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CMA Foundation · Fundamentals of Business Laws and Business Communication · Capacity of Parties, Free Consent

Under the Indian Contract Act, 1872, when a party's consent to an agreement is caused by fraud, the agreement is:

The agreement is voidable at the option of the party whose consent was caused by the fraud. Under Section 19, the deceived party may either rescind the contract or affirm it. The party who committed the fraud has no right to avoid the contract.

  1. AVoid ab initio and cannot be enforced by either party
  2. BVoidable at the option of the party whose consent was so causedCorrect
  3. CValid and binding, with only damages available
  4. DVoidable at the option of the party who committed the fraud

Explanation

Section 19 provides that where consent is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. The deceived party chooses; the wrongdoer cannot avoid the contract. Calling it void ab initio ignores that the innocent party may affirm it.

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