Contract Law: Free Consent: Coercion

 

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 Section 15, "Coercion is the committing, or threatening to commit, any act forbidden by the Indian Penal Code, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing to enter into an agreement." Coercion is said to be there where the consent of a person has any person been caused either by:

        I.            committing, or threatening to commit any act forbidden by the Indian Penal Code, or by

     II.            unlawful detaining, or threatening to detain any property.

Such an act should be to the prejudice of any person whatever.

(i)                 Act forbidden by the Indian Penal Code

It has been noted above that if a person commits or threatens to commit an act forbidden by the Indian Penal Code with a view to obtaining the consent of the other person to an agreement, the consent in such a case is deemed to have been obtained by coercion. For instance, A threatens to shoot B if B does not agree to sell his property to A at a stated price, B's consent in this case has been obtained by coercion.

For coercion, it is not necessary that the Indian Penal Code should be applicable at the place where the consent has been so caused. Explanation to Section 15 makes it clear that to constitute coercion, "it is immaterial whether the Indian Penal Code is or is not in force in the place where the coercion is employed." The following illustration would explain the point:

 

A, on board an English ship on the high seas, causes B to enter into an agreement by an act amounting to criminal intimidation under the Indian Penal Code. A afterwards sues B for breach of contract at Calcutta. A has employed coercion, although his act is not an offence by the law of England, and although Section 506 of the Indian Penal Code was not in force at the time when, or at the place where, the act was done (Illustration to Section 15).

In Ranganayakamma v. Alwar Setti, 2 LL.R. (1889) 13 Mad. 214 the question before the Madras High Court was regarding the validity of the adoption of a boy by a widow, aged 13 years. On the death of her husband, the husband's dead body was not allowed to be removed from her house for cremation, by the relatives of the adopted boy until she adopted the boy. It was held that the adoption was not binding on the widow as her consent had been obtained by coercion. In Chikkan Ammiraju v. Chikkam Seshama ILR (1918) 41 Mad. 33, the question before the court was whether a threat to commit suicide could be considered to be an act forbidden by the Indian Penal Code was answered in affirmative.

(ii)              Unlawful detaining of property

According to Section 15, coercion could also be caused by the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement. For example, if an outgoing agent refuses to hand over the account books to the new agent until the principal executes release in his favour, it is coercion. (Muthiah Chettiar v. Karupan Chetti, I.L.R. (1927) Mad. 786) If the detention of property is not unlawful, there is no coercion. Thus, if a mortgagee refuses to convey the equity of redemption except on the terms dictated by him, there is nothing unlawful in it and, therefore, no coercion is caused in this case. (Bengal Stone Co. Ltd. v. Joseph Hyam, (1918) Cal. L.J. 78)

To the prejudice of a person

Section 15 requires that there should be committing or threatening to commit, any act forbidden by the Indian Penal Code, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.

It means that the act causing coercion should not necessarily be directed against the contracting party, it is enough that the act is to the prejudice of any person whatever, and with the intention of causing any person to enter into an agreement. If, for example, A unlawfully detains B's son, C, in order to coerce B to enter into the agreement, the case would be covered within this Section. Apart from that, it is also not necessary that the wrongful act causing coercion should proceed from the party to the contract. Ranganayakamma v. Ahwar Setti, IL.R. (1889) 13 Mad. 214

Threat to strike is no coercion

In Workmen of Appin Tea Estate v. Industrial Tribunal, A.I.R. 1966 Assam 115, the demand of the workers for bonus was accepted after a threat of strike. The question which had arisen was, whether such a decision between the union of the workers and the Indian Tea Association could be declared void on the ground that there was coercion. It was held that because of the doctrine of collective bargaining under the Industrial Disputes Act, the demand of the workers could be backed by a threat of strike. Such a threat was neither a threat to commit an offence under the Indian Penal Code, nor was it unlawful detaining or threatening to detain any property and hence it did not amount to coercion and as such the agreement was valid.

Statutory compulsion is no coercion

When a statute requires a contract to be entered into, the consent in such a case is not deemed to be caused by coercion, undue influence, fraud, misrepresentation or mistake. In Andhra Sugars Ltd. v. State of A.P., if any cane grower offered to sell his sugarcane to a factory in a certain zone, the factory was bound to accept the offer under the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961, and accordingly the agreement was entered into. It was held that in such a case even though there was a legal compulsion for the factory to make the agreement, the agreement could not be said to be entered into by the lack of free consent, and there was no coercion either.

"Duress" under English Law

Under Common Law duress consists in actual violence or threat of violence to a person. It only includes fear of loss to life or bodily harm including imprisonment, but not a threat of damage to goods.! The threat must be to do something illegal, i.e., to commit a tort or a crime? There is nothing wrong in threat to prosecute a person for an offence, or to sue him for a tort' committed by him, although threatening illegal detention would be duress. Moreover, duress must be directed against a party to the contract, or his wife, child, parent or other near relative, and also caused by the party to the contract, or within his knowledge.

Threat to goods is no duress

It has been noted above that the Common Law recognizes only a threat to man's person and not to his goods to constitute duress. This is different from the Indian law where Section 15 of the Indian Contract Act recognizes unlawful detention, or a threat to detain property as coercion. The position under English law may be explained by referring to the case of Skeate v. Beale, (1840) 11 A. & E. In this case, a landlord threatened to sell his tenant's goods, against the tenant for rent. The tenant pleaded that this promise had been obtained under duress by threatening sale of his property in so far as the distress was wrongful. The tenant's plea was rejected and he was made to pay the amount in accordance with the promise because threat regarding goods cannot constitute duress.

In India, in case of coercion not only the contract is voidable under Section 19, but if some money has been paid or goods delivered by a party to the contract under coercion, the same is recoverable under Section 72. The Section reads as under:

"A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it."

For example, a railway company refuses to deliver up certain goods to the consignee, except upon the payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to recover so much of the charge as was illegally excessive. (Illustration (b) to Section 72).

If a person is dispossessed of his property under illegal threat that unless he parts with the possession, he would be detained under MISA (Maintenance of Internal Security), parting with the property under such threat amounts to coercion under Section 15. (Krishan Lal Kalra v. N.D.M.C. AIR. 2001 Delhi 402).

Where a party had entered into a loan transaction willingly, there would be no element of coercion. (Union of India v. M.V. Damodar A.LR. 2005 Bom. 137).

Difference between Coercion and Duress

Coercion	Duress
1.Coercion in India means committing or threatening to commit an act forbidden by the Indian Penal Code.	1.Duress, under Common Law, consists in actual violence or threat of violence to a It includes doing of an illegal act against a person, whether it be a crime or a tort. Thus, unlike coercion, duress is not confined to unlawful acts forbidden by any specific penal law, like the Indian Penal Code in India.
2.In India, coercion can also be there by detaining or threatening to detain any property	2. In England, duress, is constituted by acts or threats against the person of a man and not against his property.
3. In India, coercion may proceed from a person who is not a party to the contract, and it may also be directed against a person who, again, may be a stranger to the contract.	3. In England, duress should proceed from a party to the contract and is also directed against the party to the contract himself, or his wife, parent, child, or other near relative.