Voidability of Agreements Without Free Consent

In one line

Section 19 is where the four vitiating factors are turned into a remedy: the contract is real, it binds, and the injured party gets to choose whether to keep it or kill it.

In the words a student can write in an exam: section 19 of the Indian Contract Act 1872 provides that "When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused." A party whose consent was caused by fraud or misrepresentation may instead insist that the contract be performed and that he be put in the position in which he would have been if the representations made had been true. The Exception denies avoidance where the party had the means of discovering the truth with ordinary diligence, and the Explanation denies it where the fraud or misrepresentation did not cause the consent.

Why the Act made these contracts voidable and not void

The Act could have said that a contract obtained by fraud is a nullity. It did not, and the reason is that the wrong was done to one party, so the choice should be that party's.

Three consequences follow, and they are the practical value of the section.

The wrongdoer stays bound. He cannot escape a bargain that has turned out badly for him by pointing to his own fraud.

The injured party may prefer to keep the contract. A buyer who was lied to about a machine's output may still want the machine, especially if it has risen in value. Section 19 lets him keep it and be compensated within the contract.

Third parties are protected. Because the contract is valid until avoided, a person who buys from the fraudster for value and without notice, before avoidance, gets a good title. Had the contract been void, nothing would ever have passed and the innocent buyer would lose.

The provision itself

"When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.

A party to a contract whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true.

Exception. If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.

Explanation. A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised, or to whom such misrepresentation was made, does not render a contract voidable."