CONSENT-COMPARISON BETWEEN ENGLISH AND INDIAN LAW

Table of Contends

Introduction4Coercion..5Undue Influence.9Fraud..16Misrepresentation.24Mistake...31Conclusion.35Bibliography..36

Introduction Consent can defined as the meeting up of two minds. It well defined principle in common as well as in Indian Law. Section 13 of the Indian Contract Act, 1872 clearly defines consent which says that: Two or more persons are said to consent when they agree upon the same thing in the same sense. For example a customer buys a food processor because the retailer has claimed that the product was made in France but actually the product was made in Taiwan or an instance where a patient signed a contract to pay large sum of money to a doctor for immediate surgery which was actually unnecessary. In all the cases the offer was accepted leading to formation of an agreement and even there was a meeting of minds. However the consent of the person has been manipulated. If it were not the misrepresentation or undue influence the person should not have signed the agreement. It would be unjust if the contract was not set aside. S.10 of the Indian Contract Act says that: All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Thus free consent is an essential requirement of a valid contract. The expression free consent is defined in Section 14: 14.Free Consent defined- Consent is said to be free when it is not caused by-(1) coercion, as defined in section 15, or(2) undue influence, as defined in section 16, or(3) fraud, as defined in section 17, or(4) misrepresentation, as defined in section 18, or(5) mistake, subject to the provisions of sections 20, 21, and 22.Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation, or mistake.Where a consent to an agreement is caused by coercion, undue influence, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. This is mentioned in S.19 and S.19A of the Act which discusses the provision of voidability of agreement without free consent and power to set aside contract influenced by undue influence respectively. Thus the factors affecting free consent in Indian as well as English law are discussed and compared in the following sections. CoercionAccording to Section 15 of the Indian Contract Act, 1872 , Coercion is the committing, or threatening to commit, any act forbidden by the Indian Penal Code, or 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. Thus coercion is said to be there when the consent of a person has been caused either by1. committing, or threatening to commit any act forbidden by the Indian Penal Code, or by2. unlawfully detaining, or threatening to detain any property, to the prejudice of any person whatever. Act forbidden by the Indian Penal CodeIt has been noted that if a person commits or threatens to commit an act forbidden by the Indian Penal Code with a view to obtain the consent of the other person to some agreement, the consent in such case is deemed to have been obtained by coercion. For instance, A threatens to shoot B if B does not agree to sell his property to A at a stated price, Bs consent in this case has been obtained by coercion. For coercion to be there it is not necessary that the Indian Penal Code should be applicable at the place where the consent has been so caused. Explanation to section 15 makes it clear that to constitute coercion, it is immaterial whether the Indian Penal Code is or is not in force in the place where the coercion is employed. The following illustration would explain the point:A, on board an English ship on the high seas, causes B to enter into an agreement by act amounting to criminal intimidation under the Indian Penal Code. A afterwards sues B for breach of Contract at Calcutta. A has employed coercion, although his act is not an offence by the law of England, and although section 506 of the Indian Penal Code was not in force at the time when, or at the place where, the act was done.In Ranganayakamma v. Alwar Setti[footnoteRef:1] , the question before the Madras High Court was regarding the validity of the adoption of a boy by a widow, aged 13 years. On the death of her husband, the husbands dead body was not allowed to be removed from her house by the relatives of the adopted boy until she adopted the boy. It was held that the adoption was not binding on the widow. [1: (1889) I.L.R. 13 Mad. 214]

In Chikkam Ammiraju v. Chikkam Seshama[footnoteRef:2], the question before the Madras High Court was that whether coercion could be caused by a threat to commit suicide. In this case a Hindu by a threat of suicide induced his wife and son to execute a release deed in favour of his brother in respect of certain properties claimed as their own by the wife and the son. The question before the court was whether a threat to commit suicide could be considered to be an act forbidden by the Indian Penal Code. It was held by Wallis, C.J. And Seshagiri Ayer, J. that a threat to commit suicide amounted to coercion within the meaning of Section 15 of the Indian Contract Act and therefore the release deed was voidable. [2: (1912) 16 IC 344]

In Askari Mirza v. Bibi Jai Kishori[footnoteRef:3] , a minor contracted by misrepresenting his age and then entered into a contract to avoid the threatened prosecution. This was held to be no coercion. The Privy Council held that to threaten a prosecution is not per se an act forbidden by the Indian Penal Code. Such an act could only be one forbidden by the Indian Penal Code if it amounted to threat to file a false charge. [3: (1912) 16 IC 344]

Unlawful detaining of propertyAccording to Section 15 coercion could also be caused by unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any per to enter into an agreement. For example, if an outgoing agent refuses to handover the accounts books to the new agent until the principal executes release in his favour, it is coercion.[footnoteRef:4] If the detention of property is not unlawful there is no coercion. Thus, if a mortgagee refuses to convey the equity of redemption except on the terms dictated by him, there is nothing unlawful in it and, therefore, no coercion is caused in this case.[footnoteRef:5] [4: Muthiah Chettiar v. Karupan (1927) 53 MLJ 606.] [5: Bengal Stone Co. Ltd. Vs. Joseph Hyam 45 Ind Cas 738]

To the prejudice of a personSection 15 requires that there is committing or threatening to commit, any act forbidden by the Indian Penal Code, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with an intention of any person to enter into an agreement.

It means that the act causing coercion should not necessarily be directed against the contracting party, it is enough that the act is to the prejudice of any person whatever, and with the intention of any person to enter into an agreement. If, for example, A unlawfully detains Bs friend C, in order to coerce B to enter into agreement, the case would be covered within this section.Threat to strike is no coercionIn Workmen of Appin Tea Estate v. Industrial Tribunal[footnoteRef:6], the demand of the workers for bonus was accepted after a threat of strike. The question which had arisen was, whether such a decision between the Union of the workers and the Indian Tea Association could be declared void on the ground that there was coercion. It was held that because of the doctrine of collective bargaining under the Industrial Dispute Act the demand of the workers could be backed by a threat of strike. Such a threat was neither a threat to commit an offence under the Indian Penal Code, nor was it unlawful detaining or threatening to detain any property and hence it did not amount to coercion, and as such the agreement was valid. [6: (1967) IILLJ 371 Gau]

Statutory Compulsion is no coercionWhen a statue requires a contract to be entered into the consent in such a case is not deemed to be caused by coercion, undue influence, fraud, misrepresentation or mistake. In Andhra Sugars Ltd. Vs. State of A.P.[footnoteRef:7], if any cane grower offered to sell his sugarcane to a factory in a certain zone, the factory was bound to accept the offer under the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961, and accordingly the agreement was entered into. It was held that in such a case even though there was a legal compulsion for the factory to make the agreement, the agreement could not be said to be entered into by lack of free consent, and there was no coercion either. [7: 1968 SCR (1) 705]

Duress under English lawUnder common law duress consists in actual violence or threat of violence to a person. It only includes fear of loss to life or bodily harm including imprisonment, but not a threat of damage to goods. The threat must be to do something illegal, i.e., to commit a tort or a crime. The duress must be directed against a party to the contract, or his wife, child, parent or other near relative, and also caused by the party to the contract, or within his knowledge. It has been noted above that the common law recognises only a threat to a mans person, and not to his goods to constitute duress. The question whether a threat amounts to duress depends on its coercive effect in each case.[footnoteRef:8] [8: CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All E.R 714]

In D & C Builders v Rees[footnoteRef:9] , the creditors promise to accept part payment in full settlement had been obtained by duress. [9: 1966 2 QB 617]

In Pao On v Lau Yiu Long[footnoteRef:10], where the claimants threatened to break a contract with a company unless the defendants who were shareholders in the company, gave them a guarantee against loss resulting from the performance of that contract. The defendants thinking that the risk of such loss was small, gave the guarantee in order to avoid the adverse publicity which the company might suffer if the contract were not performed. In these circumstances, it was held that there was no coercion of the will, so that the guarantee was not voidable for duress. The relevant causal link would not now be described as a coercion of the will. Instead in the Pao On case it would not be said that, but for the claimants threat, the defendants would not have given guarantee. Alternatively, it may be better to regard Pao On case as a case where the threat did not amount to illegitimate pressure. [10: [1980] A.C 614]

It may be noted that Indian law also recognises an action for the recovery of money paid or goods delivered under coercion, through the provision contained in section 72, Indian Contract Act. The provision is as follows:A person to whom money has been paid. Or anything delivered, by mistake or undue coercion, must repay or return it For example, a railway company refuses to deliver up certain goods to the consignee, except upon the payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to recover so much of the charge as was illegally excessive.A contract made under duress is voidable. The right to rescind is subjected to usual bars against relief viz. affirmation, lapse of time, third party rights and it seems it is impossible to make counter- restitution.In Kolmar Group AG v. Traxpo Enterprises Pvt Ltd[footnoteRef:11], damages were awarded for the tort of intimidation, but same also awarded by way of restitution, either on the grounds of duress or failure of consideration. [11: [2010] EWHC 113 (Comm)]

Coercion and Duress1.Coercion in India means committing or threatening to commit an act forbidden by the Indian Penal Code, or unlawful detaining or threatening to detain the property. Thus it may be an act or threat directed against a person or his property. In England duress is constituted only by acts or threats against the person of a man and not against his property.2.In India coercion may proceed from a person who is not a party to the contract, and it may also be directed against a person who, again, may be a stranger to the contract. In England duress should proceed from a party to the contract and is also directed against the party to the contract himself, or his wife, parent, child, or other near relative.

UNDUE INFLUENCEIf the consent of a party to the contract has been obtained by undue influence the consent is not free consent which is needed for the validity of a contract and if the consent has been caused by undue influence, the contract is voidable at the option of the party whose consent had been so obtained. Section 16 defines undue influence as follows:

16. Undue influence defined- 1. 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 obtain an unfair advantage over the other.2. In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of anothera) where he holds a real or apparent authority over the other ; or where he stands in a fiduciary relation to the other ; or b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.3. Where a person who is in a position to dominate the will of another, enters into contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other. Nothing in this sub-section shall affect the provisions of Section 111 of the Indian Evidence Act, 1872.Explaining the nature of the provisions contained in section 16, Indian Contract Act and the adoption of English law in India, our Supreme Court has observed in the case of Ladli Parshad v. Karnal Distillery Co.[footnoteRef:12]The doctrine of undue influence under the common law was evolved by the courts in England for granting protection against transactions procured by exercise of insidious forms of influence spiritual and temporal. The doctrine applies to acts of bounty as well as to other transactions in which one party by exercising his position of dominance obtains an unfair advantage over another. The Indian enactment is founded substantially on the rules of English Common law. The first Sub-section of Section 16 lays down the principle in general terms. By sub-section (2) a presumption arises that a person shall be deemed to be in a position to dominate the will of another if the conditions set out therein are fulfilled. Sub-section (3) lays down the conditions for raising a rebut table presumption that a transaction is procured by the exercise of undue influence. The reason for the rule in the third sub-section is that a person who has obtained an advantage over another by dominating his will, may also remain in a position to suppress the requisite evidence in support of the plea of undue influence. [12: 1963 AIR 1279]

Effect of undue influenceSection 19-A declares that when consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused. For example, As son has forged Bs name to a promissory note. B, under threat of prosecuting As son, obtains a bond from A, for the amount of the forged note. If B sues on this bond, the court may set the bond aside.

Because of undue influence one party to the contract may take an undue advantage under the contract, or the party entitled to avoid the contract may have already received some benefit under the contract. The court in cases has been empowered to set aside the contract either absolutely or upon such terms and conditions as the Court may deem just. Second para to Section 19-A incorporates the following provision in this regard:Any such contract may be set aside either absolutely, or, if the party who was entitled to avoid it has received any benefit there under, upon such terms and conditions as to the Court may seem justFor example, a , a money-lender, advances Rs. 100 to B, an agriculturalist, and, by undue influence, induces B to execute a bond for Rs. 200 with interest at 6 per cent per month. The court may set the bond aside, ordering B to repay Rs.100 with interest as may seem just.Essentials of undue influenceIn order to constitute undue influence it is necessary that: 1. 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. 2. such a person uses his dominant position to obtain an unfair advantage over the other.It is manifest that both the conditions have ordinarily to be established by the person seeking to avoid the transaction: he has to prove that the other party to the transaction was in a position to dominate his will and that the other party had obtained an unfair advantage by using that position.Person in dominant position and obtaining of unfair advantageSometimes one of the parties to the contract may be in such a dominant position in relation to the other that he has peculiar opportunity of exercising that position to the prejudice of the other party. If the dominant party takes an undue advantage of his position in procuring a contract to the detriment of the other contracting party, the contract is voidable at the option of the party whose will is so dominated. In the following cases a person is deemed to be in a position to dominate the will of another 1. where he holds a real or apparent authority over the other, or,2. where he stands in a fiduciary relation to the other, or,3. where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.Real or apparent authority If a person has an authority over the other contracting party it is expected that he would not abuse that authority to gain an undue advantage from the other. An employer may be deemed to be having authority over his employee, an income-tax authority over the assesse, a police or a judicial officer over the accused, or a licensing authority over the licence.Fiduciary relationFiduciary relationship means a relationship of confidence and trust. When a person reposes confidence in the other, it is expected that he will not be betrayed. If a person betrays the confidence and trust reposed in him and gains an unfair advantage over the other party in any contract, the suffering party has an option to avoid the contract. The principle of undue influence applies to every case, where influence is acquired and abused, where confidence is reposed and betrayed.Examples of fiduciary relationship are solicitor and client, spiritual advisor and devotee, medical attendant and patient, parent and child, husband and wife, master and servant, creditor and debtor, principal and agent, land lord and tenant, lover and beloved, guardian and ward. For example, A,, having advanced money to his son b, during his minority, upon Bs coming of age obtains, by misuse of parental influence, a bond from B for a greater amount than the sum due in respect of the advance. A employs undue influence.

In Mannu Singh v. Umadat Pande[footnoteRef:13], the plaintiff, an aged person executed a deed of gift in respect of whole of his property in favour of the defendant, who was plaintiffs guru or spiritual adviser. The only reason for the gift was his desire to secure benefits to his soul in the next world and also in view of the plaintiff having heard recitation of the holy book, Bhagwat. Soon after the execution of the said deed the plaintiff applied for the cancellation of the same by a suit brought by him under section 39 of the specific relief Act, 1877. [13: [1890] 12 All. 523]

Section 111, Indian Evidence Act, 1872 was applied to this situation, according to which in case of a person being in a position of active confidence, the burden of proof lies on such a person who enjoys such a confidence. It was held that because of the fiduciary relationship between the parties, and the absurdity of the reason given by the plaintiff in the gift deed for executing the gift deed, and in view of the provision contained in section 111, Indian Evidence Act, the defendant must prove the absence of undue influence. And since he failed to prove the same the plaintiff is entitled to obtain the cancellation of the deed.Similarly in Diala Ram v. Sarga[footnoteRef:14], there was a debtor-creditor relationship between the parties and the defendant signed a bond agreeing to pay exorbitant rate of interest on the loan taken from the plaintiff, who was a money lender of his village, the presumption of undue influence was raised. [14: I.L.R. [1944] Lab. 1 (F.B.)]

Person in mental or bodily distressA person is deemed to be in a position to dominate the will of another also in a situation, where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress. A persons mental capacity may have been affected on account of his old age, illness, or mental or bodily distress, and there is every possibility that such a persons position may be exploited and unfair advantage taken in such a situation. The law tries to afford protection to such persons also. If a contract is made to the prejudice of such a person, there is deemed to be undue influence in such a case. For example. A, a man enfeebled by disease or age, is induced, by Bs influence over him as his medical attendant, to agree to pay B an unreasonable sum for his professional services, B employs undue influence. In Rannee Annapurni v Swaminatha[footnoteRef:15], a poor Hindu window, who was in great need of money to establish her right to maintenance, was persuaded by a money lender to agree to pay 100 percent rate of interest. This is a clear instance of undue influence being exerted upon a person in distress, and the court reduced the interest to 24 percent. [15: 1910 34 Mad 7.]

In Raghunath Prasad v. Sarju Prasad[footnoteRef:16], a person was facing criminal prosecution t the instance of his father borrowed on high terms a sum of money to defend himself, it was held that he was not in such mental distress as would enable a money lender to dominate his will. [16: AIR 1924 PC 60]

Presumption of undue influence in Unconscionable BargainsIn cases of unconscionable bargain between the parties on an unequal footing the law raises a presumption of undue influence. Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other.When:1. One of the parties who has obtained the benefit of a transaction is in a position to dominate the will of the other, and 2. The transaction between the parties appears to be unconscionable, the law raises a presumption of undue influence.It is, in such a case, for the dominant party to rebut the presumption of undue influence. If a party has got exorbitant gain at the cost of the other party, it is for him to prove that this advantage had not been gained by undue influence. For example, A being in debt to B, a money lender of his village, contracts a fresh loan on terms which appear to be unconscionable. It lies on B to prove that the contract was not induced by undue influence.In Diala Ram v. Sarga, the defendant, who was already indebted to the plaintiff, a village money lender, took a fresh loan from the plaintiff and executed a bond, wherein he agreed to pay interest up to 371/2 %, per annum, and also to deliver some bhoosa (wheat husk) in addition thereto. It was held that the position in this case was similar to that in illustration to Section 16, the contract was unconscionable and, therefore, the burden of proof was on the plaintiff to show that there was no undue influence in this case.In Wajid Khan v. Raja Ewaz Ali Khan[footnoteRef:17], an old, illiterate, lady, who was herself incapable of transacting any business, conferred a grant of her substantial property without any valuable consideration in favour of her confidential managing agent. The Privy Council held that it was incumbent on the grantee to show that he had made proper use of confidence reposed by the lady in him and there was no undue influence. [17: (1910) I.L.R. 33 All. 122]

Position in England In England, the narrow scope of the common law doctrine of duress led to the development, in equity, of the doctrine of undue influence. The doctrine of undue influence applies wherever improper pressure (not amounting to duress at common law) is brought to bear on a party to enter a contract. Where undue influence is found, the contract is voidable; gifts, as well as contracts, may be avoided under the doctrine.The modern law has been shaped by two House of Lords decisions, Barclays Bank Plc v OBrien and Royal Bank of Scotland Plc v Etridge In Barclays Bank Plc. v OBrien[footnoteRef:18], Mr O'Brien was a chartered accountant and he also had a shareholding in a company in which he was an auditor. The company was experiencing financial difficulty and the bank wished to find security for the company debts. Mr O'Brien offered the matrimonial home as security. He told his wife that the charge was limited to 60,000 and that it was only to last for a few weeks. Initially the wife refused to sign but was later persuaded to sign as the husband told her that the company would fail if she did not and that her son, who also had an interest in the company, would lose his home. In fact the charge was not limited in the amount or time. The wife agreed to sign the charge. The manager of the bank had left sent the documents to their local branch with instructions that the wife was to be advised of the full extent of the liability and that the wife should be advised to take independent advice before signing. However, the bank clerk got the wife to sign and failed to carry out the instructions. The bank sought to enforce the charge and the wife raised undue influence and misrepresentation in her defence to have the charge set aside. It was held that the defence based on undue influence failed because the wife was held to exercise independence of thought on financial matters and was used to dealing with the family finances whilst her husband was working away. The wife was successful with regards to misrepresentation. The charge was set aside as the bank had constructive notice of the misrepresentation and failed to take reasonable steps to ensure that the charge had been obtained without influence or that Mrs O'Brien was aware of the full extent of liability. [18: [1994] 1 AC 180 House of Lords]

In Royal Bank of Scotland Plc v Etridge[footnoteRef:19], an attempt at reconciliation od the case law and the further refinement of the Obrein principles was made by the House of Lords. The House made it clear that the bank would be put on inquiry whenever the relationship between the surety and the debtor is non-commercial. However, the suggestion in Obrein that the bank should have a private meeting with the wife to explain the transaction was not followed in Etridge. The content of the independent legal advice the solicitor advising the wife should give us set out. The solicitor should obtain from the bank any relevant information needed to give the advice. It is not necessary that the solicitor should act only for the wife. He should consider whether there are any conflicts of duty or interest and what are the best interest of the wife. The solicitor is not the banks agent and in the normal case the bank is entitled to proceed on the assumption that the solicitor has done the job properly [19: [1998] 4 All ER 705 House of Lords]

FRAUDWhen the consent of a party to the contract has been obtained by fraud, the consent is not free consent, which is necessary for the formation of a valid contract. In such a case the contract is voidable at the option of the party whose consent has been so obtained. Fraud or deceit is also tort, for which an action for damages can also lie. Section 17 defines fraud as follows:Fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him, to enter into the contract-1. the suggestion, as a fact, of that which is not true by one who does not believe it to be true :2. the active concealment of a fact by one having knowledge or belief of the fact :3. a promise made without any intention of performing it :4. any other act fitted to deceive :5. any such act or omission as the law specially declares to be fraudulent.The essentials of fraud are:1. There should be a false statement of fact by a person who himself does not believe the statement to be true.2. The statement should be made with a wrongful intention of deceiving another party thereto and inducing him to enter into the contract on that basis.False statement of fact.In order to constitute fraud it is necessary that there should be a statement of fact which is not true. Mere expression of opinion is not enough to constitute fraud. Thus, if while taking a policy of marine insurance, the insured communicates to the insurers a letter from the master of his vessel mentioning that in the masters opinion the anchorage of a place of destination of the vessel is safe and good, there is only an expression of opinion and not a statement of fact, which could constitute fraud.Representation as to untrue facts may be made either by positively stating certain fats or by conduct. In Edington v. Fitzmaurice[footnoteRef:20], a company was in great financial difficulties and needed funds to pay some pressing liabilities. The company raised the amount by issue of debentures. While raising the loans the directors stated that the amount was needed by the company for its development, purchasing assets and completing buildings. It was held that the directors has committed fraud. [20: 29 Ch. 459 (1885)]

Active concealmentWhen there is an active concealment of a fact by one having knowledge or belief of the fact, that can also be considered to be equivalent to a statement of fact and would amount to fraud. Active concealment is different from merely keeping silent as to certain facts. By an active concealment of certain facts, there is an effort to see that the other party is not able to know the truth and he is made to believe as true which is in fact not so.Mere silence is no fraudIt has been noted above that for constituting fraud there should be representation as to certain untrue facts. Active concealment has also been considered to be equivalent to a statement because in that case there is a positive effort to conceal the truth and create untrue impression on the mind of the other. Mere silence, however, as to facts is no fraud. Explanation to Section 17, in this connection, incorporates the following provisions:Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech.A contracting party is not obliged to disclose each and everything to the other party. If a person is to sell his goods he is under no duty to disclose the defects in his goods. If he makes false statement as to the quality of his goods, it would be fraud, but if he merely keeps silence as regards the defects in them there is no fraud. In case of sale of goods the rule is caveat emptor, i.e., buyer be aware, which means that it is the duty of the buyer to be careful while purchasing the goods, and there is no implied condition or warranty by the seller as to the quality or fitness of the goods for any particular purpose.In Keates v The Earl of Cadogan[footnoteRef:21], A let his house to B which he knew was in a ruinous condition. He also knew that the house is going to be occupied by B immediately. A did not disclose the condition of the house to B. It was held that he had committed nom fraud. [21: (1851) 10 CB 591]

In Shri Krishan v. Kurushetra University[footnoteRef:22], Shri Krishan, a candidate for the LL.B. Part I exam, who was short in attendance, did not mention that fact himself in the admission form for the examination. Neither the Head of the Law Department nor the University authorities made proper scrutiny to discover the truth. It was held by the Supreme Court that there was no fraud by the candidate and the University had no power to withdraw the candidature of the candidate. [22: 1976 AIR 376]

ExceptionsAlthough as a general rule mere silence or non-disclosure of facts do not amount to fraud, but in some exceptional cases keeping silence may be deemed to be an act of deception. Explanation to Section 17, which mentions the rule that mere silence is not fraud also mentions the following two exceptions:1. When there is a duty to speak, keeping silence is fraud.2. When silence is, in itself, equivalent to speech, such silence is a fraud.

Duty to speakWhen the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, keeping silence in such a case amounts to fraud. When there is a duty to disclose fats, one should do so rather than to remain silent. By remaining silent one may be responsible for creating a false impression in the mind of the other. Certain contracts are uberrima fides, i.e., contracts of utmost faith. In such a case it is supposed that the party in whom good faith is reposed would make full disclosures and not keep silent. Suppression of truth in such cases is equivalent to suggestion of false hood. Withholding the facts, which ought to be disclosed, is fraud. Contracts of insurance are contracts of utmost good faith. Since some of the facts may be in the in the sole knowledge of the insured, he must make full disclosure to the insurer.Speaking halftruth may also amount to misrepresentation as regards those facts which have not been disclosed. Withholding a part of the information may be enough to convey a false impression and it amounts to fraud. Thus, if the cleaner of clothes makes a customer sign a document orally telling him that the terms exempt the cleaner from liability for damage to beads and sequins, but in fact the document contains a clause giving him exemption from any damage however arising, this is a fraud. In Curtis v. Chemical Cleaning[footnoteRef:23], The claimant took her wedding dress to the cleaners. She was asked to sign a form. She asked the assistant what she was signing and the assistant told her that it excluded liability for any damage to the beads. The form in fact contained a clause excluding all liability for any damage howsoever caused. The dress was returned badly stained. It was held that the assistant had misrepresented the effect of the clause and therefore could not rely on the clause in the form even though the claimant had signed it. [23: [1951] 1 KB 805 Court of Appeal]

Duty to disclose changesIf a statement is true when made, but subsequently becomes false by the change of circumstances, there is a duty to disclose the change, before the other party acts upon it. If the change is notifies to the other party it would amount to fraud.[footnoteRef:24] [24: Briess v.Woolley [1954] AC 333]

In Gluckstein vs Barnes[footnoteRef:25], it was held that a person may keep silence, but if he speaks a duty arises to disclose the whole truth [25: [1900] AC 240 ]

In With v. OFlanagan [footnoteRef:26], a medical practitioner started negotiations in January, 1934 for the sale of his practice. He stated that his average practice was worth 2000 pounds per annum. The contract for the sale of practice was signed on May1, 1934, but by that time the position of his practice had changed as his practice had fallen considerably owing to his illness and consequent absence from practice. These changed circumstances were not disclosed to the purchasers of the practice and when they took charge they found that the practice was non-existent. They brought an action for the rescission of the contract on the ground that the changed circumstances were not communicated to them. It was held that the representation made in this case to induce the other party to the contract to enter into contract was a continuing one and it was the duty of the vendor to notify the change of circumstances to the purchaser if the same occurred before the contract was signed. Under these circumstances the plaintiff were entitled to rescind the contract [26: [1936] Ch 575]

Silence being equivalent to speechSometimes keeping silent as to certain facts may be capable of creating an impression as to the existence of a certain situation. In such a case silence amounts to fraud. For example, B says to A if you don not deny it, I shall assume that the horse is sound. A says nothing. Here As silence is equivalent to speech. Here, the relation between the parties would make it As duty to tell B if the horse is unsound.Means of discovering the truthEven if, in any case, the silence is fraudulent, but if the other party could have discovered the truth by ordinary diligence he cannot avoid the contract. In this connection the provision in the Indian contract Act is as under:If such a consent was caused by misrepresentation or by silence, fraudulent within meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent was caused had the means of discovering the truth with ordinary diligence. [footnoteRef:27] [27: Shri Krishan v. Kurushetra University]

Promise made without any intention to perform it When a person makes a promise there is deemed to be an undertaking by him to perform it. If there is no such intention when the contract is being made, it amounts to fraud. Thus if a man takes a loan without any intention to repay, or when he is insolvent, or purchases goods on credit without any intention to pay for them, there is fraud. If, however, there is no such wrongful intention at the time of making of the contract, but the promisor does not perform the contract, it does not amount to fraud. Any other act fitted to deceiveWe have already noted that either a false statement of fact, or active concealment, or a promise made without any intention to perform it have been declared to be fraudulent according to clauses (1), (2) and (3) to section 17 respectively. Clause (4) further provides that any other act fitted to deceive will also amount to fraud. This clause is general and is intended to include such cases of fraud which would otherwise not come within the purview of the earlier three clauses.In Ningawwa v. Byrappa Shiddatpa Hireknrabar[footnoteRef:28], a husband persuaded his illiterate wife to sign certain documents telling her that by them he was going to mortgage her two lands to secure his indebtness and in fact mortgaged four lands belonging to her. This was an act done with the intention of deceiving her. [28: AIR 1968 SC 956]

Any act or omission which the law declares as fraudulentAccording to section 17 (5) fraud also includes any such act or omission as the law specially declares to be fraudulent. In some cases the law requires certain duties to be performed, failure to do which is expressly declared as a fraud. For instance, section 55, Transfer of property Act, 1882 declares certain kinds of omissions on the part of the seller or the buyer as fraudulent. It provides that:1.The seller of immovable property is bound to disclose to the buyer any material defect in the property or in the sellers title thereto of which the seller is, and the buyer is not, aware, and which the buyer could not with ordinary care discover. And2.The buyer of immovable property is bound to disclose to the seller any fact as to the nature or extent of the sellers interest in the property of which the buyer is aware, but of which he has reason to believe that the seller is not aware and which materially increases the value of such interest, and an omission to make the above stated disclosures is fraudulent.In Akhtar Jahan Begum v. Hazarilal[footnoteRef:29], the defendant sold some property to the plaintiff stating in the sale deed that he would not be liable to the buyer if he suffered any loss owing to the sellers defective title. The defendant had, earlier to this transaction, sold this property to somebody else, but did not inform the buyer about it. It was held that the defendant had committed fraud and the contract was voidable at the option of the buyer. [29: AIR 1927 All 693]

Wrongful intentionIn order to constitute fraud it is necessary that a person should intentionally make a false statement with an intent to deceive another party thereto to induce him to enter into the contract. If that intention to deceive the other party is absent there is no fraud. It may, in such a case, be a mere misrepresentation as defined in section 18 of the Act.In Derry v. Peek[footnoteRef:30], the directors of a company issued a prospectus stating that they had got the authority to run tramways with steam or mechanical power instead of animal power. In fact a plan had been submitted for the same and directors honestly believed that the Board of Trade, who had to accord its sanction for the same, would do so as a matter of course. The board of Trade refused the sanction and the company had to be wound up. The respondent, who had taken shares in the company on the faith of the representation by the directors in the prospectus, brought an action for the tort of deceit. It was held by the House of Lords that since the statement had not been made with an intention to deceive there was no fraud. [30: (1889) LR 14 App Cas 337]

Contract on the basis of a false statementIt is necessary that the false statement must have been made to induce the other party to enter into the contract. If, said Lord Blackburn, it is proved that the defendants with a view to induce the plaintiff to enter into a contract made a statement to the plaintiff of such a nature as would be likely to induce a person to enter into a contract, it is fair inference of fact that he induced to do so by the statement. If a man, being induced by false statement enters into a contract which he would not have done otherwise, there is fraud. But if in spite of the false statement he was not misled or did not enter into the contract on that basis, there is no fraud. In Kamal Kant v. Prakash Devi[footnoteRef:31], the plaintiff, filed a suit against his mother, and some others seeking cancellation of a trust deed on the ground that his signatures to it were obtained by fraud by falsely telling him that it was attested by the plaintiffs father and advocate. The plaintiff was an educated man and had all the means to know the contents of the document. Under these circumstances it was held that there was no fraud in this case. [31: 1975 WLN 429]

In Horsfall v. Thomas[footnoteRef:32], the plaintiff contracted to manufacture a gun for the defendant and supply the same to him. The gun was made for the defendant and supplied to him, but the defendant never examined the gun and he started using it. There was a defect in the gun, and if the defendant had carefully examined the gun he could detect the same and then he would have been justified in rejecting it. The defendant accepted two bills of exchange towards the payment for the gun. After some time the gun burst flew to pieces. One of the bills, was paid by him, but when the second bill was not paid, the plaintiff sued him for the same. At this stage the defendant contended that because of a concealed defect in the gun it was weak and consequently it had burst and broken into pieces and thus it amounted to fraud, as such he is not liable to pay. [32: [1862] 1 H&C 90]

If there is a patent defect in an article supplied to a buyer and the buyer having an opportunity to examine the same neglects to do so, the supplier cannot be considered guilty of fraud for not pointing out the defect.Statement should be meant for the party to misleadIn Peek v. Gurney[footnoteRef:33], a person purchased some shares of a company from the market and then sued the promoters of the company for fraud on the ground that there were some false statements contained in the prospectus. It was held that the prospectus is meant for an original allot tee of the shares by the company and not a person like the present appellant, who buys the shares subsequently from the original allot tee and therefore the promoters were not liable for fraud. [33: (1873) LR 6 HL 377]

Position in English Law In English law, fraud is included in fraudulent misrepresentation. Fraudulent in the sense was defined by Lord Herschell in Derry v Peek, as a false statement that is made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless as to whether it be true or false. The essence of fraud is absence of honest belief; in Derry v Peek a share prospectus falsely stated that the company had the right to use the mechanical power to draw trams, without explaining that governmental consent was required for this. In fact, the directors honestly believed that obtaining consent was a pure formality, although it was ultimately refused. The House of Lords held that there had been no fraudulent misrepresentation.The claim for such damages is claim in the tort of deceit. The object is to restore the claimant to the they would have been in had the representation not been made, i.e. the amount by which the claimant is out of pocket by entering the contract; McConnel v Wright. The out of pocket rule does not necessarily preclude a claim for loss as illustrated by East v Maurer, in which the claimant purchased a hairdressing salon on the basis of a fraudulent misrepresentation. Damages were awarded for the profit the claimant might have made had he bought a different saloon in the same area, i.e. he could recover from the opportunity cost of relying on the misrepresentation. By contrast the basis of damages for breach of contract is normally the loss of bargain basis.It seems that the test of remoteness in the deceit is that the claimant may recover for all the direct loss incurred as a result of the fraudulent inducement, regardless of foreseeability; Doyle v Olby (Ironmongers) ltd, affirmed by the house of lords in Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd, HL, 1996.

MISREPRESENTATIONWhen the person making a false statement believes the statement to be true and does not intend to mislead the other party to the contract it is known as Misrepresentation. When the consent of a party to a contract has been obtained by misrepresentation it is not free consent and the contract is voidable at his option. Section 18 defines misrepresentation as under:18. Misrepresentation defined. Misrepresentation means and includes1. 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 :2. any breach of duty which, without an intention to deceive, gains an advantage to the person committing it, or any one claiming under him, by misleading another to his prejudice or to the prejudice of any one claiming under him ;3. causing, however, innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement.Misrepresentation is of the following types:1. Unwarranted Statements 2. Breach of Duty3. Inducing mistake about subject matterUnwarranted StatementsWhen a person positively asserts that a fact is true when this information doesnt warrant it to be so, though he believes it to be true, this is misrepresentation. In Oceanic Steam Navigation Co. v. Soonderdas Dharmasey[footnoteRef:34], the defendant chartered a ship from the plaintiffs, who stated that the ship was certainly no more than 2800 tonnage register. As a matter of fact the ship had never been in Bombay and was wholly unknown to the plaintiffs. She turned to of the registered tonnage of more than 30 tonnes. It was held that the defendants were entitled to avoid the charter party. [34: [1980] 14 ILR Bom. 241]

1In Mohan Lal v. Sri Gungaji Cotton Mills Co[footnoteRef:35], B told the plaintiff that one C would be the Director of a company. B had obtained this information not from C directly, but from another person called, L. The information proved untrue [35: [1900] 4 CalWN 369]

Where a representation acquires the status of being a term of the contract, and it turns out to be untrue, the disadvantaged party may, not only avoid the contract but also sue damages for breach.Breach of duty Any breach of duty which brings an advantage to the person committing it by misleading the other to his prejudice is misrepresentation. This clause is probably intended to meet all those cases which are called in the court of equity-cases of constructive fraud in which there is no intention to deceive, but where the circumstances are such as to make the party who derives a benefit from the transaction equally answerable in effect if he had been actuated by motives of fraud or deceit.In Oriental Banking Corpn v John Fleming[footnoteRef:36], the plaintiff, having no time to content of a deed, signed it as he was given the impression by the defendant that it contained nothing but formal matters already settled between them. The deed, however, contained a release in favour of the defendants. Accordingly, the plaintiff was allowed to set aside the deed. [36: [1879] 3 Bom 242]

In Samira Kohli v. Dr Prabha Manchanda[footnoteRef:37], where a husband undergoing vasectomy operation was not want that there was a slight risk of his wife becoming pregnant, the surgeon was held responsible to the man and his wife for the pains of unwanted pregnancy. The court said that the plaintiffs were entitled to damages for distress, pain and suffering, since the personal distress of both plaintiffs and the pain and the suffering of the birth was a separate head of claim which was not cancelled out by the relief and joy felt after birth of a healthy baby and there was no reason in principle why damages could not be recovered for the discomfort and pain of a normal pregnancy and delivery. [37: AIR 2008 SC 1385]

Including mistake about subject matterCausing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement is also misrepresentation. The subject- matter of every agreement of every agreement is supposed by the parties to possess certain value or quality. If one of the parties leads the other, however innocently, to make a mistake as to the nature or quality of the subject- matter, there is misrepresentation.In Ferreand vs Lazarus[footnoteRef:38], a second hand car dealer attached a disclaimer to the car under sale stating that the mileage reading was incorrect. The dealer knew true mileage of the car but did not disclose it. It was held that the dealer was bound to disclose the real position because he knew it and also knew that the odometer materially understand the mileage. [38: [2002] 3 All ER 175 QBD]

Suppression of Material and Vital Facts Misrepresentation may also arise from suppression of vital facts. 1. Cases of concealment or suppression will fall either under sub- section, 2. when it amounts to a breach of duty or under sub- section 3. when it leads the other party to make a mistake about the subject- matter of the agreement.Misrepresentation should be of facts material to the contract. Mere commendatory expression such as men of business will habitually make about their goods are not sufficient to avoid the contract. In, Bindu Sharma v. Ram Prakash Sharma [footnoteRef:39], Where the girl was in a possession of high academic qualifications and agreed to a less qualified person because she was told that he was in an attractive job whereas he was only an apprentice in a factory. She was allowed to avoid the marriage. [39: AIR 1997 All 429]

Fraud and Misrepresentation distinguished1. Both in fraud and misrepresentation the statement is false, but in fraud the false statement is made by a person, who knows that it is false or does not believe in its truth, whereas in misrepresentation the person making the statement believes the same to be true.2. In fraud the intention of the person making a false statement is to deceive the other party and induce him to enter into the contract on that basis. There is no such wrongful intention in case of misrepresentation. It has been noted in Derry v. Peek that when the statement, although false, was made without any intention to deceive it did not amount to fraud.3. According to section 19, when the consent of a party to the contract has been obtained either by fraud or by misrepresentation, the contract is voidable at the option of the party whose consent has been so obtained. In other words the contractual remedy for both is the same. In case of fraud, however, there is an additional remedy available to the victim of fraud, i.e., an action for damages under the law of torts, because fraud is also a tort. No remedy under the law of torts is available if it is an innocent misrepresentation. Indian Contract Act, however, provides that a person who rightfully rescinds a contract is entitled to compensation for any damage which he has sustained through the non-fulfilment of the contract. This remedy of damages is available in every kind of rescission, whether on ground of misrepresentation or fraud, or on other ground and it is not similar to the remedy of damages available to a victim of the fraud under the law of torts.4. Although when there is misrepresentation by one party the contract is voidable at the option of the other party, but no such remedy is available if the party seeking to avoid the contract had the means of discovering the truth with ordinary diligence. But except in case of fraudulent silence, a person obtaining the consent of the other party by fraud cannot be allowed to say that the other party could have discovered the truth with ordinary diligence. Position in EnglandThere are three types of misrepresentation in English Law:1. Fraudulent misrepresentation: Where there has been a fraudulent misrep, the innocent party is entitled to rescind the contract and claim damages. The damages that are awarded are not based on contractual principles but the damages available in the tort of deceit. There is thus no requirement that the damages are foreseeable2. Negligent Misrepresentation: In Howard Marine v Ogden, it was held that the defendant had not discharged the burden of proof by demonstrating they had reasonable grounds for believing it to be true as they had the registration document which contained the correct capacity and there was no reason why they would have chosen Lloyds register over the registration document. S.2 (1) Misrepresentation Act 1967 states that the same remedies are available where the statement was made negligently as if it were made fraudulently. Royscott v Rogerson confirmed that the principle in fraudulent misrepresentation relating to tortious damages applied also in negligent misrepresentation3. Innocent Misrepresentation: Under s.2 (2) Misrepresentation Act 1967 the remedies for an innocent misrepresentation are rescission or damages in lieu of rescission. The claimant cannot claim both. Damages are assessed on normal contractual principles.Rights of Rescission In case of the flaw in consent one party or the other may have either,1. a right of recession of the contract, i.e., the contract may be voidable at his option, or 2. a right to claim compensation. Right to Rescission of the contract The party entitled to rescind a voidable contract may do so by a notice to the other party, or taking such steps as may be necessary under the circumstances of the case. A voidable contract will be avoided only if the party having a right to do so avoids it. If instead, he affirms the contract then the contract will be binding on both the parties. Ordinarily, a notice to the other party of the intention to avoid the contract would suffice. If, however, the other party is not available then taking necessary steps which may be possible under the circumstances of the case would be enough.In Car and Universal Finance Co. Ltd. Vs. Caldwell[footnoteRef:40], the purchaser of a car committed a fraud against the seller by making the payment through a cheque which was dishonoured. The seller wanted to avoid the contract and regain the possession from the buyer, but the buyer was not traceable. The seller immediately informed the police and also the Automobile Association about the same. In the meanwhile the purchaser of the car sold it further to the plaintiffs, who had been acting in good faith. The question was whether the plaintiffs had purchased it after rescission of the contract by the seller, and if that was so the plaintiffs could not have a good title to the car. It was held that even though the seller could not communicate the rescission to the purchaser himself, information to the police and the Automobile Association had resulted in the rescission of the contract and therefore, the plaintiffs did not get a good title to the car. [40: 1965] 1 QB 525]

Limits to the rights of rescission The right of rescission of the contract is subject to the following limitations. In such situations the law may not permit the exercise of the right to rescind the contract.1. When the contract is affirmedThe affirmation of the contract may be made either expressly, or impliedly or it could be inferred from a persons conduct. In Long v. Lloyd[footnoteRef:41], the defendant sold his lorry to the plaintiff by making a false representation that the lorry was in excellent condition. On the lorrys first journey the plaintiff discovered serious defects in the lorry. He did not rescind the contract, but instead accepted the defendants offer of half the cost of repairs. The lorry completely broke in the next journey and then the plaintiff wanted to rescind the contract. It was held that the plaintiff, by accepting the offer of sharing the cost of repairs by the defendant and thereafter continuing using the car, had affirmed the contract and he had now no right to rescind it. [41: [1958] 1 WLR 753]

2. Lapse of timeA person having a right to avoid the contract must do so within a reasonable time. Failing to exercise this right in time may mean affirmation of the contract. If a person transfer his property to another person while under a spiritual influence, but does not take steps to take back the property for six years after such influence has ceased, the right to retrieve the property comes to an end.[footnoteRef:42] Similarly, if a person purchasing a picture on the basis of an innocent but false representation that it has been painted by a particular renowned artist, wants to avoid the contract after five years of its purchase, the rescission would not be allowed. [42: Allcord v. Skinner]

3. Acquisition of a right by a third party The right of rescission may be gone if before the contract has been rescinded some third party has acquired a right in the subject matter of the contract. A voidable contract is valid until avoided and it becomes void only after it has been avoided, there is a possibility that so long as the contract has not been avoided, there could be creation of an instrument in favour of a third party. If a shareholder is induced by misrepresentation to purchase shares, he may rescind the contract. In case the proceedings for winding up of the company starts, shareholders right of rescission cannot be exercised because that wou8ld affect the interest of the creditors.4. Inability to restore the goodsWhen a party wants to avoid the contract he must do so, so long as the parties to the contract can be placed in the same situation in which they were before the contract was made. If restitutio in integrum is not possible there can be no rescission. :In Wallis v. Pratt, the buyer purchased seeds described as English sainfoin seeds. The seeds supplied by the seller were of an inferior and a different variety known as Gaint sainfoin seeds. At the time of supply of seeds the buyer could not make out the defect as the two varieties were indistinguishable. The defect could only known after the seeds had been sown and the crop was ready. The buyer could claim compensation only. There was no chance of avoiding the contract and rejecting the goods.5. Damages in lieu of rescission of contract Misrepresentation Act, 1967 has given power to the English Courts to grant damages in lieu of rescission, if in the opinion of the Court it would be just and equitable to do so. Section 2 (2) of the Act which contain the above mentioned provision is as under:Where a person has entered into a contract after a misrepresentation has been otherwise than fraudulently, and he would be entitled, by reason of the misrepresentation, to rescind the contract, that the contract ought to be or has been rescinded, the court or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of the opinion that it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract was upheld, as well as to the loss that rescission would cause to the other party.The remedy of damages in lieu of recession provided here is in respect of innocent misrepresentation. When the misrepresentation is fraudulent, the aggrieved party may recover damages in addition to the of avoiding the contract, because fraud is also a tort. Right to claim compensation1. Damages in case of fraud: It has already been noted that fraud is a tort. Therefore, a party whose consent has been obtained by a fraudulent statement, may seek rescission of the contract as a contractual remedy and may also claim damages under the law of torts.2. Damages in case of non-fraudulent misrepresentation: It has already been noted that the Misrepresentation Act, 1967 empowers the court in case of other than fraudulent misrepresentation to allow damages in lieu of rescission of contract.3. Duty of a party rescinding the contract to pay compensation: Sometimes a party entitled to rescind a voidable contract may have already received some benefit under the contract. Equity demands that if he avoids the contract, he should also restore the benefit which he may have received from the other party. (section 64 of the Act) MistakeWhen the consent of the parties is caused by mistake, it is not the free consent which is needed for the validity of a contract. One, or both, of the parties may be working under some misunderstanding or misapprehension of some fact relating to the agreement. If such a misunderstanding or misapprehension had not been there, probably they would not have entered into the agreement. Such contracts are said to be have been caused by mistake.Mistake may work in two ways:1. Mistake in the mind of the parties is such that there is no genuine agreement at all. They may be no consensus ad idem. i.e. the meeting of the two minds. The offer and acceptance do not coincide and thus no genuine agreement is constituted between the parties. nIn Raffles v. Wichelhaus, the buyer and the seller entered into an agreement under which the seller was to supply a cargo of cotton to arrive ex peerless from Bombay. There were two ships of the same name. i.e., Peerless, and both were to sail from Bombay, one in October and the other in December. The buyer in mind Peerless sailing in October, whereas the seller thought of the ship sailing in December. The seller dispatched cotton by December ship but the buyer refused to accept the same. In this case the offer and acceptance did not coincide and there was no contract and, therefore, it was held that the buyer was entitled to refuse to take delivery.

2. There may be a genuine agreement, but there may be mistake as to a matter of fact relating to that agreementSection 20 deals with such mistake. Section 20 requires that :1. Both the parties to the contract should be under a mistake: In Ayekam Angahal Singh Vs. The Union of India, there was auction for the sale of fishery rights and the plaintiff was the highest bidder making a bid of Rs. 40,000. The fishery right had been auctioned for 3 years. The rental in fact was Rs. 40,000 per year. The plaintiff sought to avoid the contract on the ground that he was working under a mistake and he thought that he made a bid of Rs. 40000 being the rent for all the three years. It was held that since the mistake was unilateral the contract was not affected thereby and the same could not be avoided.2. Mistake should as regards a matter of fact: There should be mistake of fact and not of law. The validity of the contract is not affected by mistake of law. 3. The fact regarding which the mistake is made should be essential to the agreement: It is also essential that the fact regarding which the mistake is made should be essential to the agreement. Whether the mistake is regarding a fact essential to the agreement or not depends on a particular contract. In EnglandWhere the courts make a finding of mistake this will generally render the contract void ab initio (from the beginning) so it is as if the contract never existed. This represents an important distinction from voidable contracts. Where a contract is voidable, the contract exists and is valid until such time as the innocent party takes action to set the contract aside. Thus where there is a voidable contract a person acquiring goods under a contract will obtain good title to those goods. If a contract is void, no title passes. This distinction is most relevant where the goods have been sold on to a third party. A purchaser of the goods will acquire good title if the original contract was voidable, but will not obtain title if the contract is void.

English contract law recognises three types of mistake:1. Common Mistake 2. Mutual Mistake 3. Unilatreal MistakeCommon mistakeCommon mistakes exist where both parties to the contract make the same mistake. Three categories have emerged as giving rise to a cause of action:1. Res extincta: Res extincta will apply where both parties enter a contract with the belief that the subject matter exists when in fact it does not exist. The contract will be held to be void for mistake.Scott v Coulson [1903] 2 Ch 439At the time of entering a contract for life insurance both parties believed the person whose life was to be insured was living. When in fact he was dead. The contract was void for mistake as it was a common mistake as to the existence of the subject matter.2. Res sua: This applies where a party contracts to buy something which in fact belongs to him. This will generally render the contract void. Although if the action is based in equity this will render the contract voidable Cooper v Phibbs (1867) LR 2 HL 149A nephew leased a fishery from his uncle. His uncle died. When the lease came up for renewal the nephew renewed the lease from his aunt. It later transpired that the uncle had given the nephew a life tenancy in his will. The lease was held to be voidable for mistake as the nephew was already had a beneficial ownership right in the fishery.This is an instance of res sua. Normally where a contract is found to have been entered under a common mistake the contract will be rendered void as oppose to voidable. The lease was held to be voidable rather than void as the claim was based in equity as it related to beneficial ownership as oppose to legal ownership.This caused some uncertainty as to whether there was equitable relief for mistake which was wider than that which existed at common law.3. Mistake as to quality is only capable of rendering a contract void where the mistake is as to the existence of some quality which renders the subject matter of the contract essentially different to that what it was believed.Bell v Lever bros [1932] AC 161 House of LordsLever bros appointed Mr Bell and Mr Snelling (the two defendants) as Chairman and Vice Chairman to run a subsidiary company called Niger. Under the contract of employment the appointments were to run 5 years. However, due to poor performance of the Niger company, Lever bros decided to merge Niger with another subsidiary and make the defendants redundant. Lever bros drew up a contract providing for substantial payments to each if they agreed to terminate their employment. The defendants accepted the offer and received the payments. However, it later transpired that the two defendants had committed serious breaches of duty which would have entitled Lever bros to end their employment without notice and without compensation. Lever bros brought an action based on mistake in that they entered the agreement thinking they were under a legal obligation to pay compensation.Unilatrel MistakeIn unilateral mistakes only one of the parties is mistaken. There are two categories within unilateral mistakes: mistakes relating to the terms of the contract and mistakes as to identity.1. Mistake as to the terms of the contract: Hartog v Colin & Shields [1939] 3 All ER 566 The defendants mistakenly offered a large quantity of hare skins at a certain price per pound whereas they meant to offer them at that price per piece. This meant that the price was roughly one third of what it should have been. The claimant accepted the offer.The court held that the contract was void for mistake. Hare skins were generally sold per piece and given the price the claimant must have realised the mistake.2. Mistake as to identityMistakes as to identity are generally induced by fraud in that one of the parties is claiming to be someone who they are not. There is thus an overlap with misrepresentation. A claim based in mistake is more favourable to one based in misrepresentation as the affect of a finding of mistake is that the contract is void as oppose to voidable. This is important where a rogue has acquired goods and sold them on to a third party. If the contract is void the rogue will never receive title to goods and will not be able to pass title when selling the goods. However, if the contract is voidable the contract exists and title passes. If the goods are sold before the innocent party rescinds the contract, the purchaser acquires good title to the goods. In determining whether a contract will be held void for mistake the courts draw a distinction between contracts made inter absentes (at a distance) and contracts made inter praesentes (face to face transactions).ConclusionThus consent forms an important element of the contract. Without free consent an agreement does not form a contract. Although basics in consent in both the British as well as Indian Law are same there are some difference which are discussed above.

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