Free Consent

Introduction

A contract is binding on the parties because, at the time it was made, they freely and knowingly agreed to fulfill the specified responsibilities. A person has a moral obligation to fulfill any obligations he or she took on for themselves. The law holds that a person is liable for his contract on this moral basis. The parties must bear this obligation voluntarily and on their own behalf. On the other hand, a contract is a way of expressing the freedom of choice that is actually realized if the parties create it of their own volition.

Example:

• If Y refuses to sign a promissory note, X will kill him. Y consents to signing the promissory note. Y's consent in this instance cannot be recognized as valid because it is not voluntary. Y can nullify it.

There are two ways to define "free consent":

• If consent was given knowingly and voluntarily, it becomes free.
• If it wasn't brought on by fraud, deceit, misrepresentation, coercion, or mistake, it was said to be free.

Importance/Need of Free Consent

An agreement must be entered into voluntarily and with the parties' free consent in order to be legally binding. If it is established that one party's permission was gained at the time of the agreement by another without that party's free consent, the agreement may be revoked at the discretion of the person whose consent was not truly free. The following are some factors that make it necessary or important:

• If an act is performed of one's own free will, one is exclusively accountable for one's own actions. As the contract was not entered into by him, an actor of a contract without free consent is not liable.
• The primary purpose of legislation is to preserve individual liberties. Acts that violate a person's freedom and will are not covered by the law. The legal system shouldn't be used to rob people of their freedom or liberty.
• The law should forbid transactions between parties that are reluctant because they could result in anarchy and disruption in society due to the arbitrary or oppressive conduct of some dishonest people.
• The use of various unpleasant acts to take advantage of another person's interest and property should be illegal according to the law.
• If the parties engaged into or assumed the responsibilities of their own free choice, there is still a good chance that they will be fulfilled. The parties may refuse to carry out their assigned obligations if there is no free consent. A contract cannot be made if a performance is absent, hence doing so is pointless.

Legal Effects of Free Consent

Without freely given permission, the arrangement is voidable as illegal. A contract is voidable when:

• If it was created without freely given consent.
• If the party whose consent was so impacted has the ability to determine its validity.
• Until it is avoided, it is valid.

As a result, the party whose permission was not freely given may file a case with the requisite evidence with the court to have the contract declared void. The agreement is legally binding and enforceable if the other party accepts it or does not file a lawsuit within the allotted time period. The injured party who wants to declare the contract void has the burden of evidence. The intriguing thing is that the party who was free to assent at the time of the agreement, even though he may be in loss now, cannot file an action to void the contract.

Vitiating Elements of Free Consent

The term "vitiation aspects of a free consent" refers to those elements or variables that adversely affect a person's free consent in a contract. Coercion, undue influence, false representation, fraud, or error are some examples of these factors. The following is a succinct summary of those components:

Coercion

In general, it refers to the unlawful use of force by one person against the will of another in order to win that person's consent to a deal. Therefore, the consent is said to have been obtained through coercion if it was obtained through the imposition of harm or the threat of harm that is unlawful against the life, property, or persons of the contracting party, or, in extremely rare circumstances, against other people. Because it is a prohibited act, the person who commits it could face criminal charges. The use of coercion renders a contract voidable since it undermines the party's free will.

Example:

• If Y does not lend Rs. 7000 to Z, X will kill her. Y consents to loan Z the money. The accord was coerced into being.

Undue Influence

It is commonly referred to as mental pressure. A contract may be canceled owing to improper influence:

• If there was a fiduciary or trust connection between the parties at the time the agreement was made.
• If the parties were not on equal footing at the time of the agreement, i.e., one was in a higher position and the other was in a lower position, which would allow one party to easily control the other's will.
• if the party in the dominant position uses the position to gain undue advantages from the other party.

The aforementioned contract becomes an unconscionable bargain and, as a result, is not legal to enforce if the aforementioned conditions are met. Parent/guardian and children/wards, master and servant, doctor and patient, teacher and student, spiritual leader and disciple, etc. are instances of controlling or fiduciary relationships.

Example:

• A moneylender convinced a destitute Buddhist widow to consent to paying 100% interest on the money he had lent her. She required cash for maintenance. The court cut the interest rate to 24% due to an instance of undue influence.

Misrepresentation

When a party makes a statement about the facts of the contract's subject matter that turns out to be false, that statement is referred to be a misrepresentation. In reality, the consent of one party is said to have been obtained through misrepresentation if it was obtained by the other party by providing inaccurate facts without being aware of the true facts or believing the statements so said were true and without intending to deceive or hurt the other party. It's sometimes referred to as unintentional misrepresentation.

Example:

• When X is selling his mare to Y, he assures him that the animal is in excellent condition. X sincerely thinks the mare is sound, despite the fact that he has no solid evidence to support this. After then, Y discovers that the mare is flawed and that X's representation is inaccurate.

Consequently, a claim becomes a misrepresentation:

• If the claim proves to be erroneous or untrue.
• If the decision was made during or before signing a contract.
• If the intention was to persuade the other party to sign a contract.
• If it were pertinent.
• Whether it was made without knowledge of the actual facts or with the assumption that the information provided was truthful and authentic.
• If the other party wasn't intended to be misled or harmed.

Fraud

It has been purposefully misrepresented. Therefore, the consent is said to have been obtained through fraud if the false statement was made at the time of the agreement with the intention of obtaining the assent of another party while that party had knowledge of the true/real facts pertaining to the subject of the contract or while that party did not believe the facts stated were true. It is a deliberate lie that justifies the criminal behavior. A false statement becomes fraud as a result:

Example:

• Even though X is aware that his claim that the ring is made of subpar gold is untrue, he nonetheless sells it to Y. Y buys the ring on the belief that X's assertion is accurate. By X, it is fraud:
  • If the claim proves to be erroneous or untrue.
  • If the decision was made during or before signing a contract.
  • If the intention was to persuade the other party to sign a contract.
  • If it were pertinent.
  • If the decision was made without having awareness of the actual facts or without having faith that the information provided was accurate and authentic.
  • If the other person was the target of an attempt to trick or injure them.

Mistake

It is a person's false assumption about the truth of a certain subject. Therefore, consent is said to have been caused by error if, during the negotiation of an agreement, one or both parties mistook or misunderstood the facts pertaining to the contract's subject matter. The permission is void-ab-initio when it was given inadvertently. The error can be broadly divided into two categories: mistake of law and mistake of fact. While an error of fact renders a contract unenforceable, an error of law is not a basis for doing so.

The factual error could be bilateral or unilateral. The contract is considered unilateral and, generally speaking, the parties are nonetheless bound by it even if just one of the contracting parties misinterpreted the facts pertaining to the contract's subject matter. But in the following cases, the contract is void:

• Unilateral error on the nature of the agreement, and
• Unintentional error regarding the person's identification with whom the contract will be made.

Example:

• Y offers X a price with the intention of purchasing his red horse. With the intention of selling a black horse, X accepts Y's offer. Here, Y and X have distinct intentions and both are misinformed about the color of the horse. This is a major mistake. This contract is invalid.

Any time there is a bilateral error, the contract is void. The bilateral error could be:

• Error in identifying the nature of the contract's subject matter.
• Error about the existence of the contract's subject matter.
• Mistake regarding the cost of the contract's subject matter.
• Error regarding the size of the contract's subject matter.
• Error about the nature of the contract's subject matter.
• Error in the title of the contract's subject matter.
• Error on the likelihood of the contract's subject matter.

References:

Business Law, Ram Prasad Shrestha;M.K Books, Bhotahity, Kathmandu,2013

Merchantile law, ICAI, 2013