A contract is an arrangement of a deal made between two or more person, which the law will enact. In formation of a contract, consent is one of the important, crucial and essential elements. It stated in Section 13 of the Contracts Act 1950 saying that “two persons are said to consent when they agree upon the same thing in the same sense.” Any agreement arranged is become contract if they are made by the free consent of parties. However, there are several occurrences or situations that if the contract was not made based on free consent will cause the contract to be voidable. According to the Business Dictionary, voidable contract is a contract that has legal effect and force when it is made, but is accountable to be successively invalid or set aside by the courts through the process of cancellation. There are 3 occurrences or factors that will cause the contract to be voidable : 1. Coercion
Coercion can be defined as the constraining or threatening to commit any act prohibited by the Penal Code, or the illegal restraining or threatening to restrain, any property to the preconception of any person whatever, with the purpose of causing any person to enter into an agreement. It is irrelevant whether the Penal Code is or is not in force in the place where the coercion is occupied. For example, in the case of Kesarmal s/o Letchman Das v. Valiappa Chettiar ( 1954 )20 MLJ 119, it was held that a transfer executed under the orders of the then Sultan ( which was issued in the ominous presence of two Japanese officers ) during the Japanese occupation in Malaya, was invalid. This was due to the fact that consent was not freely given and therefore, is voidable at the option of the party whose consent was so caused.
Section 17 of the Contracts Act defines fraud as certain acts which are obliged with intent to provoke another party to enter into a contract. ‘Fraud’ includes any 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, as listed below : a. The suggestion, as to a fact, of that which is not true by one who does not believe it to be true. b. The active concealment of a fact by one -having knowledge of belief of the fact. c. A promise made without any intention of performing it. d. Any other act fitted to deceive.
e. Any such act or omission as the law specially declares to be fraudulent. In the case of Derry v Peek, ‘fraud’ is proved when it is shown that false representation has been made either knowingly, without belief in its truth or recklessly, whether it be true or false. Therefore, generally wherever a person causes another to act upon a false representation which the maker himself does not believe to be true, he is said to have committed a fraud. 3. Misrepresentation
According to the Business Dictionary, misrepresentation can be defined as deceitful, inattentive, or faultless misstatement, or an incomplete statement, of a material fact. If a specific misrepresentation induces the other party to enter into a contract, that party may have the legal right to cancel the contract or seek compensation for damages. The guilty party advantage of the defense that the offended party could have checked the facts and have discovered what was wrong. A misstatement of an intention or opinion is generally not considered a misrepresentation. Section 18 of the Contracts Act defines ‘misrepresentation’ as below : a. The positive assertion, in a manner not warranted by the information of the person making it, that of which is not true, though he believes it to be true. b. Any breach of duty which, without intent to deceive, gives 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. c. Causing, however innocently, a party to an agreement to...