Undue Influence (S.

16)
Definition as per S.16: (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.
(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, or where he
stands in a fiduciary relation to the other; or
(b) 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.
(3) Where a person who is in a position to dominate the will of another, enters
into a contract with him, and the transaction appears, on the fact of it or on the
evidence adduced, to be unconscionable, he burden of proving that such
contract was not induced by undue influence shall lie upon the person in a
position to dominate the will of the other.
Nothing in this sub-section shall affect the provision of section III of the Indian
Evidence Act 1872.
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.
Salient Features
The above definition has got the following salient features:-
(1) One of the two parties to the contract is in a position to dominate the will
and mind of the other party. This is presumed when the parties to the contract
have a real or apparent authority over the other or one of the parties has got a
fiduciary relationship which puts him in a position to win over the mind of the
other party. Such position or relationship exists in the cases of minor and
guardian; trustee and beneficiary; son and father, wife and husband or vice-
versa.
The positon is also presumed where the party is disabled or infirm and has to
depend upon the other party to the contract. Mentally deficient and physically
disabled people can take the plea of undue influence in avoiding the contract.
(2) The dominating party should have obtained an unfair advantage from the
weaker party: and
(3) The transaction between the contracting parties is unconscionable. The
bargain is called
‘unconscionable’ where the two parties are not on equal footing and one of them
is making an exhorbitant profit of the other’s distress.
Unless all the three above stated conditions exist, the contract can not be
avoided on the pretext of Undue Influence. In the words of Sir Samuel Romilly
undue influences is presumed in “all the variety of relations in which dominion
may be exercised by one person over another”.
Effect of Undue Influence (S.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
Examples
(a) A’s son has forged B’s name to a promissory note. B under threat of
prosecuting A’s son obtains a bond from A for the amount of the forged note.
If B sues on this bond, the court may set the bond aside.
(b) A, a money-lender, advances Rs. 100 to B, an agriculturist, and by undue
influence induces B to execute a bond for Rs. 200 with interest at 6 per cent per
month. The Court may set the bond aside, ordering B to repay Rs. 100 with
such interest as may seem just.
Burden of Proof
The weaker party has a right to avoid the transaction on the plea of Undue
Influence. It is the other party who is to prove that he has not exercised any
undue influence in getting the consent of the weaker party. If the other party is
unable to prove it, the court shall set aside the transaction. (Refer to example
(b) given after definition of Undue (Influence).
(a) Parties suffering with physical or mental distress e.g. a patient suffering
with actue pain entering into a contract with a doctor.
(b) Parties having confidential relations. Confidential relationship is
presumed in between parent and child; guardian and ward; solicitor and client;
managing clerk of an attorney and his client; trustee and cetstui que trust;
doctor and patient Chela (disciple) and a Guru (spiritual advise; fiance and
fiancee. There is no undue influence in the relationship of mother and daughter;
husband and wife; grandfather and grandson and landlord and tenant;
credtior and debtor.
Rebuttal: all cases of prescribed Undue Influence can be rebutted on the
following grounds: (i) full disclosure of material facts was made to the weaker
party;
(ii) adequate consideration existed; and
(iii) the weaker party received independent legal advice.
Transaction with Parda-nishin women: Who is a parada-nishin women? A
woman who observes complete seclusion due to the prevailing custom in her
community is said to be parda-nishin. She does not act independently but has
to depend upon someone else for performing her outward duties. A woman
going to the Court to give her evidence, settling gent with her tenant, collecting
rents from them, dealing with other parties in matters of business, falling to
outsiders can not be regarded as a Parda- nishin woman. The training, habit
and surrounding circumstances are the main elements to be considered to
decide whether a woman is a Parda-nishin or not Wearing a Burga does no
make a woman a Parda- nishin.
A Parda-nishin woman can be influenced by undue influence. Persons entering
into contracts with such a woman have to be very careful because they may be
required to prove (1) that such woman understood the contents of the contracts;
(2) she had free and independent advice and (3)she exercise her free will.
The Privy Council has stated in 1931 in Tara Kumari Vs Chandra Mauleshwar
that the principles to be applied to transactions with such women are not merely
deductions from the law as to undue influence but have to be founded upon
wider basis of equity and good conscience. A good number of cases have been
decided not only by the privy Council but also by the Indian High Courts over
the point.
Distinction between Coercion and Undue Influence
We can distinguish between Coercion and Undue Influence. The distinction can
be made on the following basis:
(a) Definition, Coercion is an act punishable under the Indian Penal Code,
while Influence is not a penal act.
(b) Nature of force used, Coercion requires physical force exercised by one of
the parties to contract, while undue influence requires moral force.
(c) Parties Even a stranger’s act may account to coercion, but undue influence
can be exercised only by one of the parties to the contract. Stranger has no place
in undue influence.
(d) Effect. Coercion gives a right to the effected party to repudiate the contract
in full but under undue influence court may set aside the contract absolutely or
modify the terms of the contract on such terms which it feels just and equitable.