The Court held that the definition of “coercion” under section 73 should be given its ordinary and general meaning.
Facts of the Case
The respondents were purchasers of houses to be constructed by the appellants. Each of the respondents had signed a sale and purchase agreement to purchase a house at RM29,500. The respondents alleged that they were threatened and forced by a director of the appellant company to pay an additional of RM4,000 each in the purchase price. If they did not do so, the appellant would cancel their bookings for the house. The appellant said that the additional RM4,000 was for the cost of additional works to be done to the houses not on request but agreed by them at his oral suggestion.
The Magistrate found that the respondents had not agreed to the increase of RM4,000 because under the sale and purchase agreement, a request for additional works must be made in writing. The Magistrate found that the payment of RM4,000 was made under a threat by the appellants to cancel the respondent’s bookings. The main ground of appeal to this High Court is that the appellants paid the sum of RM4,000 voluntarily and not under any coercion. The respondents, however, claimed a refund of the additional sums paid.
Issue of the Case
Whether the additional sums were paid by the respondents under coercion and whether the additional sums paid can be refunded?
Judgment of the Case
The appellants alleged that the respondents had agreed to the additional work and RM4,000 was paid voluntarily. Appellants also submitted that even if there was a threat to cancel the bookings of the houses, it did not amount to ‘coercion’ as defined under section 15 of the Contract Act 1950 and therefore plaintiff could not recover the amount paid by relying on section 73 of the Contract Act 1950.
Sections 14 and 15 of the Contracts Act 1950 state:
“"Free consent”
14. Consent is said to be free when it is not caused by –
(a) coercion, as defined in section 15; (emphasis is mine)
(b) undue influence, as defined in section 16;
(c) fraud, as defined in section 17;
(d) misrepresentation, as defined in section 18; or
(e) mistake, subject to sections 21, 22 and 23.
Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence,
fraud, misrepresentation, or mistake.
“Coercion”
15. 'Coercion' is the committing, or threatening to commit any act forbidden by the Penal Code, or the unlawful
detaining or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any
person to enter into an agreement.”
The Court did not agree with the appellant’s argument. It was held that section 2 of the Contracts Act 1950 states that words and expressions as defined in section 2 are to be given those defined meanings unless the contrary intention appears from the contexts.
Section 73 of the Contracts Act 1950 states:
"73. A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it.”
The Court referred to the Privy Council decision of Kanhaya Lal v National Bank of India Ltd 1913 ILR Vol XL (Calcutta series) 598 and held that the meaning of coercion under section 73 is wider and should be given its ordinary and general meaning since there is nothing under section 15 which says that the word ‘coercion’ should apply throughout the Act. If the word ‘coercion’ is to be given the meaning as defined in section 15, they will appebbar to be in conflict with each other.
The Court affirmed the Magistrate’s decision and held that the respondents had paid the extra RM4,000 to the appellants without consideration. It is paid under threat by the appellants to cancel their bookings, thus the amount paid must be refunded to them under section 73 of the Contracts Act 1950.
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