coercion 2
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Coercion
Section15
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Definition Section 15
Coercion is committing or threatening to
commit, any act forbidden by the IPC, or
the unlawful detaining, or threatening todetain, any property, to the prejudice of any
person whatever, with the intention of
causing any person to enter into an
agreement.
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CoercionRenganayakamma v. Alwar Chetty (1889).
Amiraju v. Seshamma (1917).
Under English law the concept ofDuress isthere which is narrower than Coercion inIndian law.
It is immaterial whether the IPC is or is notin force in the place where the coercion isemployed.
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Coercion andD
uressCoercion need notproceed from a partyto contract or be
immediately directedagainst person againstwhom the coercion isto be exercised.
Coercion can beagainst the propertyalso.
Duress must proceedfrom the party to thecontract in the nature
of immediate violenceagainst the life orliberty of the otherparty or his family
members.Detaining propertywill not be Duress.
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Modern Trends
Inequality of bargaining power isconsidered to be valid ground for avoiding a
contract on proof that the terms were veryharsh and unreasonable.
Economic Duress is a ground to avoid acontract.
D & C Builders Ltd. v. Rees (1966).Pao On v. Lau Yiu Long (1980).
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Undue Influence
Section 16
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Undue Influence, S. 16Moral coercion.
Also known as Equitable Fraud.
Presumption of undue influence applieswhere two parties are in a fiduciaryrelationship.
In such a relationship the influence isacquired and abused by one of the partiestherein.
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Presumption of Undue InfluencePresumption of undue influence in fiduciary
relationship can be rebutted by the party by
proving that the act of entering into contract was
the act of free and independent mind.
Where no fiduciary relationship exist the party
shall prove that one of the parties acquired an
influence over the will of the other and produced acontract which otherwise would not have made.
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Section 16Allcard v. Skinner (1887).
Wajid Khan v. Ewaz Ali (1891).
Sub section (1) essentials
One party in a position to dominate the will
of another, and
He uses that position to obtain an unfairadvantage over the other.
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S.16, Sub-sec.(2) Presumption of
Undue InfluenceA person is deemed to be in a position to dominate
the will of another if
He holds real or apparent authority over the other,or where he stands in a fiduciary relationship with
that other, or
Where he enters into a contract with a person
whose mental capacity is temporarily orpermanently affected by reason of age, illness, or
mental or bodily distress.
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Burden of ProofS. 16, Sub-Sec. (3), talks about the burden ofproof.
If a person is in a position to dominate the will ofanother, and
If the transaction appears, on the face of to or onthe evidence adduced to be unconscionable,
Burden of proving that there was no undueinfluence exercised while entering into contract.
Subhas Chandra v. Ganga Prasad (1967).
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Raghunath Prasad V. Sarju
Prasad (1924)Three things are determined by the Court before
deciding a case of undue influence.
Relation between the parties is such that one partyis in a position to dominate the will of other,
That undue influence was exercised by such a
party, and
Burden of proof shifts on the person in thedominating position.
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Pardanashin LadyPresumption of undue influence on theperson supporting the deed.
Following things must be proved.That the transaction or deed was explainedto her,
That she understood it, and
That she deliberately and of her own freewill entered into the transaction.
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Unconscionable BargainsWhere in the circumstances of a case, it is shown
that though there was no fiduciary relationship
existing between two parties yet one of them was
stronger enough to dominate the will of another,
court may, in its discretion, declare the contract as
void.
Ill. (c) S. 16, a contract of a creditor with alreadyindebted debtor is on the face of it is
unconscionable and so may be declared to be void.
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Misrepresentation
Section 18
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N
ature of RepresentationInnocent or intentional.
Representations made may be intended to
be a term in the contract or not a term in thecontract.
This term may be a Condition or Warranty
if embodied in the contract.
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M
isrepresentationMisrepresentation is a ground to avoid the
contract and is not actionable for damages.
It must be made without any intention todeceive another party.
Misrepresentation is innocent when it is
made by a person in relation to matter offact believing it to be true.
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M
isrepresentationIn order to avoid a contract on ground ofmisrepresentation 3 things must be proved.
There should be a representation orassertion.
Such misrepresentation must relate to amatter of fact which has become untrue.
Such misrepresentation must have beenmaterial in influencing the contract.
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S. 18, C. (1)There must be a representation or positive
assertion,
Assertion in a manner not warranted by theinformation of person making it, and
Information which is not true, though
person making it believes it to be true.
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Representation or AssertionIt may be express, by words spoken or written, orimplied, by acts or conduct.
As a general rule silence does not amount to
misrepresentation unless,
Contract is one ofuberreimae fidei,
Where fiduciary relationship exists between twoparties,
Where silence as to some fact distorts a positiverepresentation.
S. 18 Cl. (2).
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Representation As to a FactEvery person is presumed to know the Law of theland and so misrepresentation as to a matter of lawis not an excuse
Fact and Promise Misrepresentation, to entitle aperson to avoid a contract, must be of an existingfact and not a mere promise in future, unless it isshown that, the promise formed the basis or part
of the contract so as to induce a contract. e.g. acontract entered into on the basis that a certainperson A is going to be the director of acompany.
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Representation As to a FactFact and opinion. a statement of opinion is
not actionable. But if such opinion is
deliberately made a statement of fact, it willbe a considered to be a statement of fact.
Fact and puffery mere statement of puff is
not considered to be a misrepresentation.
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Representation to Be False and
UntrueRepresentation should have become untrue.
If true when made and the becomes false,
before the other party could act upon it, theduty is casted upon the person who made
the representation to communicate the
change of circumstances to other party.With v. OFlanagan (1936).
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Representation to Be False and
UntrueA statement even though literally true may
be a misrepresentation if it implies the
additional facts which are themselves false.Curtis v. Chemical Cleaning and Dyeing
Co. Ltd. (1951).
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Misrepresentation Material in
Influencing ContractWhere a representation is not a term in
contract but has induced the party to enter
into a contract the contract is voidable at theoption of the influenced party.
Bannerman v. White (1861).
Redgrave v. Hurd (1885).Bellotti v. Chequers Developments (1936).
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ExceptionsMisrepresentation cannot influence or
induce a transaction where the plaintiff
Never knew of its existence.Did not allow it to affect his judgment.
Was aware of the falsity.
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Fraud
Section 17
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Fraud S. 17Derry v. Peek (1887).
Fraud is proved when it is shown that a
false representation is been made Knowingly, or
Without belief in its truth, or
Recklessly careless whether it be rue orfalse.
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Taylor v. Ashton (1843)Five essential elements are laid down
There must be a representation,
It must be of a fact,It must be made with the knowledge that itis false or without belief in its truth,
It must be to induce another to act uponassertion,
The person acting must be damnified.
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Suppression of FactsTo constitute a fraud thee must be an
assertion of something false within the
knowledge of the party asserting it or thesuppression of that which is true and which
it was his duty to disclose.
Peek v. Gurney (1873).
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Active Concealment
Industrious concealmentor aggressiveconcealment.
As a general rule seller is not bound to disclose the
defects in the goods to the purchaser.
But if he does something which has a effect ofconcealing the facts the contract can be avoided.
There is a duty imposed on the seller that he shallinform about the latent defects in the goods whichhe is aware of.
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Essentials of Fraud
The representation must be of a fact as seenin misrepresentation.
The element of knowledge of falsehood orwant of belief distinguishes fraud frommisrepresentation.
The mental state of a person when making a
representation may be one of the followingfive kinds. (discussed in the next slide.)
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Mental State to Determine Fraud
Representation made with a belief in itstruth based on proper and sufficientgrounds.
Representation made with an honest beliefin its truth, but not based on proper andsufficient grounds.
Derry v. Peek (1887). Legal FraudorFraud in law.
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Mental State to Determine Fraud
Representation made recklessly or carelesslywithout any regard whether it be true or false.
UnitedMotor Finance v. RomerDan (1937).
S. 17 (3) a promise made without any intention ofperforming it.
Representation made knowing it to be false, butwithout any intention to deceive.
Polhill v. Walter (1832).Motive is immaterial.
Representation made knowing it to be false, andwith an intent to deceive.
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Inducing the Act
Representation must be such as to induce
another person to enter into the transaction.
It requires There must be an inducement in fact.
The representation must be material and
important in inducing the other party toenter the transaction.
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Inducing the Act
If a party wants to assert that the plaintiff
was not induced by the misrepresentation,
he must prove that the other party in facthad a knowledge of the truth.
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Means ofDiscovery
If means of discovering of truth are made
available to the representee but if he does not avail
them then the knowledge should be imputed to
him.
But the party cannot take a defense that the other
party might have discovered the truth by
reasonable diligence instead of relying on therepresentation made.
There is no fraud without damage.
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Misrepresentation and Fraud
In representing, nointention to deceive isthere.
Not a tort.
Generally no damages areawarded.
The fact that therepresentee had the means
of discovering the truth byordinary diligence would
preclude him fromavoiding contract.
In representing there is
an intention to
deceive.
Fraud in itself is a tort.
Damages are always
recoverable in fraud.
It is not the same incase of fraud.
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Remedies forMistake,
Misrepresentation, Fraud
If consent of one of the parties is caused by
any of above means then,
The party can successfully defend an actionof damages for breach of contract.
The party can successfully defend an action
for specific performance of contract.The party can rescind the contract.
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Cancellation and Rectification
In case of a mistake the contract is void andnullity.
The court only declares such a contract as nullity
and thereby cancellation of the contract.S. 31 33 of Specific Relief Act.
Court may order rectification of the instrument ifit is drawn up differently from what was been
contracted by the parties.
S. 26 of Specific Relief Act.
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S. 31 of Specific Relief Act
S. 31 of the Act gives a power to the Court to
declare a contract as void at the request of the
party who has a right to declare it void.
It also lays down that the court shall, if the
instrument is registered under Indian Registration
Act, send a copy of its decree to the officer in
whose office it is registered and he shall notedown the fact of cancellation of the instrument in
his register.
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S. 32 & 33 of Specific Relief Act
It gives a power to the court of law to declare a
contract partially void and may enforce the rest of
it.
If any instrument is so declared to be void by the
court, at the request of one of the parties, then
court may order the plaintiff or the defendant to
restore the benefit which he has derived undersuch a contract.
The principle is also extended to the minors.
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S. 33 of Specific Relief Act
Relief provided under S. 33 is based on the
principle ofprotective orpreventivejustice.
Conditions precedent for availing relief
Contract void or voidable against plaintiff,
There is a reasonable apprehension of serious
injury, (determined from circumstances of case)
Case is fit for exercise of Courts discretion togrant the prayer.
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Limitations S. 31 and S. 32
Relief is not as a matter of right.
When parties are inpari delicto, and fraud isalleged as a ground for cancellation, court may
refuse the relief.S. 32 is applicable only when the rights andobligations contained under the instrument areseparable and distinct.
Limitation period prescribed under IndianLimitation Act, 1953, is three years from thedate when the fact entitling plaintiff to cancel theinstrument.
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S. 26 of Specific Relief Act
If any instrument either by fraud or mutual
mistake, does not disclose the true intention of the
parties, court may order the rectification of
instrument.
Instrument is defined in S. 2(14) of Indian Stamp
Act, (II of 1899), as every document by which any
right or liability is or purports to be created,transferred, limited, extended, extinguished, or
recorded.
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S. 26 of Specific Relief Act
Rectification can be granted only if it isspecifically claimed by the party.
Granting rectification is purely adiscretionary power of the court.
Essentials to be proved
Existence of mutual mistake or fraud, and
That the instrument on that account did nottruly express the intention of the parties.
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S. 26 of Specific Relief Act
A separate suit may be instituted for
rectification of contract or it may be done in
the course of a suit in which any rightarising under the instrument is in issue.
The rectification shall be granted by the
court, as far as possible, without prejudice
to any third party rights acquired
bonafidely.
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Contents of S. 26
Either party or his representative in interest may
institute a suit to have the instrument rectified, or
Plaintiff may, in any suit in which any right
arising under the instrument is in issue, claim in
his pleading that the instrument shall be rectified,
or
A defendant in any such case may plead for suchrectification.
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Rescission S. 27 & S. 28 of
Specific Relief Act
Section 27
The relief of rescission can be given to a
person on whom the burden of the contractis imposed by means of fraud or illegality orsomething equivalent which makes thecontract void or voidable.
He may ask the court to declare the contractas not binding on him.
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S. 27 of Specific Relief Act
Rescission may be allowed where
Contract is voidable or terminable by the
plaintiff, orContract is unlawful for causes not apparenton its face and the defendant is more to beblamed for it.
The relief is available is subject toimportant limits laid down in Sub Section 2.
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When Rescission Cannot Be
Granted
Affirmation of contract by the plaintiff.
Where rescission is not possible because theposition of parties is so changed that restoration of
status quo is impossible, e.g. consumption ofgoods or reselling.
Intervention of third party rights.
If plaintiff wants to rescind only one of the terms
in contract and it is not severable from the rest ofthe contract.
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S. 28 of Specific Relief Act
Where in a suit the remedy of specificperformance is given to the purchaser or lessee,fails to pay the money within the time prescribed
by the court in such a decree, seller or lessor mayask the court to declare the contract as void byrescinding it.
If such rescission is granted by the court, court
may ask the purchaser or lessee to restore thepossession and even the profit which he has got inthe mean time.
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S. 28 of Specific Relief Act
The court may also ask the seller of lessor to pay
back any earnest money if is been paid by the
other party.
But if the purchaser or lessee pays the ordered
amount within time, then the court may grant a
remedy to them like preparing a proper deed of
sale or lease.
The relief under this section can be granted only in
the suit for a specific performance of the contract.
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Damages for Fraud
For misrepresentation there are no damagesawarded by the court. But after the decision ofDerry v. Peek the legislature laid down two
exceptions for this.Liability of the directors of company formisrepresentation.
Liability of an agent for the acts done by him
outside the scope of authority.Liability, however, based on principle of breach ofwarranty.