Explain the effect of mistake, misrepresentation, and undue influence respectively on the validity of an agreement.

Question: Explain the effect of mistake, misrepresentation, and undue influence respectively on the validity of an agreement. [UPJS 1985]

Find the answer to the mains question of the Law of Contract only on Legal Bites. [ Explain the effect of mistake, misrepresentation, and undue influence respectively on the validity of an agreement.]

Answer

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.

According to Section 10, free consent is an essential requirement to form a valid contract.  Free consent by the parties is one of the essentials to form a valid contract means parties that are entering into a contract should do it with their will without the external factors or forces. Section 14 of the Indian Contract Act, 1872 defines a contract entered with free consent as a valid contract and if affected by some other factors then, would believe a contract invalid.

These factors are defined by the Indian Contract, 1872:

Coercion: It is defined under Section 15 of the Indian Contract Act, 1872 which means committing any act which is forbidden by law defined under the Indian Penal Code or unlawful to confine of property, or frightening to commit such acts.

The act should be harmful to the other party and some legal action may arise out of it. e.g.: A husband forces her wife that if she will not sign the property papers, he will throw acid on her. This is amounting to coercion and a contract signed under coercion amounts to an invalid contract.

Undue influence: It is defined under Section 16 of the Indian Contract Act, 1872 which means one party uses its dominant position over the party and tries to obtain an advantage out of it by influencing. Such examples are the relationship of employer-employee, principle-agent relationship.

Misrepresentation: It is defined under Section 18 of the Indian Contract Act, 1872 which means presenting the False representation of facts without the wrong intentions or to deceive the other party. In misrepresentation, the party is innocent and has done the act without knowing it.

E.g.: A asked B if he had faced any issues with the water pipeline system in the basement, and he said that he has never faced any issues regarding the same, absolutely not. A bought the house after considering the fact, and within the moving in of A, the basement was flooded with water due to the rainy season and A suffered a lot of damages.

Mistake: Mistake of Fact or Mistake of Law is defined under Sections 20 and 21 of the Indian Contract Act, 1872. If any mistake (fact or law) done by either or both the parties will lead to an invalid contract. E.g.: when X wants to enter into a contract with A for selling the car but mistakenly enters into a contract with D believing him to be A and sells him the car. Hence, it’s become an invalid contract.

Vitiating Factors to free consent and their respective effect

Where 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.’ If, for example, a person is induced to sign an agreement by fraud, he may, on discovering the truth, either uphold the contract or reject it.

If he confirms it, the contract becomes binding on both parties. It is a contract that is enforceable at the option of only one of the parties, namely, the party whose consent was not free. Given the meaning of a voidable contract, Section 2(i) says that an agreement that 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.

However, where consent is caused by mistake, the agreement is void. [Section 20-22] and a void agreement is not enforceable at the option of either party. [Section 2(g)]

---

Law of Contract Mains Questions Series: Important Questions for Judiciary, APO & University Exams

1. Law of Contract Mains Questions Series Part-I
2. Law of Contract Mains Questions Series Part-II
3. Law of Contract Mains Questions Series Part-III
4. Law of Contract Mains Questions Series Part-IV
5. Law of Contract Mains Questions Series Part-V
6. Law of Contract Mains Questions Series Part-VI
7. Law of Contract Mains Questions Series Part-VII
8. Law of Contract Mains Questions Series Part-VIII
9. Law of Contract Mains Questions Series Part-IX
10. Law of Contract Mains Questions Series Part-X