.19A). 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).

Example: A railway company refused to deliver certain goods to the consignee except
upon the payment of an illegal charge for carriage, and he paid the sum charged in order to
obtain the goods. He is entitled to recover so much of the charge as was illegally excessive.

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