Q. Define free consent. When consent is said to be caused by fraud.

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One of the essential of a valid contract mentioned in section 10 is that the parties should enter into the contract with their free consent. This statement contains 2 major concepts: consent and free consent.


Meaning of consent

Section 13, Which defines consent provides that:

"Two or more persons are said to consented when they agree upon the same thing in the same sense."

This concept is based on the principle of “consensus-ad-idem”, which basically means agreeing upon the same thing in the same manner, or meeting of minds


Meaning of Free Consent

According to section 14, "Consent is said to be free when it is not caused by-

A.      Coercion, sec 15,

B.      Undue influence, sec 16,

C.      Fraud, sec 17,

D.      Misrepresentation, sec 18, or

E.       Mistake, sec 20, 21 and 22.


Effect of contracts made without free consent

A contract without free consent is considered as voidable contract.


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Consent caused by fraud

Fraud means deceit by one of the parties, i.e. when one of the parties deliberately makes false statements. So, the misrepresentation is done with full knowledge that it is not true, or recklessly without checking for the trueness, this is said to be fraudulent. It absolutely impairs free consent.

Section 17 of ICA defines, and contains the provision regarding the fraud. It states as:

‘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. 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 speak2, or unless his silence, is, in itself, equivalent to speech. Illustrations


“A” agrees to sell his horse to “B”. “A” had the knowledge that the horse is of unsound mind and did not inform it to “B”. “B”, asked “A” if he does not deny the fact then “B” would consider the horse to be sound and “A” kept silence to it. This will be considered as a fraudulent act.

Fraud is of infinite variety and is thus hard to define. The use of the phrase “includes” indicates the intent of the drafters to enlarge the definition of the phrase to include even those matters which would not be included within its ordinary meaning.


Important keywords used in section

Based on the definition of fraud under section 17, the circumstances that constitute fraud are:

1.      Suggesting a fact that is not true, and one does not believe it to be true:

In the well-famous case of Derry vs peek, a company had made a false representation. However, they honestly believed in the truth of the representation conveyed. It was observed by the court that “Fraud is proved when it is shown that a false representation has been made – (1) knowingly, or (2) without belief in its truth, or (3) recklessly careless whether it be true or false.” Therefore, intentional misrepresentation is the essence of fraud and it is dealt with under the first three clauses of section 17. However, if the plaintiff has the means to discover the truth by ordinary diligence, no fraud is proved.


2.      The active concealment of facts

Active concealment is a situation where one party conceals material information related to the contract despite having a duty to disclose such information.

Note: generally, mere silence is not considered as fraud, except in the following cases:

I.                     Where there arises a Duty to Speak,

II.                   Where silence is deceptive,

III.                 Change of Circumstances,

IV.                Half-Truths.


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3.      A promise made without any intention of performing it

where a person contracts with another without the intent to perform, only to prevent the other from contracting with some third person; contracting without the intending to pay the agreed consideration; one party promising the other, something which he is certain of not being able to accomplish in the given contractual period, all above described situation falls under this category.


4.      Any other such act fitted to deceive.

Since fraud can be of an infinite variety, it is futile to make an attempt to define fraud precisely and exhaustively to cater to all the contingencies because it is highly likely that many loopholes may become available to escape liability. Thus, this clause has been drafted as a tool to enable the judiciary in doing effective and true justice.


5.      Any act or omission specially declared to be fraudulent by law

For instance, concepts of “fraudulent transfer” under the Transfer of Property Act and “fraudulent preference” in Insolvency laws


Effects of fraud

I.                     The contract raised out of fraud is a voidable contract.

II.                   The party deceived has the right to revoke the contract.

III.                  The party is liable to recover the damages due to the fraudulent contract.



As per the ICA, contracts which are made without free consent i.e. due to coercion, undue influence, fraud, and misrepresentation is a voidable contract as the contracting parties have an option for performance or nonperformance of the contract. It is illegal to form any contract without the consent of both parties in the same sense.


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