Coercion in Contract Law
In terms of contractual law, coercion indicates that threats or actual wrongdoing were used to get someone to sign an agreement. In the unlikely event that coercion has a role in the formation of a contract, it will not be legally binding.
This Story also Contains
- Meaning of the word Coercion
- Coercion under Section 15
- Elements of Coercion under the Indian Contract Act 1872
- Impact of Coercion under Contract Law
- Case Laws on Coercion under the Indian Contract Act
- Conclusion
An agreement must have been gladly entered into by the two parties for it to be legally executory. Nevertheless, the agreement cannot be enforceable if one party was coerced into signing it, meaning that threats were used to get their consent.
This norm, which is associated with coercion, applies to both the express terms and the whole agreement. Essentially, this means that parties to a contract have to agree to all of the conditions as well as the agreement as a whole. In the unlikely event that it is discovered that coercion played a role in the agreement's establishment, the understanding will often be revoked.
Meaning of the word Coercion
The act of committing or threatening to commit any act prohibited by the Indian Penal Code, or the unlawful detention or threat of detention of any property, to the detriment of any person whatsoever, with the intent to cause any person to agree, is defined as coercion under Section 15 of the Indian Contract Act, 1872.
When someone is coerced into doing something against their will or is prevented from doing a certain action, coercion is the use of force, threats, intimidation, or excessive pressure.
It entails using force or control over another person, frequently in an effort to change that person's behaviour, choices, or actions.
Coercion may occur in a variety of settings and situations, including personal relationships, the workplace, commercial transactions, and even broader social contexts.
It is crucial to understand that coercion is typically seen as immoral and illegal as it infringes on a person's autonomy and freedom to make decisions without fear of damage or unfavourable outcomes.
Within the legal domain, coercion legislation may pertain to particular behaviours that are illegal under the law, such as extortion, blackmail, and violent threats.
Commonly Asked Questions
While coercion focuses on the process of contract formation, unconscionability deals with the fairness of the contract terms themselves. A contract can be unconscionable without involving coercion, and vice versa.
Threatening to breach an existing contract to force someone into a new contract can potentially be considered coercion, especially if it would cause significant harm and leave the threatened party with no reasonable alternative.
Voluntary agreement is fundamental to valid contracts. Coercion directly undermines this principle by forcing a party to agree involuntarily, which is why coerced contracts are voidable.
The severity of the threat is a key factor in determining coercion. Courts consider whether the threat was serious enough to overcome the will of a reasonable person in similar circumstances.
While coercion deals with external pressure, capacity relates to a person's mental ability to understand and enter into a contract. Both can affect a contract's validity, but they are distinct concepts.
Coercion under Section 15
The use of force to persuade someone to sign a contract is known as coercion. Therefore, it is not free consent when force or threats are used to get the assent of the individual being coerced. According to Section 15 of the Act, coercion is:
Engaging in any activity that the IPC forbids or threatening to engage in any such activity.
Illegally reserving or threatening to reclaim any property to pressure someone to sign a contract.
Example: If B doesn't sell his house to A for 5 lakh rupees, A threatens to injure him. Given that B's assent was gained by compulsion, even if B sells the house to A, the agreement will not be enforceable.
Commonly Asked Questions
Emotional manipulation alone is typically not considered coercion. However, if it rises to the level of severe psychological pressure that effectively removes free will, it might be deemed coercive.
While both can invalidate a contract, coercion involves forcing someone to enter a contract against their will, whereas fraud involves deceiving someone into entering a contract based on false information.
While coercion can potentially be used as a defense in most types of contracts, some contracts (like those involving national security) may have limitations on using coercion as a defense.
Having time to seek legal advice doesn't automatically negate a claim of coercion, but it can weaken it. Courts may consider whether the person reasonably could have sought help or resisted the coercion.
The intent of the party alleged to be coercing is important. Courts will consider whether they intended to force the other party into the contract through improper means.
Elements of Coercion under the Indian Contract Act 1872
Illegally reserving or threatening to reserve any property: This component entails using or threatening to illegally reclaim property to compel a party to sign a contract. Depriving someone of their belongings without a valid reason is known as unlawful detention.
Any of the following offences are prohibited under the Indian Penal Code, either by act or threat: This aspect deals with circumstances when one party coerces the other party into signing a contract by using or threatening to use force, assault, or any other conduct that is illegal under the law. For an act to be considered coercion, it must be prohibited by the Indian Penal Code.
Intention to induce someone to enter into a contract: Any coercion must be used with the express purpose of compelling the target party to sign a contract against their will. Under the Indian Contract Act, coercion may not include the mere use of force or threats made without the aim to force someone to sign an agreement.
Protecting Against Coercion
An agreement can be intimidated by the threat of "unclean hands," which is a safeguard.
The main idea behind unclean hands is that one group cannot be subjected to coercion because another group deserves a comparable protest.
An alternative way to understand this idea is that the agreement was shaped by the constraints placed on the two parties.
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Commonly Asked Questions
The key elements of coercion are: (1) a threat or use of force, (2) the threat is improper or unlawful, (3) the threat induces the other party to enter the contract, and (4) the threatened party had no reasonable alternative but to agree.
Yes, threats from a third party can constitute coercion if the other contracting party knew about or should have known about the threats and took advantage of the situation.
Coercion and duress are often used interchangeably in contract law. Duress is a specific form of coercion that involves unlawful pressure or threats to compel someone to enter a contract.
Typically, silence or inaction alone is not considered coercion. However, if combined with other threatening circumstances or a duty to act, it might contribute to a coercive situation.
Courts consider factors such as the nature of the threat, the fairness of the resulting contract, and whether the threat violates public policy or law to determine if it's "improper" in the context of coercion.
Impact of Coercion under Contract Law
According to the Indian Contract Act, of 1872, Section 19, "An agreement is a contract voidable at the discretion of the party whose consent was thus induced where assent is caused by force, fraud, or misrepresentation.”
As a result, coercion has the consequence of making the contract voidable at the choosing of the person who was coerced. This implies that the party that was pressured has the option of accepting the contract or rejecting it and having it ruled void.
If coercion was used to induce the contract, the affected party must use their right to avoid it as soon as reasonably possible after the compulsion has stopped. The contract may become enforceable and legitimate if they carry out their end of the bargain without quickly using their right to withdraw.
Both parties must return any advantages or consideration they acquired from one another under the terms of the contract if the compelled party decides to avoid it. Essentially, they have to put each other back in the same situation as before the contract was signed.
Commonly Asked Questions
Coercion in contract law refers to the use of force, threats, or pressure to compel someone to enter into a contract against their will. It undermines the fundamental principle of voluntary agreement in contracts and can render an agreement voidable.
Coercion directly contradicts the "meeting of the minds" principle in contract formation. This principle requires voluntary agreement between parties, which is impossible if one party is coerced.
Yes, coercion doesn't always involve violence. Threats of economic harm, damage to reputation, or other non-violent but serious consequences can also constitute coercion.
Free will is crucial in determining coercion. If a person's free will is overborne by threats or pressure to the point where they feel they have no real choice but to enter the contract, coercion may be found to exist.
Generally, threats to do something legal (like filing a lawsuit) are not considered coercion. However, if such threats are used improperly to force unfair contract terms, they might be deemed coercive.
Case Laws on Coercion under the Indian Contract Act
Askari Mirza v. Bibi Jai kishori
An individual was the subject of a criminal indictment, and fearing the repercussions of being arraigned, he agreed to the next gathering abandoning the indictment. It was decided that the Indian Penal Code does not inherently prohibit demonstrations with the possibility of criminal prosecution. Thus, consent is crucial.
Chikham Amiraju v. Chikham Seshamma
In the present case, a Hindu man makes a suicide threat, prompting his partner and kid to carry out the arrival of many properties for his brother, which they have pledged to be their own. It was decided that the risk of suicide equates to intimidation, and the discharge deed is therefore voidable due to the application of section 15.
Ranganayakamma vs. Alwar Setti (1900)
In this instance, the court stressed that the act of coercion must be the "dominant" factor that persuades someone to enter into a contract for it to be a basis for contract avoidance.
Abdul Razzak Sahib vs. Mahomed Cassum & Co. (1917)
In this instance, the court stressed that the act of coercion must be the "dominant" factor that persuades someone to enter into a contract for it to be a basis for contract avoidance. This case made it clear that wrongful detention of property can also result in coercion, in addition to acts or threats. The court decided that coercion might be implied by threatening to stop someone from engaging in their trade.
Commonly Asked Questions
While both coercion and undue influence can invalidate a contract, coercion involves direct threats or force, whereas undue influence is a more subtle form of pressure, often arising from a relationship of trust or authority.
Generally, economic pressure alone is not considered coercion in contract law. However, if the economic pressure is combined with unlawful threats or actions, it may constitute coercion.
The "but for" test in coercion cases asks whether the party would have entered into the contract "but for" the coercive act. If the answer is no, it suggests that coercion may have occurred.
Physical duress involves threats of bodily harm or actual violence, while economic duress involves threats to a person's financial well-being or business interests. Both can be forms of coercion, but physical duress is typically easier to prove.
The primary remedy for a victim of coercion is to have the contract declared voidable. This means the victim can choose to either rescind (cancel) the contract or affirm it. In some cases, damages may also be awarded.
Conclusion
It's critical to recognise that coercion is a legally defined term with proof requirements that must be met by the side attempting to break the contract. The contract might not be affected in the same way by simple persuasion or pressure, which does not fall under the legal definition of coercion.
Frequently Asked Questions (FAQs)
Having alternatives doesn't automatically negate a claim of coercion, but it can weaken it. Courts will consider whether the alternatives were reasonably viable given the circumstances.
Freedom of contract, a fundamental principle in contract law, is directly undermined by coercion. Coercion negates the freedom to choose whether to enter into a contract and on what terms, which is essential to the concept of freedom of contract.
Generally, pressure from market conditions or economic necessity alone isn't considered coercion. However, if another party exploits these conditions through improper threats or actions, it might constitute coercion.
While having legal representation doesn't automatically prevent coercion, it can make claims of coercion more difficult to prove. Courts may consider whether the lawyer had a real opportunity to advise their client freely.
If a contract is found to be coerced, choice of law or forum selection clauses within it would typically be unenforceable along with the rest of the contract, unless the coerced party chooses to affirm the contract.
Coercion prevents a true "meeting of the minds," which is essential for contract formation. If one party's mind is overborne by coercion, there can't be a genuine agreement on contract terms.
Misunderstanding consequences alone isn't typically considered coercion. However, if the misunderstanding was deliberately induced by the other party as part of a coercive strategy, it might support a coercion claim.
If a contract is found to be coerced, liquidated damages clauses within it would typically be unenforceable, as the entire contract is voidable at the option of the coerced party.
Coercion is inherently contrary to the duty of good faith in contracting. If one party coerces another into a contract, they have violated the good faith principle from the outset.
Generally, if a party can prove they were coerced into the contract, they would not be liable for damages for non-performance, as the contract would be voidable at their option.