Chapter 04: Free Consent and Void Agreements

Question 1

Explain Coercion?

Answer 1

Definition:
coercion is commiting ( or threatning to commit) any act forbidden by Pakistan penal code or detaining ( or threating to detain) any property with intention of causing any person to enter into agreement

Effects of Coercion::
> Contract =voidable.
> if rescinded, restore benefits.

Burden of Proof;
On Party rescinding the contract

Question 2

Undue Influence: and its effects?

Answer 2

Definition ;
contract is by undue influence if :
> one party is in position to domiate te will of orther person beacuse of having close relationship betwee them , and
> dominant party use that position to obtain unfair advantages

Effect of Undue Influence:
> Contract voidable
> Court may set aside on such terms and conditions as it thinks fit

Question 3

undue influence presumed and burden of prof?

Answer 3

Examples of Relations/Positions in which Undue
Influence is assumed:
1. hold REAL/APPARENT authority (Employer and Employee, Police officer and Accused,
Tax officer and Tax payer.)
2. has FIDUCIARY RELATIONSHIP (Parent and Child, Guardian and Minor, Advocate and
Client, Trustee and Beneficiary, Fiance’ and fiancee’.)
3. MENTAL CAPACITY is AFFECTED due to age or illlnes (Doctor and Patient, Medical Attendant and Patient, a
Family Member and Enfeebled Old Man)

Burden of Proof:
Party in dominating position will prove “no undue
influence”

Question 4

List cases in which undue influence NOT presumed and burden of prof?

Answer 4

Examples of Relations/Positions in which Undue 
Influence is NOT assumed:
  > Husband and Wife
  > Creditor and Debtor
  > Landlord and Tenant
  > Principal and Agent

Burden of Proof:
> Party rescinding the contract will prove “undue
influence”

Question 5

define and effects and essentials Misrepresentation?

Answer 5

Definition:

1. A person believe and give statement which is false
2. A party obtain advantages through breach of contract, without intent to decieve
3. a party innocently causes another person to make mistake with egard to ature or quality of subject of agreement

Essentials of Misrepresentation:

1. By Party to the contract: (not by stranger)
2. False representation: (not intention to deceive)
3. Representation as to fact: (not opinions or intentions)
4. Acted upon it: (not on other information)

Effect of Misrepresentation:
Contract voidable at option of aggrieved party, except:
1. if aggrieved Party had means of discovery of truth with ordinary delligence.
2. If aggrieved Party did not act on the basis of misrepresentation;
3. If aggrieved Party takes a benefit under the contract after becoming aware of misrepresentation.
4. A third party acquired interest in property in good faith for consideration;
5. if parties cannot be restored to its initial poition

Question 6

Define and effects and essentials of FRAUD?

Answer 6

Definition of Fraud:
A person act to make contract with other party by decieving him it include following :

1. False Representation (intentionally)
2. Active Concealment. (a person actively take steps to conceal defects so that a reasonable EXamination cannot find it
3. Empty Promise. (with no intention to comelete)
4. Fitted or Declared Act ( any other act which the law specifically decleares to be fraudelent)

Essentials of Fraud:

1. By Party to the contract (not by stranger)
2. False representation (intentional)
3. Representation as to fact (not opinions or intentions).
4. Acted upon it (not on other information)
5. Suffered loss

Effect of Fraud:
Contract voidable at option of aggrieved party, except:
1. if aggrieved Party had means of discovery of truth with ordinary delligence.
2. If aggrieved Party did not act on the basis of misrepresentation;
3. If aggrieved Party takes a benefit under the contract after becoming aware of misrepresentation.
4. A third party acquired interest in property in good faith for consideration;
5. if parties cannot be restored to its initial poition

> > DAMAGES for loss

Question 7

Remaining Silent in fraud?

Answer 7

Remaining Silent on material fact regarding subject matter of the contract is not fraud :
Not a fraud, unless:
1. silence is equivalent to speech, or
2. there is obligation to disclose ( e.g, fiduciary relationship)

Question 8

difference between fraud and misrepresentation?

Answer 8

Misrepresentation Vs. Fraud (Main Points)

1. Intention
2. Remedies =right of recission(damages on decretion of court) =right of recission and damages

Question 9

Examples of void agreement and Effect on Collateral Agreements?

Answer 9

Examples of void agreement:
1. Uncertain agreements. 
2. Illegal Agreement.
3. Impossible Agreements.
4. Agreements with incompetent persons. 
5. Agreement made without consideration.
6. Agreements in restraint of marriage.
7. Wagering Agreements
8. Agreements in restraint of trade.
9. Agreements in restraint of legal 
proceedings.

Effect on Collateral Agreements:
Agreements collateral/contingent on void
agreements, also become void

Question 10

Agreements in Restraint of Trade and his exceptions?

Answer 10

an agreement to restrict someone from carrying any legal profession or buisness however in following exceptions parties may restrict oher from trading.

Sale of Goodwill:
Restriction valid :
If person sale buisness/goodwill ,he can be stopped from carrying on buisness provided if:
> such restriction is for similar business
> such res for period till buyer runs same business.
> for specified local limits
> ocal limits must be reasonable.

Agreements between partners:
Restriction valid for:
1. Existing partners may agree that they will not carry any other buisness.
2. Outgoing partner may agree that they will not carry same buisness for specified period or local limit

Specified time or local limit must be reasonable (having regard to nature of buisness)

Question 11

Restriction valid to legal proceedings?

Answer 11

a agreemnet is void if:
> restrict party to enforce his legal right
> limit time within which he can enforce legal right
Restriction valid to:
1. parties may agree toRefer dispute to Arbitration.
2. parties can make out of court settlement and submit arbitration agreement to court
3. parties may agree Not to appeal in upper court of law.
4. parties may Choose any court of law (between two equvialent courts) to file suit

Question 12

define mistake and its types?

Answer 12

DEF: Believing something true which is not true.

Mistake of Fact:
1. Unilateral Mistake –> Contract remains valid.
2. Bilateral Mistake –> Contract becomes void.
Mistake of Law:
1. Mistake of Pakistani Law –> Contract remains valid.
2. Mistake of Foreign Law –> Effect is same as mistake of Fact.