Consensus Ad Idem PDF

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TOPIC: CONSENSUS AD IDEM CONTENT PAGE

S. No.

Contents

Pg. no.

I

INTRODUCTION

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II

CONSENSUS AD IDEM

6-7

III

CONSENT CAUSED BY COERSION

8-9

IV

CONSENT CAUSED BY UNDUE INFLUENCE

9-12

V

CONSENT CAUSED BY MISREPRESENTATION

12-13

VI

CONSENT CAUSED BY FRAUD

14-16

VII

MISTAKE

16-18

VIII

CONCLUSION

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1

I.

INTRODUCTION Consensus ad Idem is basically the meeting of minds of parties of the agreement. Which means before the agreement is formed both the parties must be in concord with the subject matter to the agreement. It is the agreement between different groups about the exact nature of the contract before it can be said to be legally acceptable. It basically indicates the Consent of both the parties to an agreement made. Consent has been expressed in the Indian contract act 1872 under section 13. It goes on to say that when different parties agree on to the same thing in the same sense, one can say a contract is formed. However, the consent given must not be extorted illegally, it must be given freely. Free consent has been enumerated in section 14 of the Indian contract act, 1872. It goes on to explain that the consent is said to be given freely when it was not caused by coercion, undue influence, fraud, misrepresentation and mistake. So, in this paper will make us understand about the meaning of consensus ad idem and what are those elements which should not be the integral reason for the existence of a contract.

II.

CONSENSUS AD IDEM Meaning; Consensus Ad Idem also called as mutual agreement, mutual assent or the meeting of minds is a phrase used to express the state of minds of the parties that enters into a contract.1 It is an agreement between those parties who make a contract on what they understand the contract to be about. Consensus ad idem should exist, before a court can force any of the parties to obey the contract.

1 https://en.wikipedia.org/wiki/Meeting_of_the_minds

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There must be evidence that the each parties from an objective perspective, engaged in activities manifesting their assent, and a contract is formed when the parties meets such a requirement2 This phrase has been explained explicitly in the Indian contract act, 1872 under section 14. Section 13 under the Indian contract act, 1872 explains what ‘consent’ is, ‘Consent’ defined, “Two or more persons are said to consent when they agree upon the same thing in the same sense”3 Therefore, the two parties must agree upon on the same thing as well. Section 14 of the Indian contract Act, 1872 talks about free consent, according to which “Consent is said to be free when it is not caused by— 1) Coercion, 2) undue influence, 3) fraud, 4) misrepresentation 5) mistake” 4 When the 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. Voidable contract as defined under section 2(i) of the Indian contract Act ,1872 says “An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract.”5 So, if a person was induced to sign an agreement by fraud then he may uphold the contract or reject it. if he agrees to it then the contract is binding for both the parties. This contract is voidable at the option of one of the parties i.e. the one whose consent was not free. 2 Ibid 3 Universal’s, Indian contract Act, 1872, 10th edition, (new delhi:lexis nexis, 2019) section 13 4 Universal’s, Indian contract Act, 1872, 10th edition, (new delhi:lexis nexis, 2019) section 14 5 Universal’s, Indian contract Act, 1872, 10th edition, (new delhi:lexis nexis, 2019) section 2(i)

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However, if the consent is caused by mistake then the agreement is considered to be void.

III.

CONSENT CAUSED BY COERCION 1. Definition

Section 15 of the Indian contract Act, 1872, defines coercion; “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. Explanation:- It is immaterial whether the Indian Penal Code (45 of 1860) is or is not in force in the place where the coercion is employed.”6 So, here force or threats are used to obtain the consent of the party under coercion, i.e it is not free consent. For e.g. X threatens to hurt Y if he does not sell his house to X for 6 lakh rupees. Here even if Y sells the house to X, it will not be a valid contract since Y’s consent was obtained by coercion.

2. Acts forbidden by IPC i. Threat of suicide amounts to coercion 

Chikham Amiraju v. Chikham Seshamma7 In this case a Hindu by the threat of suicide induced his wife and son to execute a release in favour of his brother with respect to some properties which they had claimed as their own. It was held that the threat of suicide amounted to coercion under section 15 of the Indian Contract Act 1872.

ii. Detention of property amounts to coercion, 

Astley v. Reynolds8

6 Universal’s, Indian contract Act, 1872, 10th edition, (new delhi:lexis nexis, 2019) section 15 7 34 Ind Cas 578, (1917) 32 MLJ 494 8 (1731) 2 STR 915: 93 ER 939

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The plaintiff had pledged his plate with the defendant for 20 pounds. When he went to redeem it, the pledgee insisted an additional 20 pounds were also owed. The plaintiff paid this amount to receive his plate but sued the pledgee soon after that. The plaintiff was in immediate need of his article and the defendant had tried to extract from him money by refusing to return it. So in this case it was held that the threat to deprive a property rightfully belonging to the plaintiff is deemed as unlawful also plaintiff was entitled to recover the extra amount and the contract was said to be void. iii. Threat of criminal prosecution: if a person enters into a contract in fear of a criminal prosecution which has been instituted towards them. In such contract, consent cannot be said to have been made through coercion. But if the threat had been to file a false charge, such an act would be considered to be forbidden under the IPC. 

Askari mirza v. Bibi jai kishori9: A minor who had borrowed on two mortgage deeds entered into a compromise decree even though the deed were void. Later on he pleaded that the reason he entered into a compromise was because he was threatened that he would be punished for falsely representing his age which thereby amounted to coercion.

IV.

CONSENT CAUSED BY UNDUE INFLUENCE 1. Definition; Section 16 of Indian Contract Act, 1872 defines undue influence as: “(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 dominate the will of the other and uses that position to obtain an unfair advantage over the other.

9 (1912) 16 IC 344

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(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 another— (a) 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 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 be upon the person in a position to dominate the will of the other”.10

2. Illustrations: For eg: X sold his gold watch for only Rs 600/- to his teacher Y after his teacher promised him good grades. Here the consent of X (adult) is not freely given, he was under the influence of his teacher.

3. Ability to dominate will of others: The parties are in such a relationship that one has the ability to dominate the will of the other. Mannu Singh v. Umadat Pande11 A spiritual adviser guru induced the plaintiff, his devotee, to gift him the whole of his property t secure benefits to his soul in the next world. Such a consent is said to be obtained under undue influence 4.

Relations which involve domination:

We can say that one party is able to dominate the will of the other when there is active trust and confidence between the parties or the parties are not on equal footing. In Williams v. Bailey12, A son forged his father’s signature on several promissory notes and paid them into his bank account. When the truth came out the manager threatened the 10 Universal’s, Indian contract Act, 1872, 10th edition, (new delhi:lexis nexis, 2019), section 16 11 ILR (1888 - 90) 12 AII 523 12 (1866) LR 1 HL 20

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prosecution of the son if a satisfactory solution was not found. To avert the threat the father agreed to give an equitable mortgage to the bank on his property in return for the promissory notes. After which the father sought have the agreement cancelled on the ground that they were influenced on threat. The house of Lords held the agreement voidable. Lord Chelmsford expressed that here the negotiation had happened on the understanding that the agreement to give security for the promissory note would relieve the son from criminal prosecution. Here the fear of the father was taken advantage of and deprived him of free agency in order to extort an agreement from him. Here there was a clear inequality between the parties and one took advantage of the other indicating use of undue influence.

5. Burden of proof In an action to avoid contract on the ground of undue influence the plaintiff has to prove the plaintiff has to prove two things. One, he must prove that the other party was in a position to dominate his will and secondly, he actually used his influence to get the plaintiff’s consent to the contract. 6. Case laws 

Presumption of undue influence Here the once it is proved the defendant to the contract was at a position to dominate, it is presumed that he must have used his power to take undue advantage. It is with the defendant to prove that the plaintiff freely consented In the case, Lancashire Loans v. Black13 Defendant was a married girl of full age. She gave a security for the loan which her mother took from company. The only advice she had was from the solicitor of the company. With respect to the facts of the case the court found her to be under the influence of her mother.

13 1934 1 kb 380 a 7

V.

CONSENT CAUSED BY MISREPRESENTATIONS0 1. Definition Misrepresentation has been defined under section 18 of Indian contract act “Misrepresentation” means and includes— (1) 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 intent to deceive, gains an advantage of 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.”14 A contract whose consent has been induced by misrepresentation is voidable at the option of the deceived party. Misrepresentation means misstatement to a fact material to the contract The difference here is that the act done was not intentionally, rather it was done innocently.

2. Types of misrepresentation Unwarranted statements, When a person positively asserts that a certain fact is true though the information does not warrant it so, though he believes it to be true, is said to be misrepresentation.

14 Universal’s, Indian contract Act, 1872, 10th edition, (new delhi:lexis nexis, 2019) ,section 18

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In Ocean Steam Navigation Co. v. Soonderdas Dharamsey,15 The defendants chartered a ship +9from plaintiff, who said that the ship was not more than 2800 tonnage register. But in fact, the ship has never been in Bombay and was wholly unknown to the plaintiffs. The ship turned out to be a registered tonnage of 3000 tonnes. It was held that the defendants were entitled to avoid the charterparty. There was a positive assertion on the size of the ship by the plaintiff, the assertion was not warranted by any information at that time by the plaintiff, turned out to be false.

3. . Breach of duty Any breach of duty which brings an advantage to the person committing it by misleading the other to his prejudice is committing the act of misrepresentation. In cases where there is constructive fraud, in which there is no intention to deceive but the party who is at an advantage due to the transaction will be equally answerable in effect as in those who acted with motive of fraud. Thake v. Maurice16, A husband undergoing vasectomy was not warranted that there is a slight risk of his wife becoming pregnant. The doctor in charge was held liable for the pains of unwarranted pregnancy undergone by husband and wife.

iv. Inducing mistake about subject matter, If one party leads the other, however innocently, to make a mistake as to the nature or quality of the subject matter, there is misrepresentation. Dambarudhar Behera v. state of Orissa17, The govt. auctioned certain forest coupes. A portion of the forest was occupied by tenants. The forest department knew this but did not disclose this to the purchasers. The contract was held to be vitiated by misrepresentation. The purchaser was allowed to recover damages.

15 (1891) ILR 15BOM389 16 [1986] QB 644 17 AIR 1980 Ori 188

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VI.

CONSENT CAUSED BY FRAUD 1. Definition Fraud has been defined under section 17 of the Indian contract act 1872, “According to this ‘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. Explanation.—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.”18 Intentional misrepresentation of facts is called as fraud. Here the aggravated party should suffer from the act of fraud committed. Also the false statement must be a fact and not an opinion of the deceiver. In Derry v. peek19, fraud was defined as “Fraud is proved when it is shown that a false representation has been madei.

Knowingly

ii.

Without belief in its truth

iii.

Recklessly, carelessly whether it to be true or false”20

18 Universal’s, Indian contract Act, 1872, 10th edition, (new delhi:lexis nexis, 2019) ,section 17 19 (1889) LR 14 App Cas 337,, UKHL 1 20 ibid

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In this case, a company’s prospectus contained a representation that the company had been authorized by a special act of parliament to run trams by stream or mechanical power. The authority to use stream was subject to the approval of the Board of Trade, but no mention was made of this. The board refused consent and consequently the company was wound up. The plaintiff had bought some shares sued the directors for fraud but they were not held to be liable because they truly believed they would receive the approval of the board and had acted accordingly. They had no such intention to cause fraud.

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Illustrations X bought a horse from Y. Y claims the horse can be used on the farm. But it turns out that the horse is lame and X cannot use the horse on his farm. Here Y knowingly deceived X and this will amount to fraud.

3.

Active concealment: Active concealment is different from passive concealment. Passive concealment means mere silence as to material facts. An active concealment of a material fact is a fraud. Mere silence except in few cases does not amount to fraud. Ningawwa v. Byrappa Shiddappa Hireknrabar,21 A husband persuaded his illiterate wife to sign certain documents telling her by that he would mortgage her two lands to secure his indebtedness but in fact mortgaged four of her lands. This was an act done with an intention of deceiving her.

4. Promise made without intention of performance To tie up a person to a promise with no intention of performing from one side and with the intention of only preventing the other from dealing with others is an example of promise made without the intention of performing. A purchase of goods without the intention of paying the price is a fraud of this species. DDV v. Skipper Construction Co.22 21 1968 AIR 956, 1968 SCR (2) 797 22 1996 AIR 2005, 1996 SCC (4) 622

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A builder enters into a large number of bookings nearly three times the available accommodation and collects the money. The SC held this to be a fraud because he should have known that he would not be able to perform the agreement with all the buyers. There was no provision on the interest of deposit money. Inspite of this he was held to be liable to pay the interest.

5. Any other act fitted to deceive This means any act committed with the obvious intention of committing the act of fraud.

6. Any act or omission specially declared to be fraudulent This category of fraud mentioned in section 17 was intended to cover al such acts under any branch of law appear to be fraudulent. For e.g. Transfer of property has the concept of fraudulent transfer and insolvency law has the concept of fraudulent preference.

VII. CONSENT CAUSED BY MISTAKE 1. Definition Mistake can be defined as an erroneous belief that is innocent in nature. Its existence leads to a misunderstanding between the two parties Section 20 under the Indian contract Act 1872, applies when both the parties are under mistake to a matter of fact. “According to this, where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement the agreement is void. Explanation.—An erroneous opinion as to the value of the thing which forms the subjectmatter of the agreement, is not to be deemed a mistake as to a matter of fact.”23 So “section 20 will come into play when i.

When both parties to an agreement are mistaken

ii.

Their mistake is as to a matter of fact

23Universal’s, Indian contract Act, 1872, 10th edition, (new delhi:lexis nexis, 2019), section 20

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iii.

The fact as to which they have mistaken is essential to the agreement.”24

1. Mistake of fact and mistake of law Now when talking about a mistake, the law identifies two types of mistakes, mistake of Law and mistake of Fact. A agrees to buy from B a certain horse. It turns out that the horse was dead at the ...