The Indian Contract Act of 1872 is one of India's oldest laws, having been in operation for the longest time and still being used today. Its objective is to manage the contractual relationship between two or more parties. It establishes norms and regulations that apply throughout India and must be followed while entering or fulfilling a contract. The legislation was established on September 1, 1872, and is based on English Common Law principles.
Section 2(h) of the ICA, 1872, has the following definition of contract: A contract is a legally binding arrangement.
A contract's fundamental features must always be met in order for it to be legally binding and legitimate, as stated in Section 10 of the ICA, 1872. [2]
The following are the essential elements:
· The Parties' Free Consent
· Contracting Ability
· Lawful Consideration & Lawful Object
· Not prohibited by law
Consent is the first and most crucial aspect of a legitimate contract, and it is referenced in Section 13 of the ICA, 1872. In simple terms, consent means that the parties to a contract agree on the same item in the same way.
Sometimes, when entering into a contract, free consent is not there, and consent is persuaded in an unlawful manner, which may be illegal. The contract will be voidable at the offended party's discretion, and he will have the choice of declaring the contract void or continuing with the deal on its previous terms. “Coercion, undue influence, fraud, misrepresentation, or mistake can all impair or induce free consent.”
EFFECT OF THE DIFFERENT FACTORS:
1) COERCION (SECTION 15)
It is stated as "committing or threatening to do any act prohibited by the Indian Penal Code (45 of 1860), or unlawfully detaining or threatening to detain any property, to the disadvantage of any person whatever, with the goal of compelling any person to enter into an agreement."
Coercion is the act of compelling someone to sign a contract. It is not free consent when intimidation or threats are employed under duress to get the assent of the other person.
In order to increase the threat, coercion can also result in real bodily and psychological suffering. The prospect of more damage might then motivate the threatened individual to cooperate or obey.
EFFECT
The contract becomes voidable because of coercion. It means that the contract is voidable at the discretion of the person whose consent was not freely given. As a result, the aggrieved party will decide whether to pursue the contract or cancel it.
2) UNDUE INFLUENCE (SECTION 16)
Under “Section 16 of the Indian Contract Act of 1872, an influence is considered undue when”:
Ø One contracting party is in a state of trust and improperly dominates the other party.
Ø The person in this situation takes use of the dominant position to acquire an unfair advantage over the other person.
Undue influence has two main components:
· Trust, confidence, and authority characterise the connection.
· Unfair persuasion entails a thorough review of the contract's provisions.
EFFECT
Undue influence renders a contract voidable at the discretion of the person whose consent was induced. Any contract like this can be cancelled. The contract may only be avoided or rescinded by one of the parties. Third party cannot possess this right.
3) FRAUD (SECTION 17)
Fraud is defined as any of the following acts undertaken by a contractual party or its connivance or agent in order to deceive or entice a party or its agent to enter into a contract, according to Section 17 of the Indian Contract Act:
· Any hiding of fact by someone who already knows about it;
· a commitment made with no intention of keeping it;
· act which is designed to mislead;
· act or omission which law regards as fraudulent.
“Silence on facts probable to influence a individual's desire to engage into a contract is not fraud unless the circumstances of the case are such that the quiet person is obligated to speak or unless his or her silence is equal to speaking in and of itself.”
EFFECT
· A contract formed as a result of fraud is void.
· The deceived party has the right to cancel the agreement.
· The party is accountable for collecting losses as a result of the false agreement.
4) MISREPRESENTATION (SECTION 18)
“Section 18 of the Indian Contract” states:
The truth is misrepresented through misrepresentation. Misrepresentation is the disclosure of false information that leads to the assumption that the other party will enter into an agreement only to lose it. Nonetheless, the guilty party's knowledge is the product of a real belief in the topic. Misrepresentation is alleged to have occurred.
To begin with, when the deceptive person says that no justifiable data exists, the individual is being misled in some way.
Second, there is a breach of a responsibility that has resulted in one or both parties becoming prejudiced. Finally, a person made a mistake as a result of the act or information being misrepresented.
EFFECT
Under “The Specific Relief Act 1963”, a party who has been at loss due to misrepresentation while coming into a contract may opt to cancel or repudiate the contract within the mentioned time.
5) MISTAKE (SECTION 20)
Under Indian Contract Law, there are two types of mistake:
· The Mistake of Fact
· The Mistake of Law
MISTAKE OF FACT
Ø A mistake of fact occurs when either one or both contractual parties misunderstand a phrase that is critical to the contract's meaning;
Ø Such an error might occur due to misunderstanding, ignorance, or omission, among other things.
Ø A mistake is never made on purpose; it is an unintentional oversight.
Ø These blunders might be unilateral or bilateral.
MISTAKE OF LAW
The mistake might be due to a misunderstanding of Indian laws or a misunderstanding of foreign laws. If the error is related to Indian legislation, the concept is that ignorance of the law is not a valid explanation. This implies that neither side may claim ignorance of the rules.
No party can obtain remedies based on ignorance of Indian law, according to the Contract Act. An improper interpretation of any legal provisions is also included.
Foreign legal ignorance, on the other hand, does not receive the same respect. The parties are not expected to grasp foreign law and its meaning, therefore ignorance of foreign law allows considerable discretion. As a result, an error of foreign law is considered as a factual error under the Indian Contract Act.
CONCLUSION
In order to reach to an agreement in a legal contract, free consent is important. The significance of free consent cannot be overstated. The permission of the Party must be given freely and willingly. It is vital to sign the contract without being under any duress or compulsion. It is critical that the parties' consent is unrestricted, since this might jeopardise the contract's legitimacy. The injured party has the right to nullify the agreement if it was obtained by force, undue influence, fraud, misrepresentation, or mistake.
This article is written by Ananaya Chauhan of Delhi Metropolitan Education, Affiliated to Guru Gobind Singh Indraprastha University, New Delhi.