Understanding Coercion in Contract Law Under Section 518 of MCC
Definition of Coercion
According to Webster’s College Dictionary, “ to coerce means to force or compel by threats to do something”.
According to Black Law Dictionary, “ Coercion is compulsion, constraint, compelling by force or army to threats, it may be actual, direct or positive as where physical force is used to compel on act against one,s will or implied, legal, or constructive, as where one party is considered by subjugation to another to do what his free will would refuse.
Section 518 (2) (a) of Muluki Civil Code, 2074 defined coercion as “ if a person detained or threatens to detain any property of another person or threatens to put that other person’s life or prestige in peril or commits or threatens to commit any other actt forbidden by law with the intention of causing that other person to enter into a contract against his/her will, the person is said to commit coercion. An agreement, the consent to which is caused by coercion, is voidable at the option of the party whose consent was so caused.
For Example, suppose X hovers to hurt Y if he is not going to sell his land to X for Rs 5 lakh, which is worth Rs 50 lakh. Here, if Y agreed and sells the land to X, it won’t be a valid contract because the consent of Y was not obtained freely, as he agreed to sell his land due to the threat of X, which is coercion by X.
Effects of Coercion
- The contract, without free consent or with coercion, will become voidable at the option of that party whose consent was not free.
- The aggrieved party will have to decide whether to perform the contract or to declare it voidable by the court.
- If any amount of the sum of goods/ property has been obtained under coercion shall be repaid or returned if the contract is declared void by the court at the request of the aggrieved party.
For example, A threatens to kill B if he refuses to sell his scooter for Rs 1000 to A. B sells the scooter to A and receives the payment. Here, B’s consent was not free; if B decides to avoid the contract, then he will have to return the Rs 1000 that had received from A.
Specific Cases of Non-Coercion
A threat to prosecute.
The mere threat to one party/ person to file a case, whether criminal or civil, is not coercion. But the threat to file a false case is coercion.
A threat to commit suicide
Under the Indian Penal Code, a suicide and a threat to commit suicide are not punishable. But an attempt to commit suicide is punishable. Now the questions arise whether a “ threat to commit suicide” shall amount to coercion or not. This point was considered by the Madras High Court in the case of Ammiraju v Seshamma.
High Interest Rate.
Charging a high rate is not coercion. A person may be compelled to borrow a loan from the person charging a high interest rate due to their own circumstances, but it is not considered coercion. But if someone is compelled to force someone to take a loan only from him, then this can be called coercion.
High Price.
Sometimes, on account of necessity, it needs to charge a high price for the value of goods. In such a case, a mere reason for paying a high price is not coercion, but one cannot force anyone to purchase their own goods.
Burden of Proof.
The burden of proving that consent was induced by coercion lies on the party who wants to avoid the contract. In other words, it is for the aggrieved party to prove that his consent was not free. This would be done by proving that he would not have entered into this contract had coercion not been employed.
