Free consent has been given great importance in the law of contract as it signifies the will and meeting of minds of the parties entering into contract. It has been highlighted in the Section 10 of the Indian Contract Act[i] as one of the essentials of a valid contract i.e. in absence of free consent to enter into the agreement; such an agreement is invalid and cannot be considered to be a contract.
Free consent has been defined as a consent which has not been obtained by the means of coercion, fraud, undue influence, mistake and misrepresentation[ii].
However, there is always confusion when it comes to the aspects of coercion and undue influence being used to obtain the consent of the other party.
Understanding Coercion and undue influence
Coercion is defined as committing or threatening to commit such as act which has been forbidden by the Indian Penal Code expressly or unlawful detention or threatening to detain any property, to the disadvantage of a person with the sole intention of obtaining his consent in regards of an agreement.[iii]
However, it is immaterial as to whether the Indian Penal Code was or not in force at the place where coercion had been employed.
Undue Influence as per the Indian Contract Act is induced from the relation existing between the parties in such a manner where one is in a position to dominate the will of the other party and obtain consent[iv]
COERCION UNDER INDIAN CONTRACT ACT, 1872
From the definition of coercion one can establish that it mainly involves pressurizing the opposite party either by:
- Committing or threatening to commit an act that has been expressly forbidden under the Indian Penal Code; or
- Detaining or threatening to detain the property of another unlawfully
A clear example of the same would be consent obtained at gunpoint, or threatening to cause him bodily harm, or by threatening to burn his house
1. Chikham Amiraju v Chikham Seshamma[v]:
Under this case, a man-induced his wife and son to execute a release in the favour of his brother with respect to certain properties, by the threat of suicide.
The court held the consent to be invalid, and hence the contract to be invalid. However, the court debated the difference between an attempt to commit suicide and the act of suicide as the former was forbidden under the IPC but there was no punishment regarding the latter.
It was held that there is no punishment under the act of suicide as no one is left to be punished, but it does not take away the effect of the mental pressure so exercised on the party whom consent had been obtained thereof.
2. Askari Mirza v Bibi Jai Kishori[vi]
This case, on the other hand, dealt with the threat to criminal prosecution. Herein, a minor having borrowed on 2 mortgage deeds, agreed to a compromise even though both the deeds had been void in nature. He held that the compromise was false, as it had been obtained under threat of criminal prosecution.
Under this case, the court once again differentiated between criminal prosecution and the threat to the same. The learned judges held that that the threat to criminal prosecution was not forbidden under the IPC, but for false charges.
As per the plaintiff’s plea, it was found that the threat was based on false charges and hence fell within mischief.
Detention of property to obtain some advantage or consent also works in a similar manner. For example: a pledgee forces the pledger to pay an extra interest amounting to rupees 10,000 which was above the amount under contract for the release of property.
UNDUE INFLUENCE UNDER INDIAN CONTRACT ACT, 1872
On the other hand undue influence comes from an advantageous position that one enjoys over the other and is also considered to be one of the subtle species of fraud wherein the control over one’s mind is obtained with the help of deceptive approaches and trickery. Such an advantageous position is derived from an existing relationship among the parties wherein one holds a real apparent authority or stands in a fiduciary relationship with the other. Undue Influence also considers the mental capacity and bodily distress of the party contracting so as to imply the application of some sort of influence on the will of the party whose consent has been obtained hence. The main cause for undue influence is that a person feels helpless due to his own inability, due to a position of subordination or a pre-existing relationship among the parties which provides some leverage to one over the other. A very peculiar aspect of undue influence is its presumption by a court of law, in favour of the aggrieved party and hence the onus to prove else, lies upon the party in position to dominate.[vii] However, for this presumption to take place the existence of a position of dominance is of absolute importance.
Ragunath Prasad Sahu v Sarju Prasad Sahu[viii].
In this case, the defendant and his father had been equal owners of a vast joint family property which had been under dispute between the two. As a result the father constituted criminal proceedings against his son. In order to meet the legal charges of defending himself in court, the son mortgaged the disputed property for 10,000 rupees on 24 per cent compound interest. In eleven years, the rate of interest magnified to a sum of 1, 12,885 rupees. As a result, the defendant contended that the lender had, by an exacting high rate of interest, taken an unconscionable advantage of his mental distress and, therefore, there should be a presumption of undue influence.
However, the court held that there could be no such presumption given the circumstances of the case. The court held that undue influence could not be established merely on the grounds of unconscionable but on the basis of some relationship of dominance. Since, there did not exist any such relation between the two parties except that of lender and borrower, undue influence could not be established in this case.
How is Coercion different from Undue Influence?
Considering the above we can say that coercion leads to the execution of a contract in a situation where there is a physical compulsion on the part of a person, which must be very rare, or when there is a threat to his life or limb or threat of physical harm or of imprisonment. It may also take into account threats of wrongful imprisonment or prosecution of the person and possibly his or her near relative. It also involves harm to property. In detention and threat to the same.
In contrast, undue influence may exist without violence or threats of violence against the aggrieved party. It depends on the relationship between the two parties which, while it continues, causes one to place confidence in the other which produces a natural influence over the one which other abuses to his own advantage.
This entails that the existing relationship between the parties is not necessary in coercion as it is in Undue Influence. It must also be noted that while both the principles deal with consent obtained by pressurizing the victim into giving consent, coercion deals with physical harm caused or threatened to be caused and undue influence considers the mental pressure or distress that one might be in when forced to enter into the contract. It must also be noted that coercion is criminal in nature in its relation to acts listed and forbidden under IPC. On the other hand, undue influence is not criminal in nature as it only entails the exploitation of a position of advantage.
Table: DIFFERENCE BETWEEN COERCION AND UNDUE INFLUENCE
|COMMITTING AN ACT OR THREAT TO COMMIT AN ACT FORBIDDEN BY IPC||REAL APPARENT AUTHORITYFIDUCIARY RELATIONSHIPBETWEEN THE PARTIES|
|DETENTION OF PROPERTY ORPHYSICAL HARM TO A PERSONIS THREATENED OR COMMITTED||AFFECTS THE AGGRIEVED PARTYMENTALY AND NOT PHYSICALLYNO DETENTION OF PROPERTY|
|MENTIONED IN SEC 15, ICA||MENTIONED IN SEC 16, ICA|
|RELATIONSHIP BETWEEN PARTIESIS NOT NECESSARY||RELATIONSHIP BETWEENPARTIES IS NECESSARY|
SIMILARITIES BETWEEN COERCION AND UNDUE INFLUENCE
Coercion and Undue Influence are both measures of pressuring the opposite party in order to obtain their consent to a contract. Both of these measures will create an invalid contract and free the aggrieved party from forced obligations.
In both the situations the other party holds a position of authority over the aggrieved party in order to get their demands fulfilled and have been mentioned in different sections of the Indian Contract Act.
Endnotes[i] Section 10 Indian contract act [ii] Indian contract act section 14 [iii] Indian contract act section 15 [iv] Indian contract act section 16 (1) [v] ILR (1918) 41 Mad 33, 36. [vi] (1912) 16 IC 344. [vii] Indian contract act section 16 (3) [viii] (1924) 19 LW 470: AIR 1924 PC 60.
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