Legal Llama

  MISREPRESENTATION An innocent misstatement or false statement is known as misrepresentation. Section 18 of the Indian Contract Act, 1872 defines "misrepresentation" as under: "Misrepresentation" means and includes- (1) the positive assertion, in a manner not warranted 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 intent to deceive, gains an advantage to the person committing it, or anyone claiming under him, by misleading another to his prejudice or to the prejudice of anyone claiming under him; (3) causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement." Positive assertion, ie, an explicit statement of fact by a person of that which is not true, though he believes it to be true amounts innocently, ie, without any intention to deceive. When there is a breach of d...

FRAUD When the consent of a party to the contract has been obtained by fraud, the consent is not free consent which is necessary for the formation of a valid contract. In such a case the contract is voidable at the option of the party whose consent has been so obtained (Section 19). Fraud or deceit is also a tort, for which an action for damages can also lie. Section 17 defines fraud as follows: "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 to 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) 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 ...

  UNDUE INFLUENCE If the consent of a party of the contract has been obtained by undue influence, the consent is not the free consent which is needed for the validity of a contract and contract is voidable at the option of the party whose consent has been so obtained. Section 16 defines undue influence as under: (1) A contract is said to be induced by "undue influence" where 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. (2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another- (a) where he holds a real or apparent authority over the other; or where he stands in a fiduciary relation to the other; or (b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of a...

  FREE CONSENT One of the essentials of a valid contract mentioned in Section 10 is that the parties should enter into the contract with their free consent. According to Section 14, consent is said to be free when it is not caused by- (1) coercion, as defined in Section 15, or (2) undue influence, as defined in Section 16, or (3) fraud, as defined in Section 17, or (4) misrepresentation, as defined in Section 18, or (5) mistake, subject to the provisions of Sections 20, 21 and 22 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. When 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 (Secs. 19 and 19-A). If, however, the consent is caused by mistake, the agreement is void (Section 20).   1. COERCION According to Sectio...

  THE POSITION OF A PERSON OF UNSOUND MIND It has already been noted according to Section 11, only a person of sound mind is competent to contract. It means that if a person is of unsound mind, he is incompetent to contract just like a minor. He is not capable of transferring any property by a deed of gift, etc., and a transfer by him would be void ab initio (Section 12, para 2). What is a sound mind for the purpose of making a valid contract has been defined by Section 12 as under: "A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests." Soundness of mind is required only at the time of making a contract. It is possible that a person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind. It means that even a person who is usually of unsound mind can make a ...

POSITION OF A MINOR IN PARTNERSHIP According to Section 4, Indian Partnership Act, 1932, Partnership arises out of a contract. It is, therefore, necessary that the parties to the contract of partnership should be competent to contract. A minor being incompetent to contract cannot become a partner. If a minor is made a full-fledged partner along with other major persons, the agreement would be void and the deed containing their contract would be unenforceable even as between the other major partners. (Dharam Vir v. Jagan Nath, A.L.R. 1968 Punj. 84) Apart from that any person who is of the age of majority, a who is of sound mind, can employ an agent (Section 183). A minor therefore, become a principal. In a partnership, every partner deemed to be a principal (apart from being an agent as well), but since a minor cannot be a principal, he cannot become a partner for that reason also. and cannot become a partner for that reason also. A minor is not competent to enter into a contract....

  CAPACITY TO CONTRACT   Section 11 of the Indian Contract Act clearly states as to who shall be competent to contract. It provides that every person is competent to contract (i)                  who is of the age of majority according to the law to which he is subject, (ii)          who is of sound mind, and (ii)               who is not disqualified from contracting by any law to which he is subject. Thus, a person to be competent to contract should not be i)        a minor, or ii)      of an unsound mind, or iii)    disqualified from contracting Let us now consider each of the aforesaid elements of competency to contract. 3.1 POSITION OF A MINOR 3.1.1 Who is a Minor? According to Section 3 of the Indian Majority Act, ...