Transcript Free Consent - KLE Society Law College

Free Consent
Ss.13-22
JMM KLELC
1
Consent
13."Consent" defined.-Two or more persons are said to
consent when they agree upon the same thing in
the same sense (Consensus ad idem)
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
JMM KLELC
2
Effect of Agreement without Free Consent
19.Voidability of agreements without free consent.When consent to an agreement is caused by
 coercion,
 fraud or
 misrepresentation,
 the agreement is a contract voidable
 at the option of the party whose consent was so
caused.
 A party to a contract whose consent was caused by
fraud or misrepresentation, may, if he thinks fit,
insist that


the contract shall be performed, and that
he shall be put in the position in which he would have
been if the representations
made had been true.
JMM KLELC
3
Effect of Agreement without Free Consent
Exception.-If such consent was caused by
misrepresentation or by silence, fraudulent within
the meaning of section 17, the contract, nevertheless,
is not voidable, if the party whose consent was so
caused had the means of discovering the truth with
ordinary diligence.
Explanation.-A fraud or misrepresentation which did
not cause the consent to a contract of the party on
whom such fraud was practised, or to whom such
misrepresentation was made, does not render a
contract voidable.
JMM KLELC
4
Effect of Agreement without Free Consent
Illustrations
(a) A, intending to deceive B, falsely represents that
five hundred maunds of indigo are made annually
at A's factory, and thereby induces B to buy the
factory.
The contract is voidable at the option of B.
(b) A, by a misrepresentation, leads B erroneously to
believe that, five hundred maunds of indigo are
made annually at A's factory. B examines the
accounts of the factory, which show that only four
hundred maunds of indigo have been made. After
this B buys the factory.
The contract is not voidable on account of A's
misrepresentation.
JMM KLELC
5
(c) A fraudulently informs B that A's estate is free from
encumbrance. B thereupon buys the estate. The estate
is subject to a mortgage.
B may either avoid the contract, or may insist on
its being carried out and the mortgage debt
redeemed.
(d) B, having discovered a vein of ore on the estate of A,
adopts means to conceal, and does conceal, the
existence of the ore from A. Through A's ignorance B
is enabled to buy the estate at an under-value.
The contract is voidable at the option of A.
(e) A is entitled to succeed to an estate at the death of B;
B dies: C, having received intelligence of B's death,
prevents the intelligence reaching A and thus induces
A to sell him his interest in the estate.
The sale is voidable at the option of A.
JMM KLELC
6
Kinds of Contract
S. 2(g) An agreement not enforceable by law is
said to be void:
S. 2(h) An agreement enforceable by law is a
contract:
S. 2(i) 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:
S. 2(j) A contract which ceases to be
enforceable by law becomes void when it
ceases to be enforceable.
JMM KLELC
7
Coercion
15. "Coercion" defined.-"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 IPC is or is not in
force in the place where the coercion is employed.
Illustration
A, on board an English ship on the high seas, causes B to enter
into an agreement by an act amounting to criminal
intimidation under the IPC. 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 IPC was not in force at the time when or
place where the act was done
JMM KLELC
8
Coercion - Analysis
Chikham Amiraju v. Chikham Seshamma
A Hindu induces his sons and wife to execute
a deed release in favour of his brother under
the threat of suicide.
Held: voidable
Astley v. Reynolds
Pt. pledged property with dt. for $ 20. on
redeeming the same dt. claimed additional
interest of $ 10. Pt. paid & redeemed. But
later sued for $ 10.
Held: Pt. will succeed.
JMM KLELC
9
S. 16 Undue Influence
(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
 He uses that 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 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
JMM KLELC
10
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 lie upon
the person in a position to dominate the will
of the other
JMM KLELC
11
Relation between the
Parties
one of the
parties is in a
position to
dominate the
will of the other
He uses that
position to
obtain an unfair
advantage over
the other.
Undue Influence
JMM KLELC
12
Position to dominate the will
of another - Presumption
holding a real or
apparent authority over
the other or where he
stands in a fiduciary
relation to the other
contract with a person
whose mental capacity is
temporarily or
permanently affected by
reason of age, illness, or
mental or bodily distress
JMM KLELC
13
S. 16 Undue Influence – Illustrations
(a) A having advanced money to his son, B,
during his minority, upon B's 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.
(b) A, a man enfeebled by disease or age, is
induced, by B's influence over him as his
medical attendant, to agree to pay B an
unreasonable sum for his professional services.
B employs undue influence.
JMM KLELC
14
(c) A, being in debt to B, the 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.
(d) A applies to a banker for a loan at a time
when there is stringency in the money market.
The banker declines to make the loan except at
an unusually high rate of interest. A accepts the
loan on these terms.
This is a transaction in the ordinary course
of business, and the contract is not induced by
undue influence.
JMM KLELC
15
Undue Influence – Analysis



“Position to dominate the will of the other”
Sometimes the relation between the parties is
such that one of them is able to will of the
other. The person occupying the superior
position may prevail upon the other obtain
his consent to an agreement. But for such
influence he would not have consented.
Eg., spiritual adviser inducing his devotee to
gift over the property for securing moksha
It is a kind of fraud, mastery is obtained over
the mind of the victim, calculated to prevent
expression of the free mind of the person
JMM KLELC
16
Relations involving domination – Presumption
Every case where there is a trust and confidence
between parties or the parties are not on equal footing
– influence acquired and abused – confidence reposed
and betrayed.
 Presumption is rebuttable (without prejudice to the
foregoing provisions)
“Real or apparent authority”
A person in authority may exert influence on other over
whom he has authority. Eg. IT Officer, Police officer,
Magistrate, etc.
“fiduciary relation”
Relation involving trust and confidence, innumerable
instances, doctor-patient, solicitor-client, gurudevotee, etc.,

JMM KLELC
17
Moody v. Cox
A solicitor sold his property to his client, who later alleges that
property was over valued
Held: voidable, party having influence over the other shall not
make contract with him, if he does so he shall satisfy the court
that it is advantageous to that other party.
“Mental Distress”
When a person’s mental capacity is temporarily or permanently
affected he is said to be in distress. It may be due to old age,
mental or physical illness or any other cause. He may give
consent for what is unfavorable to him.
Eg. A Hindu wife agreeing for a loan @ 100% interest for suing
her husband for maintenance.
Held: voidable, BOP is on the pt. to show that the other person
was in a dominating position and he used it for the
disadvantage of the other
JMM KLELC
18
Nature of Presumption u/s.15(2)
In some cases on showing that one was in a position
to dominate the will of the other his use of the same
to the disadvantage of the other is presumed. But
dt. may show that the pt. consented freely.
Eg. Married women of full age guaranteeing the
repayment of loan obtained by her mother
Held: though she was under the influence of her
mother, facts and circumstances of the case shall
guide and not general presumption.
A parda lady of 70 years with 3 daughters gifted the
property to his tenant who was in possession of it.
Held: by the possession of the land he may have
dominated the will of the lady, it is for him to show
her free consent.
JMM KLELC
19
Instances of presumption
1. Unconscionable bargains
Where one of the parties to the contract is in a position
to dominate the will of the other and the contract
appears to be unconscionable i.e., unfair, law
presumes that consent must have been obtained by
undue influence. Burden then shifts on the dt. to
prove that no unfair advantage was obtained over the
pt.
Wajid khan v. Raja Ewaz Ali khan
An old illiterate woman incapable of any business
confers on her managing agent with out any
consideration a valuable pecuniary benefit.
Held: voidable
Eg. Money lending, suits in courts, poverty and
distress, youth and spendthrift,
JMM KLELC no unconscionableness
20
Between equally placed parties
2. Unconscionable gifts
Eg., a person suffering from number of ailments confined to
nursing home for long executes gift deed of whole of his
property in favor of one son to the exclusion of other sons
 An old, illiterate malay lady gifted all her rent-producing
property to her nephew who assisted her always. Held:
unconscionable
3. Inequality of bargaining power
Presumption may also arise on the fact of inequality of
bargaining power between parties causing duress on the
other.
Lyods Bank v. Bundy – a contractor obtained loan from bank.
Not paid in time – bank presses for payment/security –
contractor said his father might mortgage his only residential
house – which was done by father by banker taking signature
on the readymade papers. Contractor defaulted. Bank moved
against father
Held: bank exploited the vulnerability of his father caused by his
desire to help his son.
JMM KLELC
21
4. Exploitation of the needy
When the consent of the party is obtained as a result
of exploitation undue influence is presumed
A S Music Publishing Co. v. Macaulay
Young song writer contracted to write songs for 5 yrs
and to renew the same for another 5 yrs at he
option of the music co. co. can terminate at anytime
by a word of mouth. Boy wanted liberation
Held: voidable
5. Contracts with paradanashin woman
A contract with pardanashin woman has been
presumed to have been induced by undue
influence. She can avoid contract unless other party
shows that it was her intelligent and voluntary act.
Pardanashin woman is who is totally secluded from
social intercourse.
JMM KLELC
22
Effect of undue influence
S. 19A. Power to set aside contract induced by undue
influence.- 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.
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 just.
Illustrations
(a) A's son has forged B's name to a promissory note. B, under
threat of prosecuting A's 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.
(b) A, a money-lender, advances Rs. 100 to B, an agriculturist,
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 the Rs. 100 with such
interest as may seem just.
JMM KLELC
23
Misrepresentation
S. 18."Misrepresentation" defined."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 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.
JMM KLELC
24
Misrepresentation – Analysis
1. Positive assertion of unwarranted statement of fact

When a person positively asserts that a fact is true
when his information does not warrant it to be so,
though he believes it to be true, he makes
misrepresentation.

Eg. Capacity of the ship – stated to be not more than
2800 tonnage – without information but honest belief
– actual registered 3000 tonnage –


Purchase of land for the construction of a complex –
seller represents there is no difficulty in such use of
the land – municipal authority refuses permission for
such use of land unless sewage cost of $3000 is paid


charter party was allowed to avoid the contract
buyer was allowed to avoid the sale.
When misrepresentation relates to a term of the
contract buyer not only avoids the contract he may
even claim damages forJMMbreach.
KLELC
25




2. Breach of duty
Any breach of duty which brings an advantage to the
person committing it by misleading the other to his
prejudice is a misrepresentation. [constructive fraud]
Eg. Omitting to read relevant terms from the deed –
though dt. is not under duty to do so, when he does so
he should do it without concealing – pt. can avoid the
contract
Eg. A female patient was told her sterilisation would
be irreversible – not told that there’s minute risk of
failure and pregnancy – she conceived, gave birth –
claimed damages for breach.
HELD: Representation that the operation was
irreversible did not amount to express statement that
the operation was bound to achieve its acknowledged
object. The representation merely meant that the
operative system cannot be reversed.
JMM KLELC
26
3. Inducing mistake about subject matter


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
Suppression of vital facts
 Suppression or concealment of vital facts amounts
either to breach of duty or leading other party to
make mistake
 R v. Kylsant Prospectus of a co. stated the
dividends are paid regularly crating an
impression that it is making profits - in fact, co.
was under for last several years – dividends were
paid out of war-time accumulated profits
 suppression of this fact was misrepresentation.
JMM KLELC
27
Material facts



Misrepresentation shall be of material facts – mere
commendatory expression of businessmen about
their goods or mere expression of opinion is not
misrepresentation
Sale of land - general statement that land is fertile
and improvable – in fact, parts of which was
abandoned as useless - substantial portion was fertile
– cannot avoid the contract.
Bisset v. Wilkinson – certain lands were sold –
seller was aware that the land was required for sheep
farming. Therefore, expressed an opinion that the
land had a carrying capacity of 2000 sheep – land
turned out to be unsuitable for sheep farming – buyer
opted to avoid the contract.
JMM KLELC
28
Bisset v. Wilkinson Contd..




Held: agreement was not voidable
There should be representation of specific fact,
which may be inherent in a statement of opinion. It
depends on material facts and knowledge of the
parties
Both parties knew that vendor had not nor any
other person had carried sheep farming on the land
In the circumstances, the buyer was justified in
regarding anything said by the vendor as to the
carrying capacity as being anything more than an
expression of opinion on the subject.
JMM KLELC
29
Change of circumstances


After the negotiation and before conclusion of
contract, if any change occurs relating to stated
facts, it shall be informed to the other party,
otherwise amounts to misrepresentation.
Eg. Sale of medical practice – dt said his
practice had brought him $ 2000 per annum in
the last 3 yrs. – he had a specified no. of
patients on his panel – negotiations resulted
in a contract – in 5 month – in the mean time
he became ill and could not practice as a result
lost business – pt learnt about it only after the
sale – pt. could avoid the contract.
JMM KLELC
30
Inducement





Misrepresentation must be the cause of consent
But for the misrepresentation consent would not have
been given
S. 19 - Explanation.-A fraud or misrepresentation
which did not cause the consent to a contract of the
party on whom such fraud was practised, or to whom
such misrepresentation was made, does not render a
contract voidable
No misrepresentation if the other party has the means
of discovering truth with ordinary diligence
S. 19 Exception.-If such consent was caused by
misrepresentation or by silence, fraudulent u/s. 17,
the contract, nevertheless, is not voidable, if the party
whose consent was so caused had the means of
JMM KLELC
31
discovering the truth with
ordinary diligence.
S. 17 Fraud
“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.
JMM KLELC
32

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.
JMM KLELC
33
Illustrations




A sells, by auction, to B, a horse which A knows to be
unsound. A says nothing to B about the horse's
unsoundness. This is not fraud in A.
B is A's daughter and has just come of age. Here, the
relation between the parties would make it A's duty
to tell B if the horse is unsound.
B says to A-"If you do not deny it, I shall assume that
the horse is sound." A says nothing. Here, A's silence
is equivalent to speech.
A and B, being traders, enter upon a contract. A has
private information of a change in prices which
would affect B's willingness to proceed with the
contract. A is not bound to inform B.
JMM KLELC
34
Essentials
I.
Assertion of fact without belief in its
truthfulness
Derry v. Peek
Prospectus of a co. represented that it had
been authorized by a special Act of
parliament to run trams by steam or
mechanical power – it was in fact subject to
approval of board of trade, no mention was
made of this – board refused consent and co.
wound up – pt. purchaser of shares sued the
directors for fraud.
JMM KLELC
35
Derry v. Peek Contd..
HELD: No fraud, Directors honestly believed
that once parliament had authorised the
use of steam, the consent of the board was
practically concluded. It therefore follows
that the person making false
representation is not guilty of fraud if he
honestly believes in its truthfulness.
False representation –



Made knowingly or
Without belief in truth or
Recklessly careless about its truthfulness
amounts to fraud
JMM KLELC
36
II. Active Concealment




Active concealment and silence
Active concealment of material fact is fraud
Eg. A husband persuades his wife to sign few
documents telling her that he would mortgage
her two lands while it was mortgage of 4 lands
in reality.
Non-disclosure of sudden change in price by a
trader.
JMM KLELC
37
Is Silence Fraud?
Silence
as
Fraud
Duty
to
Speak
Change
of
Circumstances
Deceptive
Silence
Half truth
JMM KLELC
38
A. Duty to Speak

Silence amounts to fraud when person
keeping silence is under a duty to speak
Duty
to
speak
Trust
and
confidence
When one of the party does not have
means of discovering truth and
depends on other party
JMM KLELC
39
Deceptive Silence


A person keeping silent knowing that his silence will
be deceptive, is no less guilty of fraud
Eg., Buyer knowing value of the property, when
keeps information without disclosing to the seller.
He may avoid contract
Change of Circumstances


True representation made at the time of negotiation
if affected by change of circumstances before
conclusion of contract – non-disclosure amounts
fraud
Eg., Sale of medical practice
JMM KLELC
40
Half truths





Even a person without duty to speak may commit
fraud, if voluntarily discloses some thing and then he
stops half-the-way
Half-truth is no better than false down-right hood
One who can keep silent, if speaks shall speak whole
truth
Eg. Pt. purchased a plot of land. It was stated that the
land was subject to a right of the Borough to open to 2
streets. In fact, it was subject to open to 3 streets.
Held: fraud
JMM KLELC
41
III. Promise without intention to perform


Situation to be assessed from the facts of the case.
Eg. Purchase of goods without intending to pay for
it
IV. Any other act fitted to deceive – intentional
cheating – abundant caution
V. Any act or omission specifically declared
fraudulent
Eg. TP Act – Fraudulent transfer of property
Insolvency law – fraudulent preference, etc
JMM KLELC
42
Fraud and Misrepresentation
Similarities
Agreement
becomes
a contract
voidable
False
Representation
JMM KLELC
Discovering
truth by
ordinary
diligence Good defense
43
Differences


FRAUD
Intentional wrong
Contract becomes
voidable and cause of
action in tort for
damages
MISREPRESENTATION
 May be quite innocent
 Makes the contract
voidable and liability
for compensation
JMM KLELC
44
Effects of fraud or misrepresentation
 Right to rescind the contract
 Agreement becomes a contract voidable at the
option of the party whose consent was not free
 He may insist that the contract be performed
 He may insist that he should be in the same
position in which he would have been if the
misrepresentation made had been true.
JMM KLELC
45
Right to rescind – Exceptions
I. Affirmation – party becomes aware of his right to



rescind and affirms it – express or implied
Eg. use of goods obtained under contract
Long v. Llyod – dt. falsely convinced the pt. that his
lorry was in excellent condition – on the very first
journey serious defects noticed - pt. accepted dt.’s
offer to bear half the cost of repairs – the lorry
completely broken down on the next journey
HELD: on the first breakdown pt came to know that
representation was false. Instead of rescinding he has
accepted to receive half the repair charges and sent
the lorry on second trip. This amounted to final
acceptance for better of for worse and conclusively
extinguished right of rescission.
JMM KLELC
46
Right to rescind – Exceptions
II. Lapse of time – “reasonable time”


Eg. Allotment of shares – misleading prospectus – 6
months after allotment sues for setting aside the
contract
Unexplained delay extinguished the right
III. Acquiring of rights by third parties
When third party acting in good faith acquires rights in
the subject matter of the voidable contract.
 Eg. Resale of goods by a buyer obtaining them under
voidable contract.
JMM KLELC
47
Effects of Rescission




I. Restitution - S. 64
Eg. Person avoiding contract of loan obtained under
undue influence shall return the amount received
with reasonable interest.
II. Damages S. 75
Intentional failure of a singer contracted to sing at the
theatre for two months.
JMM KLELC
48
Mistake Ss. 20 - 22
When the consent of the parties is caused by
mistake, it is not free consent.
 One,
or both parties may be under some
misunderstanding or misapprehension of some fact
relating to the agreement. Such contracts are said to
have been caused by mistake.
 Mistake may operate upon a contract in two ways :
1. Mistake in the mind of the parties is such that there
is no genuine agreement at all - no consensus ad
idem. i.e. the meeting of two minds.
2. There may be a genuine agreement, but there may
be mistake as to a matter of fact relating to that
agreement.

JMM KLELC
49
In Raffles Vs. Wichelhaus (1864)
Buyer and seller entered into an agreement - seller
was to supply a cargo of cotton to arrive “ex
peerless from Bombay”. - Two ships of the same
name. i.e., Peerless - both were to sail from
Bombay, one in October and the other in
December. - buyer had in mind Peerless sailing in
October, seller thought of the ship sailing in
December - seller dispatched cotton by December
ship but the buyer refused to accept the same offer and acceptance did not coincide and there
was no contract.
It was HELD that the buyer was entitled to refuse
to take delivery.

JMM KLELC
50
Mistake as to a matter of fact essential to
the agreement
S. 20. Agreement void where both parties are under
mistake as to matter of fact.-- 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.
Essentials
1. Both the parties to the contract should be under a
mistake and
2. Mistake should be regarding a matter of fact.
3. The fact regarding which the mistake is made should
be essential to the agreement.
JMM KLELC
51
Illustrations
A agrees to sell to B a specific cargo of goods
supposed to be on its way from England to Bombay.
It turns out that, before the day of the bargain, the
ship conveying the cargo had been cast away, and the
goods lost. Neither party was aware of these facts.
The agreement is void.

b) A agrees to buy from B a certain horse. It turns
out that the horse was dead at the time of the bargain,
though neither party was aware of the fact.
Agreement is void

A being entitled to an estate for the life of B, agrees
to sell it to C . B was dead at the time of the
agreement, but both the parties were ignorant of the
fact.
The agreement is void. JMM KLELC
52

Mistake of law

21. Effect of mistake as to law.--- A contract is not
voidable because it was caused by a mistake as to any
law in force in India: but a mistake as to law not in
force in India has the same effect as a mistake of fact.
Illustration


A and B make a contract grounded on the erroneous
belief that a particular debt is barred by the Indian Law
of Limitation: the contract is not voidable.
Every one is supposed to know the law of the land.
Ignorance of law is no excuse. If a person wants to
avoid the contract on the ground that there was a
mistaken impression in his mind as to the existence of
some law while he entered into the contract, he will get
no relief.
JMM KLELC
53

S. 22. Contract caused by mistake of one party as to
matter of fact.--- A contract is not voidable merely
because it was caused by one of the parties to it being
under a mistake as to matter of fact
In Ayekam Angahal Singh Vs. The Union of
India,
auction for the sale of fishery rights – pt. was highest
bidder for Rs. 40,000 - fishery right had been
auctioned for 3 years and rental in fact was Rs. 40,000
per year – pt. sought to avoid contract on the ground
that he was working under a mistake and he thought
that he had made a bid of Rs. 40000 being rent for all
the three years.
HELD: since the mistake was unilateral, contract was
not affected thereby and it could not be avoided

JMM KLELC
54
Identity
of
parties
MISTAKE
Identity of
subject
matter
Nature
of
promise
JMM KLELC
55
I. MISTAKE AS TO INDENTITY OF PARTIES
Assumption of false identity – when one represents
himself falsely than what he really is.
 Eg. Jaggannath v. Secty. of State
‘S’ the brother of ‘P’ introduces himself to be ‘P’ and
induced a govt. agent to contract with him.
HELD: there was no valid agreement and no contract.
Govt. intended to contract only with ‘P’ and not with
‘S’, who knew this and deceived the govt. There is no
real consent because an acceptance meant for one cannot be
accepted by another.

JMM KLELC
56
Caused by
business
takeover
Identity of
party as
vital
importance
Mistake Identity
of
Parties
Fraud not
leading to
mistake of
identity
Identity
caused
by fraud
Fraud
leading to
mistake of
identity
JMM KLELC
57
Mistake caused by business takeover
Boulton v. Jones – Pt. took over the business of Mr.
“B”. Dt. who was dealing with ‘B’ in the past sent
him an order for certain goods. The order was
received by the pt. who sent the goods to ‘B’. Dt.
Came to know of this only when he received invoice
for the goods and by that time he had consumed the
goods. Dt. had a set-off against Mr. ‘B’, therefore
refused to pay.
 HELD: Pollock J. – “now, the rule of law is clear, that
if you propose to make a contract with ‘A’ , then ‘B’
cannot substitute himself for ‘A’ without your
consent and to your disadvantage, securing to
himself all the benefits of the contract.”

JMM KLELC
58
Boulton v. Jones Contd…
 Bramwell J. – “when any one makes a contract
in which the personality, so to speak, of the the
particular party contracted with is important,
for any reason, whether it is to write a book, or
paint a picture or to do any work of personal
skill or whether because there is a set-off due
from that party, no one else is at liberty to step
in, and maintain that he is a party contracted
with “
JMM KLELC
59
Mistake of identity caused by fraud


Hardman v. Booth – pt intending to deal with “Thomas
Gandell & Sons” went to their office and took orders from a
person who represented himself to be a partner – he told the
pt that the goods should be sent in the name of “Edward
Gandell & sons. ” he received the goods and sold them to
the dt., a bonafide buyer. Pt. sued dt. to recover goods.
HELD: POLLOCK J. – “there are some cases in which it is
very clear that there is no contract at all; and the present case
seems to be one of those cases. It was argued that the contract
was made personally with the particular individual who
made the communication: it is very clear that the words were
uttered by and to him, but what they imported was a contract
with “Gandell & co”. The facts being that he were not a
member of the firm and had no authority to act as their agent.
Gandsell & Co. was therefore not the buyer and
consequently at no time were there two consenting minds
drawn together to same agreement.
JMM KLELC
60
Fraud leading to mistake of identity

Ingram v. Little – 3 ladies joint owners of a
car, advertised for sale – person called at the
house offered to pay an acceptable price – he
pulled out a cheque they rejected it – he then
persuaded them to believe that he is one Mr.
Hachinson, a leading businessman, quoted
an address and telephone no. – on
verification of it from the directory they gave
the car for cheque – he resold and absconded
– Cheque proved worthless – 3 ladies sued
dt. a bonafide buyer, for recovery of the car.
JMM KLELC
61

Ingram v. Little Contd…
HELD: They can recover the car
“3 ladies did not intend to contract with a man
presented at their house but with Mr.
Hachinson – the offer was made solely to and
was capable of being accepted only by the
genuine Mr. Hachinson – so far ass the rogue
was concerned there was no offer made to him
and there was no contract with him. His right to
the car was no more than that of a thief or a
finder hence he could not convey good title to
the dt. buyer.
JMM KLELC
62



Fraud not leading to mistake of identity
Lewis v. Avery
Pt had a car to sell – a rogue introduced himself as
Mr. Richard Green, a famous film actor. – liked the
car and offered a cheque – pt rejected and demanded
proof of identity – the rogue produced a special pass
of admission to the Film Studio, which showed his
photograph and official stamp – convinced of this pt
allowed the car to be taken away for a cheque –
rogue sold it to innocent buyer immediately – cheque
came back worthless – pt sued the dt, an innocent
buyer to recover his car
HLED: the car was delivered under a contract
voidable by reason of the fraud and the contract
having not been avoided before the car was passed
into the hands of innocent buyer, he acquired a good
title
JMM KLELC
63
Identity of party as vital importance



Said v. Butt
Pt knew that on a/c of his adverse criticism of some
members of a theatre, he would not be allowed to
be present at the first performance of a play at the
theatre – he bought ticket through another and
sought admission in the theater which was rejected
– pt sued him for breach of contract
HELD: No contract
“There was no contract between pt and the theatre.
Non-disclosure of the fact that the ticket was bought
for the pt prevented the sale of the ticket from
constituting a contract, identity of the pt being in
the circumstances a material fact in the formation of
the contract.”
JMM KLELC
64
Mistake
as to
Common
misappreh
ension
Nonexistent
Sub-matter
Mistake
as to
Title/rights
Mistake
as to
Submatter
Mistake as
to
Quality of
Sub-matter
Different
Sub-matters
in mind
Mistake as
to
substance of
sub-matter
JMM KLELC
65
II. Mistake as to Sub-matter
1. Non-existent Sub-matter
 Mistake as to sub-matter makes the
agreement void
 Eg. Sale horse which was dead on the dt of
bargain
 Sale of goods on voyage which are
destroyed in a ship wreck (Couturier v.
Hastile)
JMM KLELC
66
2. Mistake as to title or rights
Unknown to the parties, if the seller wants to sell
what is already belonged to buyer – transfer of
ownership is impossible
 Cooper v. Phibbs
An uncle told his nephew, not intending to
misrepresent but being in fact in error, that he was
entitled to a fishery – nephew after uncle’s death
acting in belief of the truth of what the uncle had
told him, entered into an agreement to rent the
fishery from uncle’s daughter, where as it actually
belonged to nephew himself.
HELD: Mistake was such as not only to make the
agreement void, but also liable to be set aside on
such terms as the court thought fit.

JMM KLELC
67
2. Mistake as to title or rights Contd…


Eg. Seller purported to sell all his rights in the land
including right to mine minerals – buyer wanted
land only for mining minerals in the land – but
seller did not have a right to mine minerals.
Agreement is void
3. Different sub-matters in mind
Where parties due to reasonable mistake of fact,
have different sub-matters in mind, agreement is
void for lack of true consent.
Eg. Raffles v. Wichellaus – case of two ships named
“peerrless”

JMM KLELC
68
4. Mistake as to substance of sub-matter
Mistake as to the existence of some fact/s forming an
essential and integral part of the sub-matter leads to void
agreement
 Seikh Bros. ltd., v. Ochener
pt. a lessor of forest in Kenya granted a license to the dt.
to cut, process and manufacture all sisal growing in the
forest. Dt in turn agreed to manufacture and deliver to the
Pt 50 tons of sisal fiber per month. But it tuned out that
the leaf potential of the sisal area was not sufficient to
permit the manufacture of the stipulated quantity and dt
was sued for the breach
HELD: agreement void – basis of the contract was sisal area
should be capable of producing pm & mistake was as to a
matter of fact essential to the agreement
Eg. Agreement to compromise a suit already decreed.

JMM KLELC
69
5. Mistake as to Quality of Sub-matter
A mistake as to quality of sub-matter as
distinguished from substance of the sub-matter may
not render the agreement void
 Smith v. Hughes
Dt wanted old Oats for his horse – pt showed sample
– dt kept sample for 24 hrs and placed order for Oats
– after they are delivered he found them new and
therefore rejected – on the ground that he was
mistaken about their quality
HELD: Valid contract – two minds were not at ad idem
as to the quality of Oats but they certainly were at ad
idem as to the purchase of them.
Bell v. Liver Bros. – service contract case (merger of
subsidiary co with another)

JMM KLELC
70
6. Mistake as to Common misapprehension
Magee v. Pennine Insurance co.
Pt bought a car for his 18 yr old son, who had a
provisional DL – proposal form was filled by
manager of firm where car was bought, who
happened to state that pt had a provisional DL in fact
he had none – accident took place – dt claimed $ 600 –
compromised for $ 385 – co. came to know of
misstatement and declined to pay
HELD: agreement of compromise was entered into
under the common and fundamental mistake that the
original policy was valid & binding, when in fact it
was voidable for the misstatement.

JMM KLELC
71
III. Mistake as to nature of Promise






Mistake as to the character of the deed – void
Eg. Gift deed – Power of attorney
Distinction between “fraudulent misrepresentation as
to the character of the document and its contents.” former is void later is voidable
Eg. Manager of a old man to look after lands – gift
deed in the place of deed of lease
Eg. Old lady seeking help of her brother to avoid
trespass to her lands – application to collector - thumb
impression on blank papers – later regd as sale deed
Documents mistakenly signed are non est factum – to
protect the illiterate or blind – mind and hand should
go together to make a deed valid
JMM KLELC
72