DIFFERENCE BETWEEN COERCION AND UNDUE INFLUENCE

COERCION
‘Coercion’ is the committing, or threatening to commit, any act forbidden by the Indian 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.

Ingredients of coercion

Committing or threatening to commit any act forbidden by IPC

For getting the consent for a contract, if any person actually commits or threatens to commit any act
which is forbidden by IPC, then the consent so obtained is said to be a consent obtained by coercion.
Eg. A gave a good beating to B and compelled him to sign a promissory note in favor of ‘A’. for Rs
5000. The contract is said to be induced by coercion because the act of beating is a forbidden act
under IPC; hence the consent is not free, So ‘B’ can avoid the contract.
In Ranganayakamma V Alwar Setti, 1889, a young widow was compelled to adopt a boy by relatives
of her husband by preventing the removal of dad body of her husband for burial until she agreed to
adopt the boy. Under this compulsion, she agreed to adopt the boy. Later she filed a suit and refused
to treat that boy as her adopted son. The court held that the consent given by her was not of free
consent and vitiated by coercion. Obstructing a dead body from being removed for burial is an
offence under section 297 of IPC.
In India, an attempt to commit suicide is an offence punishable under sec 308 of IPC. Committing
suicide or threatening to commit suicide is not an offence under any section of IPC. But in the case of
Amiraju Vs Seshamma, the husband by a threat of committing suicide induced his wife and son to
create a release deed in favor of his brother, the court held that though the threat to commit suicide
is not punishable under IPZC, the threat amounts to coercion and the contract is voidable.

Unlawful detaining or threatening to detain any property

If any person unlawfully detains or threatens to detain any property (movable or immovable) to the
prejudice of any person of getting consent of party to a contract, is an act amounting to coercion.
Mutthiah chettiar Vs Karuppan chetti (1927), an agent refused to hand over the account books,
bonds, etc connected with the business to his successor, unless the principal give him a release from
all liabilities during the term of his agency. The principal executed a release deed in favor of him in
order to get back all the documents. Later, he filed a suit to declare the suit invalid, by alleging that
his consent for the release deed was obtained by threat of detaining the account books and bonds,
etc. The court considered this act as coercion and held the release deed as invalid.

Act of coercion may be directed towards any person

The act of coercion may be directed toeards any person i.e, it may be directed against the other
contracting party or his relatives or friends.
Eg. ‘A’ threatened to kill ‘X’ (B’S friend) if ‘B’ does not sell his house to ‘A’. Out of fear, ‘B’ agreed to
sell his house to ‘A’. Here the threat was to ‘X’, a third party to contract. ‘B’ can avoid the consent on
the grounds of coercion.

The act of coercion need not be from the party to contract

There is no rule that the act of coercion must be always from a contracting party. The act of coercion
committed by third party on behalf of a contracting party renders the contract as voidable.
Eg. ‘A’ threatens to kill B if he does not sell his house to ‘C’. Out of fear, ‘B’ agrees to sell it to ‘C’. ‘B’
can avoid the contract on the grounds of coercion though the contracting party ‘C’ has not
committed any act of coercion for obtaining ‘B’s consent.
The place of act of coercion is immaterial
It is immaterial whether the IPC is in force or not in that place where the act of coercion is employed.

‘A’, an Indian citizen in England, caused ‘B’, another Indian to enter into an agreement, to sell his
properties in India to ‘A’ by using an act amounting to criminal intimidation under IPC. A’s act
amounts to coercion though the place (England) where it was employed has no application of IPC.

UNDUE INFLUENCE
According to sec 16 of Indian Contract act 1872, A contract is said to be induced by "under 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 is the improper use of any power possessed over the mind of the contracting party.
It is the misuse of the position to obtain unfair advantage and is a kind of fraud. This may prevent
the other contracting party from exercising his free will. Contract influenced by undue influence is
voidable. Some authors explain undue influence as mental coercion.
Ingredients of undue influence
 There must be some subsisting relation between the parties
 The relation is of such nature that one party is in a position to dominate the will of the other
 The dominant party should have used his dominant position to obtain unfair advantage over
the other
Domination of Will
In the following circumstances, a person is deemed to be in a position to dominate the will of the
other
 Where one holds real or apparent authority over the other
 Where one party stands in fiduciary relation with other
 Where one person whose mental capacity is temporarily or permanently affected by reason
of old age, illness or mental distress
Person in real or apparent authority over the other
A person who holds some authority over the other person can directly or indirectly control over the
other. The following are some of the notable instances
Legal authority - lawyer and client
Medical authority - Doctor and patient
Spiritual authority - Guru and Disciple
Employment authority - Master and servant

In all the above said examples, by virtue of one’s authority over the other, any contract entered
between such persons is under the general presumption that the contract is induced by undue
influence and the aggrieved party can avoid the contract. In the case of Takri devi Vs rama dogra, a
gift is executed by an old illiterate woman deserted by her husband in favour of her advocate was
set aside on ground of undue influence because the done (advocate) was in dominant position. The
gift was valuable land running into huge amount.
In Allcard V Skinner, the plaintiff was a sister and the defendant was the mother of the convent. The
plaintiff joined as a sister in 1871 and took vows of poverty, chastity and obedience. Between 1871
and 1878, the plaintiff gave properties worth $7000 to the defendant. In 1879, the plaintiff left
sisterhood. In 1885, the plaintiff sued her for the recovery of all the properties given to mother
superior on the ground that all her properties were taken by undue influence. The court held that
though the gifts were made under pressure that she could not resist, there was a unreasonable
delay in filing the suit and dismissed the case.
Persons in Fiduciary relation
Fiduciary relation means a relation of trust and confidence. Trust and confidence gives good
opportunity to the person in whom confidence is held, to exploit and abuse the confidence for his
advantage. The following persons stand in fiduciary relations
(a) Parent and child,(b) husband and wife, (c) Guardian and ward, (d) principal and agent, (e)
creditor and debtor

In the above examples, the other party is in a position to dominate the will of the other. Whether
any contract is entered between such persons, the general presumption is that the contract is
induced by undue influence, hence it is voidable

Persons in mental distress

A person is said to be in mental distress when his mental awareness is temporarily or permanently
affected due to old age, mental or bodily illness or by any other reason. A contract entered with such
a person by taking advantage of the mental distress, is voidable

Burden of proof
Whenever a strong allegation of undue influence is raised by one party as a ground to set aside the
contract, he need not prove the actual use of undue influence with evidence. But the burden of
proof is on the other party to prove with evidences that the contract was not signed under undue
influence.

Unconscionable bargains
Where a person who has already indebted to a money lender contracts a fresh loan with him on
exorbitant rate of interest, the general presumption is that the borrower’s consent for the loan on
such a high rate of interest is not free and the money lender has used undue influence for getting his
consent, because the borrower was in an unequal position with the lender. If the money lender fails
to prove that he has not used any undue influence, the court will reduce the rate of interest.

Coercion Undue Influence

1 It is a physical threat to a person or
property
2 It involves doing or threatening to do an
illegal act
3 IN the case of coercion, in addition to
avoiding the contract (voidable), penal
action may also be possible under IPC
4 It may be employed by a contracting
party or on his behalf by any other
person
5 It may be employed against the other
contracting party or against his relatives,
friends and neighbors
6 No specific relationship between the
parties are necessary
7 The court cannot draw the presumption
of coercion
It is a mental or moral threat
It involves doing an act which may not be illegal
but is only unfair
The contract is voidable, but no penal action is
possible
It is possible only by party to the contract
It shall be employed only against the other
contracting party
There should be some specific/binding
relationship between the parties
The court may draw the presumption of undue
influence in certain circumstances
 MINOR CONTRACT IS VOID AB INITIO

An Agreement without consideration is void." Explain this rule and state exceptions if any.

Section ‘2’ of the Indian contract act deals with competence of a person to enter into a contract.
According to this section, every person is competent to contract who is of the age of majority
according to the law to which he is subject, and who is of sound mind and is not disqualified from
contracting by any law to which he is subject. This section mainly emphasizes that the contract
(offeror and offeree) should be a person capable of understanding the terms and conditions of the
contract and its effects. The general presumption is that only majors alone can understand the
agreement in a legal sense. Hence the law insists that the parties should be a moajor. Again the act
insists that they should be of sound mind, otherwise they will not understand the effect of a
contract.
According to section 3 of Indian majority act, 1875, a person domiciled in India is deemed to have
attained majority on his completion of eighteen years of age. Till then, he is considered as minor. Till
1969, the position in England was that a person attains majority after 21 years. The family reforms
act 1969 has reduced it to 18 yrs.
Section 10 of the Indian contract act 1872, mentions the parties to contract must be competent and
section 11 says that a minor is not competent to contract. But neither sections makes it clear that
whether the minor’s contract is void or voidable. The controversy was set right by the privy council
in Moohiribibi Vs Dharmodas Ghose, 1903, by categorically declaring that all contracts by minor are
absolute void abinitio and unenforceable. In this case a minor (mortgager) executed a mortgage
deed for Rs 20000 and the party (mortgagee) had paid a sum of Rs 8000 as advance to the minor.
Later the minor filed a suit to set aside the mortgage deed. The mortgagee claimed the refund of Rs
8000 paid to the minor under the mortgage. He contended that the contract with a minor is only
voidable and the minor who is avoiding it is liable to return the amount. But the court held that the
minors agreement is absolutely void and hence the minor is not liable to return the amount which
he has received under the contract.

Sec 10. What agreements are contracts?

All agreements are contracts if they are made by the free consent of parties competent to
contract, for a lawful consideration and with a lawful object, and are not hereby expressly
declared to be void. Nothing herein contained shall affect any law in force in India, and not
hereby expressly repealed, by which any contract is required to be made in writing or in the
presence of witnesses, or any law relating to the registration of documents.
Sec 11. Who are competent to contract?
Every person is competent to contract who is of the age of majority according to the law to
which he is subject, and who is sound mind and is not disqualified from contracting by any
law to which he is subject.

Indian Contract Act 1872 in section 2(e) says that every promise and every set of promises that form a consideration for
each other is an agreement. Thus, it is clear that the formation of consideration for a promise or promises is a key ground
on which a promise becomes an agreement. There cannot be an agreement if there is no consideration. Section 25 of the
act says the same thing in precise terms and also gives three exceptions when an agreement without consideration is a
valid contract:

Section 25: An agreement without consideration is void unless,

1. it is in writing and registered and the promise has been made due to natural love and affection between the
parties standing in near relation to each other.
2. it is a promise to compensate, wholely or in part, a person who has voluntarily done something for the promisor
or something that the promisor was legally bound to do.
3. it is a promise to pay for a time barred debt.

Natural Love and Affection

Rajlukhy Debi vs Bhootnath Mukherji -  Court found no evidence of love.

Bhiwa vs Shivram - A person gave half of his property to his brother in order to be reconciled with him. Court held that it
was due to natural love and affection.

(2) Agreement Made Without Consideration-

An agreement made without consideration is void, unless
1)    it is expressed in writing and registered under the law for the time being enforce for the registration of(documents), and is
made on account of natural love and affection between parties standing in a near relation to each other; or unless.
2)    It is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or
something which the promissory was legally compellable to do, or unless.
3)    It is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially
authorized in the behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the
limitation of suits.

In any of these cases, such an agreement is a contract.

Explanation 1–Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.
Explanation 2- An agreement to which the consent of the promisor is freely given is not void merely because the consideration
may be taken into account by the court in determining the question whether the consent of the promisor was freely given.

Illustrations
a)    A promises for no consideration, to give to B Rs. 1000; this is a void agreement.
b)    A, for natural, love and affection, promises to give his son, B Rs. 1000. A puts his promise to B into writing and registers it. This
is a contract.
c)    A finds be B’s purse and gives it to him. B promises to give A Rs. 50. This is a contract.
d)    A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a contract.  

Exceptions to the Rule “No Consideration No Contract”

The general rule of law is that an agreement without consideration is void. “A bargain
without consideration is a contradiction in terms and cannot exist.”* But there are a few
exceptional cases where a contract, even though without consideration, is enforceable. They
are as follows:
1. An agreement made without consideration is valid if—
(a) it is expressed in writing, and
(b) it is registered (under the law for the time being in force for registration of
documents), and
(c) it is made on account of natural love and affection, and
(d) made between parties standing in a near relation to each other.
Examples
(1) An elder brother, on account of natural love and affection, promised to pay the debts
of his younger brother. The agreement was put to writing and was registered.
Held : The agreement was valid [Venkatswamy v. Rangaswamy (1903) 13 M.L.J. 428].
(2) A Mohammedan husband, by a registered agreement promised to pay his earnings
to his wife.
Held : The agreement, though without consideration, was valid [Poonoo Bibi v.
Fyaz Buksh (1874) Bom. L.R. 57].
Notice that for an agreement to be valid under this clause, the agreement must be the
result of natural love and affection and nearness of relation by itself does not necessarily
import natural love and affection.
Example
A Hindu husband by a registered document, after referring to quarrels and disagreements
between himself and his wife, promised to pay his wife a sum of money for her
maintenance and separate residence, it was held that the promise was unenforceable
[Raihikhy Dohee v. Bhootnath (1900) 4. C.W.N. 488].
2. A promise made without consideration is valid if, “it is a promise to compensate wholly
or in part, a person who has already voluntarily done something for the promisor, or
something which the promisor was legally compellable to do” [Section 25 (2)].
* Lord

Void Contract
A contract that has no legal force or binding effect.

Acceptable alternative way of describing a void contract:

 A contract that is nul.

 A contract which is legally no good.

Notes on this term:

Some examples of void contracts are:

 A contract which involves fraud in the execution.

 A contract in which the subject matter becomes illegal.

 A contract signed by a person under guardianship.

The subject of void contracts is studied in more depth in the chapters on capacity
and conduct which invalidates mutual assent.

Void Agreement

Definition:

Literally: Void means having no legal value and agreement means Arrangement, promise or contract made with somebody.  So
void agreement means an agreement that has no legal value.

Traditionally: “An agreement not enforceable by law is said to be void”. [Sec 2(g)]

A void agreement has no legal effect. An agreement which does not satisfy the essential elements of contract is void. Void
contract confers no rights on any person and creates no obligation.
Example of void agreement: An agreement made by a minor, agreement without consideration, certain agreements against
public policy etc.

Agreement which become void:

An agreement, which was legal and enforceable when it was entered in to, may subsequently become void due to impossibility of
performance, change of law or other reason. When it become void the agreement ceases to have legal effect.  

EXPRESSLY DECLARED VOID AGREEMENT

There are certain agreements, which are expressly declared to be void.
They are as follows:
(1)      Agreement by a minor or a person of unsound mind.[Sec(11)]
(2)      Agreement of which the consideration or object is unlawful[Sec(23)]
(3)      Agreement made under a bilateral  mistake of fact material to the agreement[Sec(20)]
(4)      Agreement of which the consideration or object is unlawful in part and the illegal  part can not be separated from the legal
part [Sec(24)]
(5)      Agreement made. without consideration.[Sec(25)]
(6)      Agreement in restraint of marriage [Sec(26)]
(7)      Agreement in restrain of trade  [Sec(27)]
(8)      Agreement  in restrain of legal proceedings[Sec(28)]
(9)      Agreements the meaning of which is uncertain [Sec(29)]
(10)    Agreements by way of wager [Sec(30)]
(11)    Agreements contingent on impossible events [Sec(36)]
(12)    Agreements to do impossible acts [Sec(56)]