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CA Foundation · Business Laws · The Indian Contract Act, 1872

Ravi, a shopkeeper in Jaipur, threatens to file a false police complaint against his employee Sunita unless she signs an agreement to sell him her ancestral plot at a very low price. Sunita signs out of fear. Under the Indian Contract Act, 1872, the agreement is:

The agreement is voidable at Sunita's option. A threat to file a false police complaint is an act forbidden by the Penal Code, so it is coercion. Consent obtained by coercion is not free, and only the coerced party may choose to rescind the contract.

  1. AVoid ab initio, because the consent was obtained by threat
  2. BValid, because Sunita actually signed the agreement
  3. CVoidable at the option of Sunita, because her consent was caused by coercionCorrect
  4. DVoidable at the option of Ravi, because he made the threat

Explanation

Threatening to do an act forbidden by the Indian Penal Code, such as filing a false complaint, to obtain consent amounts to coercion. Consent so caused is not free, and the contract is voidable at the option of the party whose consent was so obtained, here Sunita. Ravi, the wrongdoer, has no such option, and the contract is not void from the beginning.

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