Contract Law I – Research Paper

Undue Influence

This research paper is focused on the study of section 16 of Indian contract act ‘Undue Influence’.
This paper elaborates the significance of various contracts which are affected from undue influence
due to real, apparent authority or fiduciary relationship where one person is in position to dominate
the will and consent of another party.

We are going to understand the topic with the assistance of the Indian Contract Act of 1872 and also
Case Laws associated with the topics.

Introduction:

Indian Contract Act of 1872 defines consent in the section 13 of the act as “meeting of mind of the
parties which is in legal terms as consensus ad idem (when two or more persons agree in the same
sense upon the same thing). Further in according to section 14 of the act it is mentioned about the free
consent to the contract where both the parties to the contract enter with the free will, which means the
consent towards the contract is free if it is not due to any kind of force or any of the following.

 Section 15 – Coercion
 Section 16 – Undue Influence
 Section 17 – Fraud
 Section 18 – Misrepresentation
 Section 20-22 – Mistake

If the contract is initiated with any of the above sections, in such case the contract is either
void or voidable. In case there is no consent from parties then in that scenario the contract is
said to be Void ab Initio (Void from the beginning).

Keynote:

Section 16 – Undue Influence (Research Topic)

Ability to dominate the will of others

Real or Apparent Authority and Fiduciary Relationship

Mental Distress
Burden Of Proof
Pardanashin Woman
Power to set aside contract induced by Undue Influence
Case Reference relating to Undue Influence (Case Law: Lakshmi Amma and Ors. Vs.
Talengalanarayana Bhatta and Ors.)
Conclusion
Undue Influence:

Undue Influence is defined under section 16 of Indian Contract Act of 1872 which says – “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.”

In any contract, consent of either of the party is due to undue influence is considered only
when it full fills the following conditions:

 Where one party is in a position to dominate the will of other party

 One party misuses the position
 One party obtains the unfair advantage in contract

The word undue means unnecessary, unwarranted or anything required in excess whereas
influence means convincing or persuading the mind of the other party to the contract through
changing his will or by altering perspective. Undue Influence applies to a relationship which
may be connected by blood which is either real/ Apparent or some other kind of relationship
which can be either fiduciary or connection based on trust between parties. It means unfair
utilization of one who is in a superior position to acquire the consent of another party who is
in a weaker position. For reference such as –

Ability to dominate the will of others:

Section 16(2) of Indian Contract Act defines conditions for a person in a position to dominate
the will of another person, cases where a person is in a position to dominate the will and mind
of another party as follows.

A. There should be a relation or connection between the parties.

I. Real or Apparent Authority:

Real or apparent authority over the other in which one can be dominated by the other.
For Example: Father and Son, Mother and Daughter, Husband and Wife

Examples for above condition:

a) A mother applies undue influence on son to complete a work assigned, else she will give up
the relationship with the son.

b) An employer applies his undue influence on his employees to complete the work else he will
terminate them from the job.

II. Fiduciary Relation:

Where one person is in a fiduciary relation with another which is made upon the trust
between the parties.
Examples for above condition:

a) A bank manager asks for money in order to get a loan cleared for another person.

b) A cop asks for bribe to clear of a case of the person in custody

B. Mental/Bodily Distress:

Mental or bodily distress where the mental ability of one party is affected or influenced.
Which means that a person makes a contract with another person whose mental capacity is
temporarily or permanently affected by reason of age, illness or mental or bodily distress.

Example: A man is weakened by both age and illness whereas his medical attendant
influences his position over him and asks him to pay an unreasonable sum for his professional
services.

Undue Advantage:
In the scenario of Undue Influence, the proper situation in which the contract was performed will be
taken into consideration along with the relationship shared between the parties. The same is applied to
all the relations where one party can perform domination over the other party which is for reference
existing of Real or Apparent Authority or a Fiduciary relationship.
In any case where the person is in a dominating position but does not practice it over other party is not
to be considered as Undue Influence as only the usage of that dominating position is mandatory to
focus and calculate whether the contract was made with the action of attaining the undue advantage
from the said party and contract. Undue advantage is applied when such advantages are not specified
in the given contract.
Sometimes undue advantage can also be taken from a legal process where one party is a criminal and
not in a position of domination. Such as a case of Vijay Madanlala Vs. Union of India (2020 S.C) –
in this case the petition was filed by Mr. Vijay who was serving imprisonment for his crime was
granted interim bail of 2 months as his mother was ill, the petitioner after completion of 2 months
requested for extension of his bail by 1 month as his mother passed away and he had to complete the
rituals, bail was granted but was also informed that there will be no more extension and petitioner had
to return within the extended period, but the petitioner again requested for extension stating that he
himself was ill and needed proper medical care and as the pandemic was ongoing it would not be safe
for him to stay in prison.
The Supreme Court rejected the plea stating that it is an abuse to legal process (procedure)
by not following what was mentioned in the 1st extension of interim bail and also levied charges of
INR = 25000/- as penalty for not following the legal procedure. Was told that the petitioner will
receive proper care in treatment for his disease.

Real or Apparent Authority and Fiduciary Relationship:

Section 16(2) of Indian contract Act 1872 mentions the same thing as one person is in a position to
dominate the will of another party which is it can be assumed or imagined that a person has the ability
to create or exercise undue influence. According to clause (a) of section 16(2) of the act states that a
person holds a real or apparent authority over other such as a police officer’s authority to dominate the
accused or also an apparent authority where it is actually no real authority but is able show that he has
such authority over other party such as father and son where a father shows that he has complete
authority over the son and can dominate the will of his son with such authority.

Mental Distress:
Clause (b) Section 16(2) of Indian Contract Act 1872 also mentions that the person with a dominating
position takes an undue advantage of another party and gets into a contract with such person whose
mental capacity is temporarily or permanently affected due to reason of age, illness or mental and
bodily distress. Undue influence is induced when a person tries to possess temporary or permanent
undue advantage of another party whose mental condition is unstable.
Undue influence can also be accepted in case it is implied towards a person who has just attained
majority as such person’s mental capacity cannot be compared as completely matured unless it is
proved by the person who is in dominant position that the contract was initiated with proper terms
good faith and proper consideration was paid to person who is in question of being dominated.

Burden Of Proof:
According to section 16(3) of Indian Contract Act of 1872 – when a person in a position to dominate
the will of other person or party to a contract, enter into a contract with a person in a weaker position
and such transactions or contracts appears to be induced with undue influence either on the face of
such contracts or on the evidence produced to be unconscionable. In such contracts which are said to
be induced by undue influence, the burden of proving relies on the person who is in a dominating
position that such contracts were performed without any force or pressure towards another party and it
was with free consent and good faith and also there was no domination of any superior positions
applied in particular contract which is in question.
Example: A being in debt to B, who is a money lender in the village of A, gets into a contract with the
fresh loan on the terms which on face of it appeared to be unconscionable. Here the burden lies on the
money lender ‘B’ to prove that the contract was induced by the undue influence.
In Wajid Khan Vs. Raja Ewaz Ali Khan (1891) a pardanashin lady who was herself not able or not in
position of carrying any business due to her old age and also illiteracy, granted her property without
any valuable or proper consideration in favour of her confidential managing agent. The judgement by
the privy council was that it was necessary from the managing agent to prove that there was no undue
influence towards the lady and also that he had made proper use of confidence reposed by the lady in
him.

Pardanashin Woman:
As mentioned in above case law regarding a contract with a pardanashin woman, any woman who is
either with a veil or is behind the screen is called a Pardanashin woman. Such women can easily be
influenced as they are subjected to illiteracy and ignorance. In case of a transaction with pardanashin
woman, burden of proof again to be provided by the other party which is by proving that the contract
with the woman was not induced by anu kind of enforcement or undue influence and the lady knew
the provisions and everything prescribed in the contract which she is getting into. The same case law
is a reference for pardanashin woman Wajid Khan Vs. Raja Ewaz Ali Khan (1891).

Power to Set Aside contract induced by Undue Influence:

According to Section 19-A of Indian Contract Act of 1872 – When in any contract or even agreement
a Consent is caused by Undue Influence, such agreements or contract is voidable at the option of the
party whose consent was so caused.
Any such contract may be set aside either absolutely or if the party who was entitle to avoid it has
received any benefit thereunder, upon such terms and conditions as to the court may seem just.

Case Reference relating to Undue Influence:

Below is the most important Case law relating to the Undue Influence, as this case covers the entire
topic and conditions of Undue Influence where there is Real and Apparent Authority between the
Grand-Father and Grand-Son, Mental Distress, Undue Advantage Taken by the Grandson and also it
speaks about the burden of proving that contract was not induced by Undue Influence.

Case Law: Lakshmi Amma and Ors. Vs. Talengalanarayana Bhatta and Ors.

In this case Lakshmi Amma’s Husband Narasimha Bhatta had given all of his properties to
one of his grandson Narayana Bhatta. Case was earlier filed by Mr. Narasimha Bhatta with trial court
stating that he was under undue influence of his grandson due to his health and age to sign the
documents for the settlement deed giving away all his properties to grandson. Trial court gave the
judgement in favour of Mr. Narasimha Bhatta but the same was challenged by Mr. Narayana in High
court of Kerala where the judgement of trial court was reversed. Later before the judgment of high
court Mr. Narasimha Bhatta died so his wife was appellant and challenged the judgment of high court
in supreme court where the court agreed with given evidence that the deed of settlement was actually
signed by the undue influence.
Here the undue influence was both by relationship and mental distress where Mr. Narasimha Bhatta
was under undue influence of Grandson. Narayana implied Undue Influence towards his grandfather
due to his age and illness.

Conclusion to Research Topic:

During the course of this research topic by learning also about the cases related to it, Undue Influence
is mostly caused by the person who is in a superior position towards another party where the will can
be dominated and influenced to take undue advantage. Consent in such a scenario is inadequate as it is
either by influential pressure or due to mental health of the other party. In case the person in
dominating position is unable to prove that there was no undue influence or advantage the contract
becomes void only after the court seem just.