Deal or No Deal is fine… But Valid Deal or Invalid Deal?

Article for Blog Post Writing Competition 2011 | by Vikrant Shetty


June 1st, 20114:02 pm


Contract law is governed by the Indian Contract Act, 1872.

ContractWhat is a contract – A contract is an agreement enforceable by law. It can be expressed or implied. It can be written or it can be oral. No words need be said for an agreement to be a contract. For example, whenever we catch an auto or taxi, the driver does not tell us that we have to pay him in exchange. It is implied or assumed that payment needs to be made in exchange for his service. The contract cannot be enforced if it contains impossible conditions e.g. If A promises B that he will bring someone back to life using magic in exchange for money. Several other conditions must also be fulfilled to ensure that the contract is valid and not frustrated.

A party may declare a contract to be ‘invalid’ if it proves that the party has committed one or more of the below acts

1. Coercion

Section 15 explains coercion – Coercion is committing or threatening to commit an act that is prohibited by Indian Penal Code, or any unlawful detaining or threatening to detain, any property of the person to make him enter a contract.

e.g. Husband threatened to commit suicide unless wife gave property to his brother. This was held coercion.

2. Undue Influence

Section 16 explains Undue Influence – Undue Influence when the relationship between the parties is such that one party is able to dominate his will on the others and uses that position to gain an unfair advantage.

e.g. A is sick and physically feeble and is attended by his nurse B. B influences A to enter a contract to pay him an unreasonable amount for his professional services.

3. Fraud

Section 17 explains fraud s:

Fraud means and includes any of the following acts done by a party to a contract, or by his connivance, or by his agent, to deceive another party thereto or his agent, or to induce him to enter the contract.

e.g. A dealer concealed his previous employment under govt. to get dealership. SC allowed the contract to be terminated.

Note: Concealment by mere silence is not fraud. Silence may become fraud in certain cases – Duty to speak, Half-truth, change of circumstances.

4. Misrepresentation

Section 18 explains misrepresentation :

Misrepresentation means and includes

1)      making a statement in a manner that is unwarranted 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 anyone claiming under him.

3)      causing, however innocently, another party to commit a mistake as to the substance of the thing which is the subject of the agreement.

Thus, when there is no intention to deceive but still a wrong statement has been made, or a duty has not been performed, or a mistake has been induced, it is misrepresentation.

The contract is completely void if there was-

Mistake

In ‘mistake’ the contract does not become invalid but void. It means there was no meeting of the minds i.e. there is some misunderstanding between both parties regarding the facts of the contracts.

(The above article is an original work. However, the image attached with the  article is from architectureideas.info)

Article by-

Vikrant Shetty

Student, Rizvi Law College, Mumbai

[Submitted as an entry for the MightyLaws.in Blog Post Writing Competition, 2011]

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