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IAI Actuarial Core Principles · Business Management · Sources of Indian law and valid contracts

Rohan, a retired clerk, signs a sale agreement for his flat after a local moneylender, Mr Sethi, repeatedly warns him that he will publicly disgrace Rohan's family unless he sells at a price well below market. Rohan sells. Under the Indian Contract Act, 1872, what is the legal position of the agreement?

The agreement is voidable at Rohan's option. His consent was obtained through coercion, meaning a threat of an act forbidden by law, so it is not free consent. The contract is not automatically void; Rohan may choose to rescind or affirm it.

  1. AVoid ab initio because consent was caused by coercion
  2. BVoidable at Rohan's option because his consent was caused by coercionCorrect
  3. CValid, because Rohan actually signed it and the price was stated
  4. DValid, but Rohan may claim damages for the price shortfall only
  5. Unenforceable only because the price was inadequate

Explanation

Coercion is committing or threatening an act forbidden by the Indian Penal Code, or unlawfully detaining property, to obtain consent. Consent so obtained is not free, which makes the contract voidable at the option of the party whose consent was affected. It is not void, and inadequacy of price alone is irrelevant.

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