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Undue Influence



Prof. Sunil Gorge

Abhilasha Pant (A032)



Introduction ………………………………………………………. 3
Research Methodology……………………………………………….5
 Relevance of the Topic………………………………………..5
 Objective of the Study ………………………………………..5
 Research Questions……………………………………………5
 Hypothesis……………………………………………………..6
Legal Analysis…………………….…………………………….……..8
Role of Judiciary …………………………………………………….15
Comparative study…………………………………………………..18


Indian Contracts Act 2 .Statutes 1. – Versus 3. AIR – All India Reporters 2. Section 16 of the Indian Contract Act 1872 Abbreviations 1. ICA. Section 15 of The Indian Contracts Act 1872 2. v.

IL PRINCIPE 99 (Giuseppe Lisio ed.” (Per Lord Browne. Five years before Bob's death. which was a source of tension and anger for him. 1933) (1515)..Wilkinson in Barclays Bank plc v O Brien (1994) 1 AC 180 at 191) INTRODUCTION The doctrine of undue influence derives from English courts. relatives. 2010. 3 . and physical dependency. actual or constructive. relationship poisoning. even the prospect of a loss of inheritance often drives well as against the husband.. and by his friend. Consider the following scenario: Bob. 2 Although this translation is commonly used. Angela. transportation. was a bachelor with substantial wealth. Appendix C)). He was survived only by his great-niece. 2009. but the loss of his inheritance may drive him to despair. Smith. false affection. and friends to desperate measures. Smith began taking care of him and assisting him on a daily basis with meals. 1 ((Welden-Smith. These aspects include frail health. A will contest heard by Sir Francis Bacon as the Lord Chancellor of England in 1617 illustrates common aspects of the process of undue influence which emerged in the context of a will contest.. threats and mistreatment. Appendix B) (Nerenberg. and involvement in the execution of documents by and in favor of the alleged abuser. of undue influence exercised by the husband (and consequently of the wife’s equity to set aside the transaction) the creditor will take subject to that equity and the wife can set aside the transaction against the creditor.1 "A son can bear with equanimity the loss of his father."2 Indeed. and hygiene. daughters.” NICCOLÒ MACHIAVELLI.“If the creditor bank has notice. the literal quote reads: “li uomini sdimenticano piú presto la morte del padre che la perdita del patrimonio. Angela had only sporadic contact with her uncle. prior to his death at the age of 90.

and any attempt to define undue influence often degenerates into nothing more than platitudes about "substituting one's volition for another" and generalities concerning whether a testator is "susceptible" to a kind of influence considered "undue" by law. and the entirety of Bob's fortune was left to Smith.. 2006) 4 . After Bob's death. The concept of undue influence in American law is a notoriously difficult one. in THE OXFORD HANDBOOK OF COMPARATIVE LAW 1071. 1074 (Mathias Reimann & Reinhard Zimmermann eds. Comparative Succession Law. To fully understand the meaning of undue influence.3 3 Marius J. De Waal. his will was read. Smith encouraged Bob to disinherit his thankless niece and leave his money to the people who cared about him. Early Roman law did not provide for challenges to wills based on undue influence from others. it is necessary to examine its historical basis.Smith also helped Bob with his financial affairs including taking him to an attorney to draft a will. Angela contests the probate of the will by alleging that it was the product of undue influence exercised by Smith.

In order to be undue influence. it involves excessive pressure by the party in the dominant position on the party in the inferior position. like duress does. The object of the study is to understand the undue influence in contract formation.  Research Questions 5 . Sometimes mutual assent can be affected by coercion or pressure to enter the contract. in the formation of a contract. It's important to note that persuasion alone is not undue influence. Undue influence is also a defense to a contract and is also a situation that affects mutual assent. Duress is sometimes confused with undue influence. Undue influence is taking advantage of another person. with one party in a superior position over the other. through a position of trust.RESEARCH METHODOLOGY    Relevance of the topic Undue Influence is a very vast and important topic in Law of Contracts. Duress and undue influence are situations that affect mutual assent and make a contract void or voidable. the persuasion must amount to excessive pressure that affects a person's freedom of choice. Undue influence always involves a relationship between the two parties.   Object of the study Contracts must be entered into freely by both of the parties and include mutual assent. Instead. you sometimes see other types of cases that involve a lack of mutual assent. Undue influence doesn't involve a direct threat. In your courtroom.

What is undue Influence? The scope of the doctrine of undue influence has frequently been misunderstood. (b) The dominant party use his position.. He goes on to say that "duress at common law could only be pleaded where the end arrived at was achieved by the use of something in the nature of unlawful force or the threat of unlawful force against the person of the other contracting party. John Wetton & Sons Ltd.5 Meaning of undue influence :. (c) Obtain an unfair advantage over the other. 2. 389. J.dominating the will of the other person to obtain an unfair advantages over the others. remarks that "it depends on the much wider relief given on principles originally evolved in the Chancery Courts under the name of undue influence. after pointing out that the right to avoid a contract is not at the present time confined to cases of duress. v. In Mutual Finance Ltd. 5 Ibid 6 . How can undue influence affect a contract? 4 [I9373 2 K. (a)Where the relation subsisting between the parties must be such that one party is in position to dominate the will of the other..  What is Undue Influence?  How can undue influence affect a contract? Hypothesis 1. Undue influence in the Chancery Courts might exist where a promise was extracted by a threat to prosecute certain third persons unless the promises were given.B.4 Porter.

that this is a case. Example : A spiritual guru induced his chela to donate all his property to the ashram and said that in return of it. and the contract is not induced by undue influence. but due to certain contingencies. The banker declines to make the loan except at an unusually high rate of interest. Held.if transaction appears to unreasonable the dominant party to prove that there is no undue influence. he will certainly get salvation. This is a transaction in the ordinary course of business. Burden of Proof:. Again. The transaction is unconscionable (unreasonable) In such a case dominant party is under the burden to prove the undue influence was not employed. [Unconscionable transactions:. 7 . one party is able to make the other party agree to certain terms and conditions then it is not undue influence. Example : A applies to a banker for a loan at a time when there is stringency in the money market. The person unduly influenced can have the agreement set aside if he acts in good time. and does nothing to show that he has subsequently affirmed the agreement.weaker party to prove the influence was employed] Where some transaction is entered into in the ordinary course of business. of undue influence so it becomes void. the agreement should be avoided before innocent third parties become affected or involved. The chela did the same. A accepts the loan on these terms. the contract is voidable at the option of the party whose consent was so caused.A contract is presumed to be induced by undue influence if the following two condition:- 1. ] Any other transaction:. A party has the position to dominate the will of the others 2.Undue influence makes an agreement voidable. When consent to an agreement is caused by undue influence.

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1[16. upon B’s coming of age obtains. B. during his minority. a bond from B for a greater amount than the sum due in respect of the advance.LEGAL ANALYSIS According to Indian Contract Act: Section 16 ‘Undue influence’ defined. (3) Where a person who is in a position to dominate the will of another. (a) A having advanced money to his son. or mental or bodily distress. a bond from B for a greater amount than the sum due in respect of the advance." 9 . A employs undue influence. by misuse of parental influence. Illustrations (a) A having advanced money to his son. by misuse of parental influence. upon B’s coming of age obtains. and the transaction appears. to be unconscionable. A employs undue influence. enters into a contract with him. on the face of it or on the evidence adduced. —(1) A contract is said to be induced by ‘undue influence’ where 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 uses that position to obtain an unfair advantage over the other. ‘Undue influence’ defined." (2) In particular and without prejudice to the generality of the foregoing principle. 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.— (1) A contract is said to be induced by ‘undue influence’ where 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 uses that position to obtain an unfair advantage over the other. illness. B. Nothing in the subsection shall affect the provisions of section 111 of the Indian Evidence Act. or where he stands in a fiduciary relation to the other. or (b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age. 1872 (1 of 1872). during his minority. the burden of proving that such contract was not induced by undue influence shall be upon the person in a position to dominate the will of the other.

This is a transaction in the ordinary course of business. It lies on B to prove that the contract was not induced by undue influence." (c) A. Eg. and the contract is not induced by undue influence. A accepts the loan on these terms. by B’s influence over him as his medical attendant. contracts a fresh loan on terms which appear to be unconscionable. Trustee and beneficiary with spiritual Guru and his disciples. This is a transaction in the ordinary course of business. being in debt to B. (c) A." (d) A applies to a banker for a loan at a time when there is stringency in the money market. 2. a man enfeebled by disease or age. Where he holds a real or apparent authority over the other. It lies on B to prove that the contract was not induced by undue influence. Where he stands in a Trust fiduciary (benefit) relation to the other. and the contract is not induced by undue influence. (b) A. is induced.(b) A. to agree to pay B an unreasonable sum for his professional services. Eg. 10 .] (d) A applies to a banker for a loan at a time when there is stringency in the money market. Mental Capacity of a person is temporarily or permanent effected by reason of age. A accepts the loan on these terms. to agree to pay B an unreasonable sum for his professional services. by B’s influence over him as his medical attendant. illness or mental or bodily distress. Income Tax officer and assesses principal and a Temporary Teacher. 3. The banker declines to make the loan except at an unusually high rate of interest. The banker declines to make the loan except at an unusually high rate of interest. contracts a fresh loan on terms which appear to be unconscionable. the money-lender of his village. a man enfeebled by disease or age. parent and child. B employes undue influence. B employes undue influence. solicitors and clients. is induced. Presumption of domination of will: Circumstances 1. being in debt to B. Master and servant. the money-lender of his village.

but as a result of being ‘influenced’ by the other party. Relationship between medical attendant and ward. 6 Smith. who had forged his father’s signature on promissory notes. This case involved ‘pressure’ being placed on a party in much the same way as occurs with duress. It is possible that the expansion in the type of threats which are now treated as potentially giving rise to duress would mean that they would now be put in that category. as with duress. The agreement was set aside as being obtained by undue influence. In Williams v Bayley. The equitable doctrine of undue influence operates to release parties from contracts that they have entered into. Contract Theory (2004). is to find the limits of legitimate persuasion. then sale representatives would all be out of a job. If it were impermissible to seek to persuade.6 ‘Influence’ in itself is perfectly acceptable: it is only when it becomes ‘undue’ that the law will intervene. The influence is ‘undue’ because an imbalance of power between the parties has been used illegitimately by the influencer. whether intentionally or not. The creditors had threatened that the son would be prosecuted if the mortgage was not given. cajole or otherwise encourage people to enter into agreements. It can be used to indicate some impropriety on the part of the influencer.Eg. The precise concept may be due for reconsideration. S. Clarity in deciding when that has occurred is not assisted by the fact that the word ‘undue’ has two potential meanings. however at the present there are authorities which are treated as being concerned with undue influence. for example. This does not imply any necessary impropriety on the part of the influencer. Alternatively the word can be used simply to indicate that the level of influence is at such a level that the influenced party has lost autonomy in deciding whether to enter into a contract. One of the main difficulties with undue influence. the claimant had agreed to give a mortgage over his colliery as security for debts incurred by his son. 11 . not as a result of improper threats.

During that meeting. she had signed a number of guarantees and charges relating to the matrimonial home. There is no need here for there to be a previous history of such influence. that in relation to a particular transaction. 1998). of which she was nominally a director. the defendant used undue influence. came into the room.There is an issue in whether the concept is ‘claimant-focused’ or ‘defendant-focused. 7 An example of this type of influence is to be found in BCCI v Aboody8. in a state of some agitation. 8 [1992] 4 All ER 955 12 . Aboody had not acted with any improper motive. Farnsworth on Contracts (2nd ed. It can operate for the first time in connection with the transaction which is disputed.’ If it is claimant-focused. E A. simply because she wanted the peace. The starting point for the law’s analysis is therefore not the substance of the transaction. Aboody was 20 years younger than her husband. In relation to actual. but the process by which it came about. then what matters is whether the claimant acted autonomously in entering into the contract. in order to support loans by the bank to the business. She had married him when she was 17. though the bank’s solicitor had at one meeting attempted to encourage her to take legal advice. For many years. He had concealed relevant matters from her. Mr. volumes I and II. the claimant must prove. if it is defendant-focused. She had taken no independent advice. he had unduly influenced his wife. on the balance of probabilities. Aboody. then what matters is whether the defendant has deliberately taken advantage of the claimant’s weaker position. How do the courts decide when influence has overstepped the limits of acceptability and become ‘undue’? The basic test in English law is that it is only where there is some relationship between the parties which leads to an inequality between them that the law will intervene. without reading them or questioning her husband about them. and his bullying manner had led her to sign without giving proper detached consideration to her own interests. 7 Farnsworth. and through arguing with the solicitor. managed to reduce his wife to tears. On the occasion which gave rise to litigation. she signed documents relating to her husband’s business. Mrs. It was held that although Mr.

unlike the first. Where actual undue influence is proved it is not necessary for the claimant to prove that the transaction would not have been entered into but for the improper influence. that ‘manifest disadvantage’ is not a requirement in cases of actual.The Court of Appeal in this case held that Mrs. solicitor and client. therefore. of undue influence. and trustee and beneficiary (but not husband and wife).’ The loans which she was guaranteeing had. Actual undue influence. it “calls for an explanation”. such as husband and wife. given the company a reasonably good chance of surviving. This second presumption. i. 2. This category applies to certain established special “fiduciary” relationships: parent and child. undue influence. religious advisor and disciple. guardian and ward. in CIBC Mortgages plc v Pitt. as opposed to presumed. therefore. will arise. but not undue influence. is rebuttable. This was the view of the Court of Appeal in UCB Corporate Services Ltd v Williams. in fact. that is sufficient. Undue influence may be categorized as follows: 1. clearly outweigh the benefits. however. Aboody would have been substantial. Such a special relationship gives rise to a presumption of influence only. 13 . The House of Lords. although there is normally some relationship between the parties. in which case the potential benefits to Mrs. a person in the position of Mrs Aboody would be likely to succeed in having the transactions set aside. If the transaction in question is suspicious. The position is analogous to that applying to misrepresentation or duress: as long as the influence was a factor in making the decision to enter into the transaction. There does not need to be any previous history of such influence. (a) Special relationship. then a second evidential presumption. because it was not to her ‘manifest disadvantage. The risks involved did not.e. subsequently indicated. If similar facts were to recur. The claimant must establish that the defendant used undue influence in relation to particular transaction. Aboody’s claim to set aside the transaction nevertheless failed.

1975. It will be for the defendant to prove that no such influence was exercised. normally. Following Etridge there is no longer any presumption of undue influence in such cases. then. is able to take unfair advantage. HL. This category covers cases where there is no special relationship as explained above. an inference of undue influence may also apply even if the relationship is not within one of the special relationships but one party. For example. the presumption of undue influence would not apply between bank and customer. 1887: i. is the transaction such as “not to be reasonably accounted for on the ground of friendship. an elderly farmer gave the Bank a guarantee in respect of his son’s overdraft and mortgaged the farmhouse to the Bank as security. It was later held by the House of Lords in National Westminster Bank Plc v Morgan. charity or other ordinary motives on which ordinary men act?” 14 .e. It was clear that the farmer had placed himself entirely in the hands of the assistant bank manager and had been given no opportunity to seek independent advice. the Court of Appeal held that it did so here and the transaction was set aside. The claimant must show they placed trust and confidence in the defendant.(b) No special relationship. but the relationship is nevertheless one of “trust and confidence” where one party is in a position to exert undue influence over the other. thus adopting the dictum of Lindley J. in Lloyds Bank Ltd v Bundy. in Allcard v Skinner. by reason of the confidence reposed in him or her by the other weaker party. Thus. where there is a transaction “calling for an explanation” an evidential presumption that there has been undue influence will arise. CA. Although. However in the Etridge case their Lordships considered that the label “manifest disadvantage” should be abandoned in favour of a test of whether the transaction “calls for an explanation”. 1985 that the transaction would only be avoided in such cases where the transaction itself was “manifestly disadvantageous” to the weaker party. relationship. once that is established.

the House of Lords refused to accept such a wide principle.The evidential presumption of undue influence may be rebutted by the beneficiary of the transaction showing that the other party exercised independent free will. “inequality of bargaining power”. the House of Lords indicated that the existence of independent advice may not be conclusive. 15 . namely. In Lloyds Bank v Bundy. However. This is normally done by proving that the other party received competent independent advice. in the Etridge case. had sought to establish a doctrine whereby all the instances where the courts intervene to set aside unconscionable transactions are based on a single unifying principle.R. “There is no precisely defined law setting limits to the equitable jurisdiction of a court to relieve against undue influence”. Lord Denning M. Lord Scarman said. In National Westminster Bank v Morgan.

Community professionals encounter circumstances where they believe it is happening. where families feel helpless to intervene.9 Most undue influence cases are seen in probate courts with petitions for guardianships. Other states have definitions in criminal or other codes. In all those situations. and with disputed wills and trusts. and a few states have definitions that can be summarized as: Undue influence occurs when a fiduciary or confidential relationship exists in which one person substitutes his own will for that of the influenced person’s will. For instance.” making the term a matter of personal interpretation. and where elders are left penniless by scams. adults are legally able to make decisions about their affairs unless a court has appointed a guardian or conservator. community practitioners such as Adult Protective Services staff. Of course. It may also be present in some criminal cases. Undue influence situations are also seen in contract law with documents such as deeds. Some state probate laws reference the term. 16 .ROLE OF JUDICIARY Understanding undue influence. and public health nurses who work directly with elders have identified situations where it seems that undue influence is currently taking place. judicial decisions on individual cases exist but they are usually known only in legal circles. sometimes by lottery scams initiated in other countries. Some people have said. and contracts. And. (29th ed 2004). and understanding the term. an elder who is unduly influenced has the legal 9 Chitty on Contracts. has proven elusive in social service and legal settings. Undue influence usually takes place behind closed doors and there are no witnesses. Definitions of undue influence have been difficult to legislate for many reasons. dissecting it. powers of attorney. defining it. courts consider evidence indicating that undue influence may or may not have already happened. “I know it when I see it. hospital discharge planners. With the emergence of elder abuse and mandatory reporting of elder abuse over the last three decades. The issue is particularly important because the number of people over 65 is increasing nationwide. conservatorships. physicians.

R. prisoners of war. and white collar crime. cults. Her sister in Canada received notice of the petition and was certain that Ms. needed the guardianship because she could not be talked out of speaking with her “dear friend” and sending the money. and observed her speaking on the phone in a secretive manner several times a day. The sister became convinced that Ms. domestic violence. R. Complicating the matter even further. undue influence is present in many other circumstances such as hostage situations. R. thought she was making investments. R. would not tell her sister who the caller was or what the call was about. families. 17 . Ms. It could even apply to totalitarian regimes that act to control populations since the elements are similar. was wiring to another country.right to spend his money on telemarketers even though it may jeopardize his assets. R. Such a variety of complex circumstances with varying levels of intensity have made it difficult to formulate an overarching definition of undue influence. Undue Influence Case A petition was filed for the Public Guardian to be appointed the guardian of person and estate for Ms. was being “railroaded” into a guardianship. The Western Union office had contacted Adult Protective Services with concerns about the amount of money Ms. received a million dollars if only she would send more money now—it was a Jamaican lottery scheme. was talking to her “dear friend” who lived in a different country and who was going to make certain that Ms. R. R. Ms. She was on the way to impoverishing herself. She immediately came to visit Ms. Complicating the matter is that undue influence is often linked to impaired cognitive capacity even though it frequently occurs when the elder clearly has capacity. telemarketers. Later it was learned that Ms. R. The court appointed a public guardian to serve as guardian of person and estate. R.

Attorneys will likely begin including the definition in their petitions for conservatorship. Education and training will be needed for the various professionals who encounter undue influence. The definition was purposefully written in lay terms so community practitioners can utilize it more easily.” remains to be seen. courts. and community practitioners have guidelines to assist them in determining if undue influence has occurred or is occurring.With this new statutory definition of undue influence. 18 . “where the rubber hits the road. The new law represents a sea change in defining undue influence. will reflect that finding in court rulings and opinions. Community practitioners may better able to articulate what undue influence means and to describe the specific circumstances in individual cases. attorneys. Implementation of the new definition. Since specific examples of evidence are included. and trusts. Courts will then consider if undue influence has taken place and if the decision is that it has occurred. wills. Time will tell how the definition will be implemented. undue influence may be more easily detected.

e. it is influenced by coercion. In this situation. threatening to kill or beat any person. Example: A threatens B to marry him. if the other party whose will is influenced by coercion seems any benefit in the contract. due to his dominant position. This involves physical pressure.COMPARITIVE STUDY Undue Influence and Coersion ‘Coercion’ is the act of threatening a person. then it can be enforceable. Coercion includes blackmailing. The acts influenced by coercion are voidable. or forbidden by the Indian Penal Code (IPC). Moreover. Coercion is a practice of unlawfully intimidating a person or property. it includes the actually committing or threatening to commit an offence which is strictly prohibited. Undue Influence is a situation in which one person. not void i. or else he will kill her whole family.e. that he doesn’t have any choice rather than entering into an agreement with the other party. harming the family of a person. detaining property. 19 . torture. influences the free will of another person by using his position and authority over the other person. ‘Undue Influence’ is an act of influencing the will of the other party. the consent of B is not free i. which forces the other person to enter into an agreement. in order to compel him to enter into the contract. 1860. employed to induce a person to enter into an agreement without his independent will. It is an act of compelling a person in such a manner. Mental pressure and moral force are involved in it.

parent – child. 4. in order to take inequitable advantage of his position. the weaker party can enforce it. doctor – patient. The dominant party tries to persuade the decisions of the weaker party. is not criminally liable under IPC. Conversely. whereas Undue Influence involves mental pressure. employer – employee. Coercion. 2. 3. any benefit received under undue influence. in a very nominal price. 1872. is criminally liable under IPC. in order to get good grades in the examination. The act of persuading the free will of another person. The party who employs coercion. Example: A teacher forces his student to sell his brand new watch. is to be returned back to the party as per the directions given by the court. i. On the other hand. Any benefit received under coercion is to be restored back to the other party.The parties to the contract are in fiduciary relation to each other like a master – servant. is defined in section 15 while Undue Influence is defined in section 16 of the Indian contract Act. solicitor – client. etc. if he seems some benefit in it. is known as undue influence. the party who exercises undue influence. 20 . Key Differences between Coercion and Undue Influence The major differences between coercion and undue influence are as under: 1.e. Coercion involves physical force. The act of threatening a person in order to induce him to enter into an agreement is known as coercion. by taking advantage of position over the weaker party. 5. In this situation. trustee – beneficiary. The contract between the parties is voidable. the consent of the student is affected by the undue influence. teacher – student.

Undue influence should subsume duress because it is a wider doctrine and better equipped to deal with lawful pressure situations. that is. The range of pressure which duress has expanded to include has resulted in an extensive overlap between the two doctrines. Conaglen provides a helpful summary: [Undue influence] is concerned primarily with the close relationship between the two parties and is determined to prevent any abuse of that relationship. CONCLUSION It is concluded that duress can and should be merged with actual undue influence. ‘Duress. The parties under coercion need not to be in any relationship with each other. Such defects give rise to a significant power imbalance between the parties. given the recent developments of the three doctrines. As opposed to undue influence. The doctrine of unconscionable bargains. That in and of itself is not sufficient to create the relationship which is so carefully protected by the doctrine of presumed undue influence. and Unconscionable Bargains – The Theoretical Mesh’ (1999) 18(4) NZULR 509. on the other hand. However. it is duress that is the superfluous doctrine. Undue Influence. the parties must be in a fiduciary relationship with each other. is concerned more with improper advantage being taken of a situation which has arisen as a result of cognitive defects in the weaker party. While there is a substantial overlap between undue influence and un-conscionability the substance. Therefore. but there need not be any special relationship between them aside from the fact that they have come together to negotiate a transaction and one is aware that the other is laboring under a special disadvantage. 21 . p 531-2. the doctrinal elements of the two doctrines differ. Any factual situations that cannot be dealt with using undue influence can be dealt with utilizing unconscionability.10 10 M D J Conaglen. but it will suffice under the doctrine of unconscionable bargains. it is submitted that undue influence and un-conscionability (and hence a three way merger) cannot be achieved.6.