UNDUE INFLUENCE under Indian Contract Act

 UNDUE INFLUENCE (Sec.16)

Definition as per S.16 (1): "A contract is said to be induced by undue influence where,

(i) the relations subsisting between the parties are such that one of the parties is in a

position to dominate the will of the other and

(ii) uses that position to obtain an unfair advantage over the other.

Sec. 16(2) a person is deemed to be in a position to dominate the will of another: -

(a)   where he holds a real or apparent authority over the other, e.g., the relationship

between master and servant, police officer and accused; or

(b) Where he stands in a fiduciary relation to the other, e.g., father and son, doctor and

patient, trustee and beneficiary etc.

(c) When he makes a contract with a person whose mental capacity is temporarily or

permanently affected by reason of age, illness, or mental or bodily distress.

Illustrations

(a)   A, a man enfeebled by desease or age, is induced, by B’s influence over him as his

medical attendant, to agree to pay B an unreasonable sum for his profession services. B

employs undue influence.

(b)   A being in debt to B, the money-lender of his village, contracts a fresh loan on terms

which appear to be unconscionable. It lies on B to prove that the contract was not induced by

indue influence.

Presumption of undue influence

Undue influence is presumed to exist under the circumstances mentioned above in (a), (b)

and (c).

No presumption of undue influence in following cases

(i) Husband and wife

(ii) Mother and daughter

(iii) Grandson and Grandfather

(iv) Landlord and tenant

(v) Creditor and Debtor

In above case undue influences have to be proved.

Effect of Undue Influence (Sec.19-A)

A contract vitiated by undue influence is voidable at the option of weaker party. The court

can set aside such contract-

(i)    Either wholly: or

(ii)    Where the weaker party has enjoyed some benefit under the terms of the contract, then

upon just and equitable terms

Burden of proof

In cases where there is a presumption of undue influence the burden of proving that the

person who was in a position to dominate the will of another did not use his position to obtain

an unfair advantage, will lie upon the person who was in a position of dominate the will of

another [Sec. 16(3)]. He can rebut and oppose the presumption by arguing

(i) That full disclosure of fact was made

(ii) That the price was adequate

(iii) consent was free