Vitiating Factors Of A Contract: Consequences Faced By The Lower
Middle Class While Entering Into A Contract
The major purpose of contract law is to provide a suitable boundary within which parties can freely enter into a contract. A contract binds the parties legally by the laws which are applicable only to the parties whom the contract was created by. Instead of laying down the rights and duties, law of contract has put forward a number of limiting principles for the parties to follow. By this, parties involved in a contract create rights and duties for themselves subject to these limiting principles which the law will enforce. There are a number of factors that spoils the contract, rendering it imperfect. These factors are called vitiating factors. The nature of the vitiating factor involved in a contract determines whether it is a void or voidable one.
While taking into consideration the current scenario of increased number of cases related to breach or illegality of contracts, it is important to look upon the reasons behind this increase in number of cases. Usually the one who is exploited will be the weaker party in a contract or in simple words the party who is in urgent need of money, land, property etc. In majority of the cases, the plaintiff will be a person from a lower middle-class family who’s helplessness is exploited either by the opposite party or by the brokers who acts in between them. But in the light of this present situation the questions which arises are, “1. Is it getting more and more difficult for the lower middle class to enter into a contract without ending up in courts seeking justice? 2. Shouldn’t there be stronger laws to prevent brokers and other mediators from exploiting the poor?
In this article, we are going to check the need for stronger laws to protect the weaker section, the lower middle class from getting exploited.
1.2 Vitiating Factors Of A Contract
Vitiating factors are those which spoils a contract, rendering it imperfect. These include misrepresentation, mistake, fraud, undue influence, incapacity, illegality, coercion etc. Certain factors like mistake, fraud, incapacity may render a contract void ab initio whereas other factors like misrepresentation, undue influence will render the contract as a voidable one. All Vitiating elements are not uniform in effect. Some vitiating elements render a contract void, other may render a contract voidable, others may make the contract unenforceable at the suit of either one of the parties. Void, illegal, voidable and unenforceable denote the different degrees of ineffectiveness.
A void contract is a contract which the law holds to be no contract at all. It is contract void ab initio. Nullity from the very beginning. Whereas a voidable contract is in which one of the parties may rescind or affirm at his option.
1.2.1 THE RELEVANCE OF DOCTRINE OF ‘CONSENSUS AD IDEM’
The essence of a contract consists in the meeting of wills/minds of parties in full and final agreement. The presence of this doctrine is compulsory for a contract to be a valid one. This term was introduced based on the concept of human liberty. By this each party involved in a contract consents to be bound by the contract and the consent must be true full and free. Every person should be free to pursue his own interest in his own way. If the above conditions are not satisfied, no real consensus exists and the contract will fail. This mutual assent is vitiated by certain actions such as mistake, misrepresentation, fraud, duress, undue influence. This may render a contract void or unenforceable.
In most of the cases the meeting of wills or minds is not present and people enter into such contracts because of their urgency of buying or selling of their properties. This may happen in the case of either one of the party. For instance, the offer put forward by the first party may not be appropriate to the interests of the second party and vice versa. People tent to enter into such contracts only because of their urgent need of money, property, land etc. And this urgency will result in getting cheated by the other party or the broker.
188.8.131.52 Why The Weaker Party Is Exploited
When we look onto cases regarding breach of contract or illegality of agreements or contracts we often see the presence of a weaker party who’s helplessness is exploited. As mentioned earlier the exploitation is done by the second party or the brokers who acts in between. People from lower sections of the society often gets cheated and by the time when they realize that they were deceived it will be too late. This usually happens not in metropolitan cities or urban areas but in places like villages and rural areas where people are not well educated or not with much legal awareness. People in these places usually don’t enter into contracts for profit, but for their urgent needs like paying off debts, to pay for the wedding expenses, medical emergencies and so on. They have no idea about the legal side of a contract and thus they get cheated and finally end up in courts seeking justice that usually takes 2-4 years of time.
Apart from all these the lack of legal awareness in the society is the major reason for this current situation. People enter into contracts without being aware of the consequences that follows. One should be well aware of the rights offered by the law to safeguard themselves from getting exploited.
1.3 Exploitation Done By Brokers, Agents And Mediators
Brokers, agents or mediators are people who attempts to make people involve in an agreement by receiving a certain percentage of amount as commission for their work. A mediator or broker must be impartial and should not act accordingly for the benefit of either one of the party. For instance a real estate broker works to arrange and negotiate real estate transactions. He must be a licensed individual and should be capable to perform duties like overseeing transactions for sales, writing contracts, and purchasing activities on homes, land and commercial properties. A broker has attained a higher-level of license than a real estate agent. In India for the regulation and promotion of the real estate sector ‘The Real Estate Regulation Act’ 2016 (“RERA”) was Introduced with the following objectives:
1. To protect consumer’s interests in the real estate sector.
2. To regulate and promote the real estate sector.
3. To ensure sale of real estate property in a more transparent and efficient manner.
4. To establish a speedy adjudication and dispute redressal mechanism
5. To establish an Appellate tribunal.
Now in India RERA regulates the industry of real estate agents. In chapter 2 of RERA the provision for registration of real estate agents with appropriate authorities is given.
Even though India has made this registration mandatory many people are still acting as real estate agents without registering themselves in RERA. And by this they usually won’t follow the terms provided by the authorities. Therefore the chances of exploitation is further increased. Fraud brokers like these exploit the weaker party in a contract by demanding more money. There have been previous instances in which brokers misappropriate the terms of a contract either for their own benefit or for the second party.
1.3.1 The Need Of Strict Laws Regarding License Of Brokers
As mentioned in the above section majority of the brokers or real estate agents working in villages and rural areas doesn’t have any license and thus it is quite easy for them to cheat their clients. Being a RERA licensed broker means, one who has regulations for doing certain acts and cannot receive more than a certain amount of money from the clients for their services.
Even though this license is a mandatory requirement for acting as a broker or agent, It is not fully enforced by the governments all over India.
In this current scenario of increased number of cases regarding contract disputes, it is high time to analyze the reasons behind this mass number. More laws should be framed for the welfare of the lower middle class to protect them from getting exploited while entering into a contract. Since the Indian constitution has granted the right to equality to all citizens, it is important to protect the citizens from these kinds of exploitations.
The respective state governments should make contract laws more strict for it’s effective implementation.
Most of the states in India are not that concerned about the laws related to agents and brokers. The RERA acts still remain static in majority of the states and this is undoubtedly a huge problem for the whole country. Even the union government remains silent about this matter. These laws put forward by the RERA should be made mandatory all over India, and it’s effective implementation will result in preventing these exploitation to a certain extent.
The real estate development and regulation act 2016
Features of a contract
Understanding real estate agents vs. brokers vs. realtors
4. Avatar Singh, contract and specific relief ( Eastern book company, Lucknow, 11th edition.2013)