MEANING AND DEFINITION

Undue influence refers to a situation where one party exerts excessive pressure on another, compromising the latter’s free will in forming a contract. Section 16(1) of the Indian Contract Act, 1872, defines it as:

“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.”

ESSENTIALS OF UNDUE INFLUENCE

For a claim of undue influence to be valid, the following elements must be present:

1. Existence of a Dominant Position: One party must be in a position to dominate the will of the other. According to Section 16(2), this can occur when:

   • One party holds real or apparent authority over the other.
   • A fiduciary relationship exists between the parties.
   • One party’s mental capacity is affected due to age, illness, or mental or bodily distress.

2. Use of Dominant Position to Obtain Unfair Advantage: The dominant party must have used their position to gain an unfair advantage in the contract.

LEGAL PROVISIONS

Section 16 of the Indian Contract Act, 1872, elaborates on undue influence, detailing when a person is considered to be in a position to dominate another’s will and the implications thereof. Additionally, Section 19A provides that when consent to an agreement is caused by undue influence, the agreement is voidable at the option of the party whose consent was so caused.

PRESUMPTION OF UNDUE INFLUENCE

The law presumes undue influence in certain relationships, such as those between parent and child, guardian and ward, doctor and patient, and solicitor and client. In such cases, the burden of proof shifts to the dominant party to demonstrate that the contract was not induced by undue influence.

CASE LAWS ILLUSTRATING UNDUE INFLUENCE

1. Raghunath Prasad v. Sarju Prasad (1923) 51 I.A. 101: In this case, a son mortgaged property to his father under circumstances suggesting undue influence. The court held that the father, being in a position to dominate the will of his son, had obtained an unfair advantage, rendering the contract voidable.

2. Ladli Prasad Jaiswal v. Karnal Distillery Co. Ltd. (1963) AIR 1279: Here, a managing director secured personal benefits through his position. The Supreme Court held that the transaction was induced by undue influence, as the director misused his fiduciary position to gain an unfair advantage.

EFFECTS OF UNDUE INFLUENCE ON CONTRACT VALIDITY

A contract induced by undue influence is voidable at the option of the aggrieved party. This means the influenced party can choose to either affirm or rescind the contract. If they opt to rescind, they must restore any benefits received under the contract, to the extent possible.

DEFENSES AGAINST ALLEGATIONS OF UNDUE INFLUENCE

To counter a claim of undue influence, the dominant party can demonstrate:

• The absence of a dominant position.
• The contract was fair and based on mutual consent.
• The influenced party had independent advice before entering the contract.

CONCLUSION

Understanding undue influence is crucial for ensuring the validity of contracts. It safeguards individuals from being exploited in situations where power imbalances exist, ensuring that all contractual agreements are entered into freely and fairly.