Voidable Contracts Voidable contract A contract which can

Voidable Contracts • Voidable contract: A contract which can be put to an end at the option of one party to the contract is a voidable contract. If the consent of a party to the contract is not free, then such a party may avoid or put an end to the contract by filing a lawsuit in the court. Under Section 14 of the Contract Act, 2000, a contract is voidable in the following circumstances: 1. Contract by Coercion: According to Section 14 (a), coercion includes such activities as detaining or threatening to detain the property of any person, or threatening to injure his/her life or insult or defame him/her, or threatening to commit any act against the prevailing laws of Nepal, with the intention of causing him/her to enter into contract against his/her will. • However, a threat to sue or prosecute somebody is not an act of coercion. Any act which is not forbidden by law is not coercion. • Similarly, charging high price or high interest cannot be considered as coercion.

Contd. . 2. Contract by Undue Influence: Under Section 14 (b), undue influence is any influence imposed by a person, with an intention to obtain an undue or unfair advantage for his/her self benefit or interest, upon another person, who is under his/her influence and who can be asked to do any work according to his/her will. • Generally, the following persons are deemed to be under the influence of any person and amenable to his/her wishes: (i) A person living under his/her guardianship, protection or custody. (ii) Persons who cannot take care of their interest temporarily or permanently by reason of old age, sickness or physical or mental weakness. (iii) A person who can be subjected to under one's financial or positional or status influences. • Influence may exist in the following circumstances: 1. Where a person holds a real or apparent authority over the other; or 2. Where one stands in a fiduciary relationship with the other. Fiduciary relationship is a relationship of mutual trust and confidence.

Contd. . 3. Where a person contracts with another person who cannot take care of his/her interest temporarily or permanently by reason of old age, sickness or physical or mental weakness. • In case a contract is concluded with a person who is under one's influence and amenable to his/her wishes, burden of proof of innocence of undue influence rests in the party who claims that such contract is not concluded under an undue influence. 3. Contract by Misrepresentation: Misrepresentation is a false statement made by a person without any bad intention. Under Section 14 (d) of the Contract Act, the following acts are considered as misrepresentation: (i) Submission of false particulars on any matter without a reasonable ground to support them; (ii) Misleading any party which injures him/her; (iii) Causing any wrong on the matter of contract. • Rules: The misrepresentation must be of material facts; the misrepresentation must be false but the person making it honestly believes it to be true; the misrepresentation must induce the other party to enter into contract; and the false statement must have been addressed by the person making it to the party who is misled by it.

Contd. . 4. Contract by Fraud: Under Section 14 (c) of the Contract Act, a party to the contract or his/her agent is deemed to have committed fraud (i) if he/she leads the other party or his/her agent to believe or takes any action to believe that a particular matter is true, although he/she knows that it is false, or (ii) conceals any information in his/her possession, or (iii) indulges in any other fraudulent act punishable under prevailing law, with the intention of deceiving the other party or his/her agent. • Fraud generally includes the following acts: 1. False statement with the intention of deceiving others. 2. Active concealment of a fact. 3. Intentional silence or non-disclosure of a material fact as regards the subject matter of a contract: Mere silence is not a fraud, but when a person has a duty to speak or when silence is equivalent to speech, then a silence is also fraudulent. 4. Any other acts done with the intention of cheating or deceiving others. 5. Such acts or omission as the law specially declares as fraudulent.

Quasi Contracts • Quasi contract is an indirect contract. In certain circumstances, the legal rights and obligations can be enforced in the courts even if there is no essential element of a valid contract. Under Section 11 of the Contract Act, 2000, a contract is deemed to have been concluded in the following circumstances: • (a) Supply of necessaries to persons who are incompetent to contract: In case a person who is incapable of entering into a contract or any one whom he is legally bound to support is supplied by another person with necessaries by providing any thing, commodity or service suited to his social status; the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person. • (b) In case any person, who has a concern or interest with the payment or non-payment of any amount to be paid by another person under the prevailing Nepal law makes such payment him/herself, then the person making such a payment is entitled to be reimbursed, to the extent of the amount he/she actually paid, from the property of the person who was under obligation to make the payment.

Contd. . • (c) In case any person gives anything to another person, or employs him/her in any work, to pay the appropriate price of such thing or suitable remuneration for such work or employment needs to be paid. • (d) In case any person keeps under his/her personal possession any property belonging to another person that may be kept as such under the law, then such property must be maintained as a bailed property. • (e) In case any person pays any amount (to any person) by mistake, the same needs to refunded.