undue influence
Image source - https://bit.ly/2QpE4Pa

This article is written by Tanya Gupta, a 2nd-year law student, from BVP-New Law College, Pune. In this article, the author has discussed the concept of “Free Consent and Undue Influence”.

Introduction

Section 13 of the Indian Contract Act (ICA) defines consent as the meeting of mind of the parties i.e consensus ad idem (when two or more persons agree upon the same things in the same sense). Section 14 further qualifies consent is said to be free if the parties enter into a contract with free will, that means with no pressure and not caused by any of the following:  

  1. Coercion (Section 15),
  2. Undue influence (Section 16),
  3. Fraud (Section 17),
  4. Misrepresentation (Section 18),
  5. Mistake (section 20 to 22)

When there is no consent at all the contract is said to be Void Ab Initio.

Definition (S16) of The Indian Contract Act

Undue Influence is defined under Section 16 of the Indian Contract Act. When one party is in a position to dominate the will of others and actually misuses the power, then it is a case of undue influence, and the contract becomes voidable. When all the following three conditions are fulfilled then only the situation is considered as an undue influence:

  1. One person is in a position to dominate the will of others.
  2. He misuses his position.
  3. He obtains an unfair advantage.

The word undue means unnecessary, unwarranted, or more than required. Influence means convincing the mind of a counterparty through changing his mind or changing his will, but this influence must be undue i.e it is not required. Undue influence applies to a relationship which may be blood relation or some other kind of relation i.e fiduciary or relation based on trust. It means the unfair use of one’s superior position to obtain the consent of a person who is in a weak position. For example, A police officer bought a property worth Rs 1 lakh for Rs 5000 from Ram, an accused under his custody. Later this contract can be cancelled and it can be held as void because there is a mental pressure on a person.

Ability to dominate the will of other

The dominant position is not defined in the Indian Contract Act but Section 16(2) provides certain conditions when a person is in a position to dominate the will of another. Cases, where a person is in a position to dominate the will of others, are as follows:

  1. There must be a relation between the parties:

a) Real or apparent authority/relation in which one party can be dominated by the other party. For example, father and son, mother and daughter.

b) Fiduciary relation is the relation which is made upon the belief and trust between the parties. One party must believe the other. For example, Advocate and client, teacher and student, Doctor and patient.

Example of real or apparent authority:

  • A Father exerts undue influence upon his son to do something on the will of his father.  Otherwise, he will part his relation with a son.
  • A factory owner exerts undue influence upon his employee to make a certain agreement with him. If not he (employee) will be drawn from his job.

Example of fiduciary relation: 

  • An advocate asks his client to give him extra money to fight the case from his side.

2. Mental or bodily distress means the mental capacity of a person is affected. It can be either permanently or temporarily affected. The reason behind such health condition can be age, illness, mental or bodily distress.

Consent under pressure

Consent under pressure means when consent is obtained forcefully. In this manner, consent is not lawful, so it had no binding effect.

Click here
       Click above

Subtle species of fraud

Undue influence is said to be subtle species of fraud due to which a party controls the mind of the victim by his clever skills and with gradual proceedings but with very harmful effects. Sometimes the contract is signed due to fear, coercion, importunity or other domination. It was observed by the Privy Council in Someshwar Dutt vs Tribhawan Dutt that acts of undue influence range themselves under the heads of coercion or fraud. Generally, undue influence is often confused with coercion or duress. Duress occurs when there is a physical compulsion or direct force upon a person or there is a threat to a person’s life. In contrast to duress, undue influence may exist with or without force or threat to a person’s life.  For example, ‘A’ advances a sum of money to his son ‘B’ in his age of minority and through his parental influence over his son make him sign a bond of a greater amount of a sum due in respect of the advance. A used undue influence in this case as there is a fiduciary relationship between father and son as there is natural confidence between both which A abuses by making his son sign a bond. 

Coercion

Duress

Coercion can be employed against any person including the stranger.

Duress can be employed against life or liability of another party to the contract or members of his family.

Coercion may be employed against any person.

Duress may be employed only by the party to the contract or his agent.

Unlawful detention of goods is a kind of coercion.

Unlawful detention is not duress under English law.

Relations which involves domination

All cases where there is an active trust and confidence between the parties and both parties are not on equal footing. The principle of undue influence applies to all the cases where influence is acquired and abused. It applies to all relations where domination can be exercised by one party over another. i.e where exists a real or apparent authority or fiduciary relationship. In the category of undue influence, the circumstances under which the contract was made is taken in the account along with their relationships. The existence of a dominating position along with its use is mandatory to invoke an action. Merely a dominant position does not lead to undue influence. It arises only when this position is used for gaining an undue advantage. Undue advantage means any kind of advantage which is not warranted by circumstances in which the contract was entered. In the case of Ganesh Narayan Nagarkar Vs Vishnu Ramchandra Saraf, it was stated by the court that unfair advantage is the advantage or enrichment which is obtained through unjust means. It comes into existence when bargains favour a person who enjoys influence and which proves unfair to others.

Real or Apparent authority

Section 16(2) of the Indian Contract Act states that Undue Influence can arise wherever the donee stands in a fiduciary relationship to the donor or holds a real or apparent authority. In this type of influence, there is a real authority like a police officer or an employer who uses his dominance for his enrichment. Apparent authority is pretending as a real authority without its existence.

Mental distress

An only mental distress state of mind does not amount to undue influence until the defendant has used this opportunity to take unfair advantage from another party. Similarly, instigating a person to enter into a contract who has just attained majority amounts to undue influence under this category due to a lack of the plaintiff ‘s experience. In the case of Inder Singh Vs Dayal Singh, the court states that the undue influence arises when one party taking the temporary or permanent advantage of another’s mental condition executes a contract. For example, A entered a contract with B, who is a minor and is unable to understand the complex terms of a contract. It will amount to undue influence unless A proves that the contract was entered in good faith and with adequate consideration of B. A case of undue influence is established more easily when there is evidence to establish to show that the person influenced was of feeble mental capacity or in a weak state of health.

Burden of proof

Generally, the party bringing a claim has the burden to prove the truth of the facts on which he or she is relying. The burden of proof is on the claimant to show that undue influence was exerted by a stronger party over the weaker party, and the latter could not exercise free choice when entering the agreement. However, this burden can be shifted to the defendant in an undue influence case if the plaintiff can demonstrate that a confidential relationship existed between the testator and defendant, and that suspicious circumstance surrounded the preparation and execution of the will. When this occurs, the burden shifts totally on the defendant to prove that undue influence did not occur. When a person is found to be in a position by which he can dominate the will of the other or a transaction appears to be affected due to dominance, the burden of proof that no undue influence was exercised in the transaction lies on the party who is in a position to dominate the will of others. In the case of Diala Ram Vs Sarga, the defendant was already indebted to the plaintiff, who was village moneylender. He again took a fresh loan from a plaintiff and then executed a bond, wherein he agreed to pay some interest. The court held that the contract was unconscionable and therefore, the burden of proof was on the plaintiff to show that there was no undue influence in this case. The burden of proving that the contract was not induced by undue influence is to lie upon the person who was in the position to dominate the will of others if the transaction appears to be unconscionable.

Presumption of undue influence

There are some cases in which the Honourable Courts of India presume the existence of undue influence between the parties:

  1. Where one of the parties to a contract is in a position to dominate the will of the other and contract is prima facie unconscionable i.e unfair, the court presumes the existence of undue influence in such cases.
  2. Where one of the parties to a contract is a Pardanashin Woman, the contract is presumed to be induced by undue influence. In relation to Pardanashin Woman, Bombay High Court made an opinion that a woman becomes Pardanashin because she is totally exempted from ordinary social intercourse not because she is the seclusion of some degree.

A Transaction with Pardanashin Woman

When a Woman can be viewed from the screen or is placed behind the screen i.e veiled is called Pardanashin Woman. The protection of those women is rooted in the principle of good conscience and equity. Special laws are made for these women because they are subjected to ignorance, infirmity, illiteracy, etc are thus easily influenced. The burden of proof should be provided against the person who is transacting with a Pardanashin woman. He has to prove that the transaction had taken place with the consent of the women and her decision was taken by her without any coercion or enforcement and she was made well aware of the provision mentioned in the document of the transaction by the other party with whom she has made the contract. In the case of Tara Kumari vs Chandra Mauleshwar Prasad Singh, it was delivered by the court that the essential thing to establish the burden of proof is that the party executing them should be a free agent and the women should be informed about the terms and conditions of a contract. In the case of Kuna Dei vs Md Abdul Latif, it was delivered by the court that showing of the document to the pardanashin women won’t be enough to establish the burden of proof. Thus, he has to show that the women were explained clearly the facts in the document of the transaction.

This principle also applies to men also, as in the case of Daya Shanker Vs Bachi, who by their physical or mental capacity is prone to easy influence and after inducement tends to enter into a contract or transaction relating to purchase and sale of the property. The principle on which the protection by law is made for a pardanashin women is based on equity and good conscience of women.

Natural justice

Undue influence affects natural justice when the provision of a will are unjust, unreasonable and unnatural doing violence to the natural instincts of a heart, to the dictates of parental affection, to natural justice, to solemn promise, and to moral duty. Such unexplained inequality amounts to undue influence.

Conclusion

While concluding, it can be said that there is an inadequate consent in the presence of undue influence as defined in section 13 of the Indian Contract Act. Thus, in a fiduciary relationship and in other such forms of relationship, the party which enjoys the real or apparent authority must ascertain that the other party is free from external manifestation.

Reference

  • Indian contract Act,1872

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:

https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.

Did you find this blog post helpful? Subscribe so that you never miss another post! Just complete this form…

1 COMMENT

LEAVE A REPLY