Unit-3: Other essential elements of a contract

• Capacity to contract

  Capacity refers to the competence of the parties to make a contract.
• Who is competent to contract (section 11)

  1. Has attained the age of majority
  2. Is of sound mind
  3. Is not disqualified by any law
• Void-ab-initio

  Means void from the beginning
• Elements vitiating free consent(section 14)

  1. coercion (section 15)
  2. undue influence (section 16)
  3. fraud (section 17)
  4. misrepresentation (section 18)
• Position of contract with minor

  1. a contract with or by a minor is void-ab-initio
  2. no ratification after attaining majority
  3. minor can be a beneficiary or can take benefit out of contract
  4. a minor can always plead minority
  5. liability for necessaries
  6. he/she cannot enter into a contract of partnership
  7. he cannot be adjusted insolvent
  8. minor cannot bind parent or guardian
  9. minor can be agent
  10. joint contract by minor and adult
  11. surety (guarantor) for a minor
  12. minor cannot be a shareholder of a company
  13. liability for torts
• person of sound mind (section 12)


  a person is said to be of sound mind for the purposes of making a contract if, at the time when he makes it is capable of understanding it and of forming a rational judgement as to its effect upon his interests.
• contract by disqualified persons

  foreign sovereigns, ambassadors, alien enemy, corporations, convicts, insolvent, etc.
• Consent (section 13)

  Two or more persons are said to consent when they agree upon the same thing in the same sense. (consensus ad idem)
• Free consent (section 14)

  consent is said to be free when it is not caused by:-

  1. coercion (section 15)
  2. undue influence (section 16)
  3. fraud (section 17)
  4. misrepresentation (section 18)
  5. mistake (subject to provisions of section 20, 21, 22)
• coercion (section 15)


  it 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.
• Coercion


  When a person is forced to do something against their will
• Contractor whose consent was obtained by coercion


  • Must repay anything delivered under it (Section 72)
• Undue influence (Section 16)


  A contract is said to be induced by undue influence when 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
• Essential elements of undue influence

  • Relation between the parties
  • Position to dominate the will of the other
• Relation between the parties


  • A person can be influenced by the other when a relation exists between them
• Position to dominate the will

  • The relation between the parties is such that one of them is in a position to dominate the will of the other
• Types of position to dominate the will

  • Real & apparent authority (e.g. doctor & patient)
  • Fiduciary relationship (e.g. father and son)
  • Mental distress
  • Unconscionable bargains
• Burden of proof


  When a party wants to avoid a contract on the ground of undue influence, they have to prove that the other party was in a position to influence their will and actually used that position to obtain their consent
• Fraud (Section 17)


  Any of the following acts committed by a party to a contract, or with his connivance, with an intent to deceive another party or to induce him to enter into the contract
• Acts constituting fraud

  • Suggestion of that which is not true, as a fact, by one who does not believe it to be true
  • Concealment of a fact by one having knowledge or belief of the fact
  • Promise made without any intention of performing it
  • Any other act fitted to deceive
  • Any such act or omission as the law specially declares to be fraudulent
• Essential elements of fraud

  • There must be representation
  • Representation must be false
  • Silence can amount to fraud in certain cases
  • Representation must be related to a fact
  • Representation should be made before the party acts upon it
  • Representation or statement should be made with knowledge of its falsity or recklessly without belief in its truth
  • The other party must have been induced to act upon the assertion
  • The other party must have relied upon the representation and consequently suffered a loss
• Effect of fraud upon validity of contract

  The contract is voidable at the option of the defrauded party, who has the following remedies: rescind the contract within a reasonable time, sue for damages, or insist on the performance of the contract on the condition that he shall be put in the position in which he would have been had the representation made been true
• A fraud which did not cause the consent of the party to the agreement is not a ground to avoid the contract
• MISREPRESENTATION (Section 18)


  According to section 18, there is misrepresentation when:

  1. when a person positively states that a fact is true when his information does not warrant it to be so
  2. when there is a breach of duty by a person without intention to deceive which brings an advantage to him, and loss to the other
  3. when a party causes the other party to the agreement to make a mistake as to the subject matter
• Consequences of misrepresentation


  the aggrieved party, in case of misrepresentation by the other party, can-

  1. avoid or rescind the contract
  2. accept the contract but insist that he/she shall be placed in the position in which he/she would have been if the representation made had been true
• MISTAKE (Section 20-22)


  innocent or erroneous belief about something which leads the party to misunderstand the others
• Mistake

  1. mistake of law - 1. of country, 2. of foreign country
  2. mistake of fact - 1. bilateral, 2. unilateral
• mistake of law

  1. mistake of law of country - a person cannot be allowed to get any relief on the ground that it had done a particular act in ignorance of law
  2. mistake of law of foreign country - such a mistake is treated as mistake of fact and the agreement in such a case is void
• mistake of fact

  1. bilateral mistake - both the parties under a mistake as to matter of fact. the agreement is void
  2. unilateral mistake - only one party under mistake. contract is not voidable
• Legality of object and consideration (unlawful object and consideration section 23)

  1. it is forbidden by law
  2. if it is of such a nature that if permitted, it would defeat the provisions of any law
  3. if it is fraudulent
  4. if it involves or implies injury to the person or property of another
  5. if the court regards it as opposed to public policy - trading with enemy, stifling prosecution, maintenance of champerty, interference with the court of justice, marriage brokerage contracts, interest against obligation, sale of public offices, agreement for the creation of monopolies
• stifling prosecution


  it is an agreement to abstain from prosecuting a person for an offence
• maintenance of champerty

  1. maintenance is an agreement to give assistance, financial or otherwise, to another to enable him to bring or defend legal proceedings when the person giving assistance has got no legal interest of his own in the subject matter
  2. champerty is an agreement whereby one party is to assist another to bring an action for recovering money or property, and is to share in the proceeds of the action
• Agreements expressly declared void


  • Agreements expressly declared void
  • Agreements made under a mutual mistake of fact (section 20)
  • Agreements by incompetent parties (section 11)
  • Agreements the consideration or object of which is unlawful (section 23)
  • Agreements the consideration or object of which is unlawful in parts (section 24)
  • Agreements without consideration (section 25)
  • Agreement is restraint of marriage (section 26)
  • Agreement in restraint of trade (section 27)
  • Agreement in restraint of legal proceedings (section 28)
  • Agreements the meaning of which is uncertain (section 29)
  • Wagering agreements or wager (section 30)
  • Agreements to do impossible acts (section 56)