TOPIC 6

FREE CONSENT
Misrepresentation [Section 18]:
Misrepresentation includes:
 Positive assertion of unwarranted statements of material facts believing them to be true;
 Breach of duty which brings an advantage to the person committing it by misleading the
other to his prejudice; and
 Causing mistake about subject-matter innocently.
Analysis Of Definition:
1. Unwarranted positive assertion
If a person makes an explicit statement of fact not warranted by his information, under an honest
belief as to its truth though it is not true, there is misrepresentation.
Example: A sold a mine to M and told certain facts about the mine which were incorrect. A
believed them to be true. Later, M discovered the real facts. This is a misrepresentation.
2. Breach of duty
Breach of duty will be considered misrepresentation if it is done without an intent to deceive. It
includes all those cases where one party is under an obligation to disclose all material facts to the
other party.
Example: A told B that the monthly sale of his business was Rs. 50,000 before the contract was
signed. Sales was decreased to Rs.35,000. A did not inform B about the decrease. Held, that
there was misrepresentation.
3. Induced mistake
Causing mistake about the subject matter innocently constitutes misrepresentation.
Example: The seller told the buyer that the bike is free from defects but there was a built-in
defect in it. There is a misrepresentation.
Essentials of Misrepresentation:
1. Misstatement of facts must be innocent and without an intent to deceive.
2. Representation must relate to material facts of contract and not to mere opinion or
hearsay e.g. the land is fertile.
3. Representation must be or must have become untrue.
4. Representation must induce the other party to enter into the contract.
5. The other party cannot discover the truth with ordinary diligence.
Effects of Misrepresentation:
The aggrieved party has following remedies:
1. He can rescind the contract.
2. He can accept the contract and ask the other party for restoration.
Exceptions to Rescind the Contract:
A party cannot rescind the contract where:
1. the aggrieved party had the means of discovering the truth with ordinary diligence
2. the party gave the consent in ignorance of misrepresentation
3. the party after becoming aware of the misrepresentation takes a benefit under the contract
4. an innocent third party before the contract is rescinded acquires for consideration and in
good faith some interest in the property passing under the contract,
5. the parties cannot be restored to their original position e.g. subject matter is destroyed.
Burden of Proof:
The burden of proof lies on the party who wants to set aside the contract on grounds of
misrepresentation.
MISTAKE
Mistake may be defined as an erroneous belief concerning something. It may be of two kinds:
(a) mistake of law
(b) mistake of fact
Mistake Of Law [Section 21]
Mistake of law may be of two types:
1. Mistake of Pakistani law
Everyone is deemed to be conversant with the law of his country, and therefore, mistake of law
is no excuse and it does not give right to the parties to avoid the contract.
Example: A and B make a contract which is based on erroneous belief that a particular debt is
barred by Pakistani Law of limitation. The contract is valid.
2. Mistake of foreign law
Mistake of foreign law stands on the same footing as the ‘mistake of fact’. Here the agreement is
void in case of bilateral mistake only.
Example: Andrew, a Pakistani, agrees to sell a particular medicine to Bony, a foreign national.
The law of that country has banned the sale and purchase of that particular medicine. This is a
mistake and the agreement is void.
Mistake Of Fact
Mistake of fact means erroneous belief of a fact essential to contract other than value of subject
matter. It is of two types:
1. Bilateral mistake [Section 20]
Where the parties to an agreement misunderstood each other and are at cross purposes (absence
of consensus), there is a bilateral mistake. The following three conditions must be fulfilled:
(a) Both the parties must be under a mistake
(b) Mistake must relate to some fact and not to judgement or opinion etc.
(c) The fact must be essential to the agreement
Bilateral Mistakes includes:
a) Existence of subject matter: A agrees to buy a horse from B. It turns out the horse was
dead at the time of bargain but neither party was aware of this effect, the agreement is
void.
b) Identity of subject matter: A agrees to buy a transformer from B. A think she is buying
1-phase transformer while B thinks he is selling a 3-phase transformer. There is no
contract.
c) Title (ownership) of subject matter: A agreed to take a fishery from B on lease. Both
parties believed that B was the owner. Later, it was discovered that the fishery belonged
to A. Held, that the agreement is void.
d) Quantity of subject matter: P examined 50 riffles in shop. Later, P sent an order by
telegraph, “send three riffles”. The telegraph was mistakenly communicated as “send the
riffles” to H, the shop owner. H sent 50 riffles. P accepted three and returned 47 riffles. H
filed a suit for damages. Held, there was no contract.
e) Quality of subject matter: C contract to sell B a horse which both parties believe to be
race horse. Later, it turns out to be a cart horse. The agreement is void.
f) Possibility of performance: A and B, believing themselves to be married, made a
separation agreement in which A agreed to pay B Rs. 5,000 every week. Later, it was
discovered that they were not validly married. B claimed the promised payment. It was
held that the agreement is void.

2. Unilateral mistake [Section 22]

Where only one of the contracting parties is mistaken as to a matter of fact, the mistake is a
unilateral mistake. The validity of contract in case of unilateral mistake is given below;
(a) Contract valid
If a person due to his own negligence or lack of reasonable care does not ascertain what he is
contracting about, he must blame himself and cannot avoid contract.
Example: The government auctioned the right of fishery. A offered the highest bid thinking that
the right was being sold for 3 years but in fact it was for only 1 year. A cannot avoid contract.
 (b) Agreement void ab initio
In the following two cases, where consent is given by a party under a mistake which is so
fundamental as goes to the root of the agreement and has the effect of nullifying consent, no
contract will arise even though there is unilateral mistake only.
(i) Mistake as to the identity of person contracted with, where such identity is important.
Example: B, a director of a theatre, gave instructions that no ticket should be sold to S who
was critic of the plays. S got a ticket through his friend. S went to the theatre but was refused
admission. S filed a suit for damages. It was held that there was no contract because the
theatre company never wanted to contract with S.
(ii) Mistake as to the nature and character of a written document
Example: M an old illiterate man of poor sight, was induced to sign a bill of exchange
falsely representing that it was a guarantee. It was held that M was not liable.