Learning League Practice MCQs
Home › Revision Notes › CAF-4 BLD
CAF-4 · BUSINESS LAW DYNAMICS (BLD) · CHAPTER 4

Free Consent and Void Agreements

Consent · Coercion · Undue influence · Fraud · Misrepresentation · Mistake · Expressly void agreements

Comprehensive Exam Revision Handout · Prepared by Halima Latif · Learning League
2

Coercion S. 15

🔫
Coercion = committing or threatening to commit any act forbidden by the Pakistan Penal Code, or unlawfully detaining or threatening to detain any property, to the prejudice of any person, with the intention of causing any person to enter into an agreement.

PPC in force? Immaterial

It is immaterial whether the PPC is in force where coercion is employed — if the suit is in Pakistan, PPC applies.Criminal intimidation on an English ship; suit at Karachi → coercion.

By / against anyone

May be exercised by any person and directed against any person — even a stranger to the contract.Threat to kill seller's daughter → coercion.

Effects

  • Voidable at option of coerced party S. 19
  • Rescinding party must restore benefits received S. 64
  • Money paid / thing delivered under coercion must be repaid / returned S. 72
3

Undue Influence S. 16

🧲
Where the relations between the parties are such that one is in a position to dominate the will of the other and uses that position to obtain an unfair advantage.

Presumed position to dominate — a person is deemed to dominate where:

(a) Real or apparent authority

Tax officer–taxpayer · Police officer–accused · Employer–employee

(b) Fiduciary relation

Parent–child · Guardian–minor · Advocate–client · Trustee–beneficiary · Fiancé–fiancée

(c) Mental capacity affected

(temporarily/permanently) by age, illness, mental or bodily distress
Doctor–patient · Medical attendant–patient · Family member–enfeebled old man

Burden of proof S. 16

If the dominant person contracts with the other and the transaction appears unconscionable, the burden of proving no undue influence lies on the person in a position to dominate.Teacher sold land to student at market price, full facts given, independent advice taken → valid.

Effect S. 19A

Voidable at option of the influenced party. Court may set it aside absolutely, or, if that party received benefits, on terms the Court thinks just.Money-lender's double bond → Court may order repayment of original sum with just interest.
4

Comparison — Coercion vs Undue Influence

🆚
BasisCoercionUndue Influence
1. ConsentBy threat of / committing an offenceBy dominating the will
2. PressurePhysicalMoral (mental)
3. RelationshipMay or may not be relatedParties are related in some way
4. ObjectiveTo compel entry into contractTo obtain unfair advantage
5. Criminal liabilityIncurred — illegalNot incurred
6. On whomMay be on a strangerOnly on the party whose consent is desired
7. By whomMay be by a strangerOnly by a party to the contract
8. Onus of proofOn the party seeking relief from coercionOn the party in a position to dominate
9. BenefitAggrieved party has to restore benefitMay or may not restore
5

Fraud S. 17

🎭
Acts committed by a party to the contract, or with his connivance, or by his agent, with intent to deceive the other party (or his agent) or to induce him to enter the contract:

(a) False suggestion

Suggesting as a fact what is not true, by one who does not believe it true.Local goods sold as imported.

(b) Active concealment

of a fact by one having knowledge or belief of it.Cracks in furniture hidden by polish.

(c) Promise without intention

of performing it.Buying on credit knowing oneself insolvent.

(d) Any other act fitted to deceive

Prospectus implying profits when dividends came from reserves.

(e) Act/omission declared fraudulent by law

Not disclosing a mortgage when legally obliged.

Mere opinion / self-praise

"In my opinion my TVs are the best" → not fraud.
🤐 Silence as fraud — Rule & Exceptions
Mere silence about facts affecting willingness
➜
NOT fraud (seller silent about unsound horse at auction)
UNLESS
(a) Duty to speak — e.g. fiduciary relation (father selling to daughter just come of age)
/
(b) Silence is equivalent to speech ("if you don't deny, I'll assume it's sound")

Note: Islamic commercial law emphasises transparency and prohibits concealment of material defects; hence the silence provisions are not practically applicable in Pakistan.

6

Misrepresentation S. 18 & Remedies S. 19

🗣️

(a) Unwarranted assertion

Positive assertion, not warranted by the maker's information, of what is untrue, though he believes it true.Incorrect facts about a mine, honestly believed.

(b) Breach of duty

Without intent to deceive, gains an advantage by misleading another to his prejudice.Not informing buyer that sales fell from Rs. 50m to 35m.

(c) Innocent mistake as to substance

Causing, however innocently, a party to make a mistake as to the substance of the subject matter."Bike is free from defects" — built-in defect.

Remedies of the deceived party

  • Contract is voidable at his option — may rescind
  • Or insist on performance and be put in the position he would have been in if the representation were true

Cannot rescind if…

  • The fraud/misrepresentation did not cause his consent (e.g. statement made after purchase)
  • He had the means of discovering the truth with ordinary diligence (misrepresentation / fraudulent silence)
BasisFraudMisrepresentation
IntentionIntention to deceiveInnocent — no intent to deceive
RemedyCivil wrong — damages in addition to cancellationOnly avoid the contract; damages at Court's discretion
7

Mistake — Decision Roadmap

❓
Mistake (not defined in the Act) = an erroneous belief, at contracting, that certain facts are true. Effect depends on: law or fact? and, if fact, bilateral or unilateral?
MISTAKE
Mistake of LAW
↓
Law in force in Pakistan
↓
Contract NOT voidableeveryone is presumed to know Pakistani law
Foreign law
↓
Same effect as mistake of fact
Mistake of FACT
↓
Bilateral — both mistaken as to a fact essential to agreement
↓
Agreement VOID
Unilateral — only one party mistaken
↓
Not voidable — valid

Bilateral mistake may relate to the subject matter's:

Existence — horse already dead
Quantity — "all horses" (3 vs 2)
Quality — race horse vs cart horse
Price — typo Rs 1,150 vs 5,150
Identity — race horse vs cart horse
✖ Not a mistake of fact: an erroneous opinion as to value (painting believed worth Rs 100,000, really Rs 10,000 → valid)
S. 72: Money paid or anything delivered by mistake (or under coercion) must be repaid or returned.
8

Expressly Declared Void Agreements & Exceptions

📛
AgreementRule — VOIDException — VALID
Restraint of marriage S. 26Restraint of marriage of any person other than a minorPromise not to marry Salman.Restraint of marriage of a minor. A promise to marry a particular person is not a restraint.
Restraint of trade S. 27Restraint from a lawful profession, trade or business — void to that extentRival paid to stop business in a locality → void.Sale of goodwill: seller may agree not to carry on a similar business, within specified local limits, so long as buyer (or his successor) carries on a like business there — limits must be reasonable to the Court.Not in Multan for 2 years → valid; anywhere in Pakistan → void.
Restraint of legal proceedings S. 28Restricting a party absolutely from enforcing rights by usual legal proceedings, or limiting the time to enforce them — void to that extent"Must sue within 2 years" when limitation is 3 years → void.Not absolute restrictions: written agreement to refer disputes to arbitration; agreement not to appeal to a higher court; choosing one of two equally competent courts.
Uncertain agreements S. 29Meaning not certain or capable of being made certain"100 tons of oil" — kind unknown → void.If capable of being made certain — e.g. a coconut-oil dealer's "100 tons of oil".
Wagering agreements S. 30Bet — money/thing payable on happening or not of an uncertain event. No suit to recover winnings or amount entrusted to abide the result.Rs. 10,000 on whether it rains today.Contribution to a plate/prize of Rs. 500 or above for the winner of a horse race. Not wagers: wrestling prize from ticket sales; genuine share purchases; games of skill.
Collateral to wager S. 30AAgreements knowingly made to further, assist, effect, secure or guarantee a void wagerCredit to bet on cricket; stakeholder; commission for support; guardian paying ward's bet.—
9

Application to Scenarios

🧩

Fiancé takes jewellery

Haroon (fiancé) gets Ghazala's jewellery & apartment for a small profit share ➜ presumed undue influence (fiduciary); voidable; burden on Haroon.

Caretaker buys land cheap

Zain (caretaker of 90-yr-old Karim) buys Rs. 5m land for Rs. 0.5m ➜ undue influence: fiduciary relation / affected mental capacity.

Customer threatens showroom

Threat to damage displayed products to get a new AC ➜ coercion; voidable at the seller's option.

Silent on structural defects

Buyer asks about defects; seller stays silent ➜ silence = speech → fraud; buyer may affirm and claim repair cost (Rs. 5m).

Private price information

Rice trader doesn't disclose price info ➜ no fiduciary duty → not fraud; repudiation unjustified.

"No court" clause + supply deal

Supply agreement valid; clause barring courts void — party may still approach the Court; arbitration clause would be valid.
10

Common Exam Traps

⚠️
Coercion must be applied where PPC is in force → immaterial where it was applied.
Bilateral mistake of fact → voidable → VOID. Unilateral → valid.
Threat to commit suicide to get a contract → coercion (offence under PPC), not undue influence.
Mistake of law has same effect as fact only for foreign law — not Pakistani law.
Undue influence burden lies on the dominated person → dominant person (where unconscionable).
Restraint of marriage of a minor is valid; promise to marry a particular person is not a restraint.
Creditor–debtor: no presumption of domination — debtor must prove undue influence.
Prize competitions on skill are wagers → not wagers; Government lottery ticket agreement → void.
Unsoundness of mind affects capacity, not free consent.
Price "to be fixed by our eldest brother" → capable of being made certain → contract binding from the original date.
11

Quick Revision Box

⚡
5Factors vitiating free consent (S. 14)
3Presumed domination: authority · fiduciary · capacity
9Coercion vs undue influence differences
Rs. 500+Horse-race prize — wager exception
  • S. 13 Consent · S. 14 Free consent · S. 15 Coercion · S. 16 Undue influence
  • S. 17 Fraud · S. 18 Misrepresentation · S. 19 / 19A Voidable
  • S. 64 Restitution · S. 72 Repay/return
  • S. 26 Marriage · S. 27 Trade · S. 28 Legal proceedings
  • S. 29 Uncertainty · S. 30 Wager · S. 30A Collateral to wager
Void list & exceptions: Marriage → minor · Trade → goodwill · Legal proceedings → arbitration · Uncertain → capable of certainty · Wager → horse-race prize.

Test yourself on this chapter

Practice 30 ICAP-pattern BLD MCQs with full explanations – Chapter 2 is free for everyone. Enrol for all chapters.

All CAF-4 BLD revision notes
  1. Introduction to the Legal System
  2. Offer, Acceptance and Revocation
  3. Validity of Contracts and Agreements
  4. Free Consent and Void Agreements
  5. Performance of Contracts
  6. Consequences for Breach of Contract
  7. Special Type of Contracts
  8. Partnership
  9. Negotiable Instruments
  10. Anti-Money Laundering and Arbitration Act