Law of contract: Undue influence
Introduction
Section 10 of the Indian Contract Act defines what agreements are treated as contracts. This
Section gives important ingredients which must be part of an agreement for it to qualify as a
valid contract, and free consent is specified as one such ingredient. Consent is defined as
meeting of minds in Section 13, and Section 14 specifies when the consent is free. Section
14(2) states that undue influence as one such factor whose presence renders the consent as
not free. Thus, when a person gives his consent because of undue influence of another person,
his consent is not said to be free and thus the contract becomes voidable at his option as per
Section 19A of the Indian Contract Act.
What is undue influence?
Section 16 of the Indian contract Act defines undue influence as a technique, employed by a
party who is in a position to dominate the will of the victim, which induces the victim to
surrender his consent to the will of the dominating party. There are two major components
which must be present for the case of undue influence:
One of the parties must be in a position to dominate the will of the other.
The party in the dominating position must make use of their position to take undue
advantage of the party over which they bear influence.
Section 16(2) specifies the cases in which one of the parties can be said to be in a position to
dominate the will of the other:
a) Where one party hold apparent or real authority over the other, or where there exists a
fiduciary relation between the two parties; or
b) Where the mental capacity of one of the parties is temporarily or permanently affected
because of illness, age, or mental or bodily distress.
Fiduciary relationships are the relationships based on good will and trust. For example, the
relationship between parents and a child, or doctor and patient, or financial advisor and client,
etc.
Relevant legal provision(s)
Indian Contract Act provides the following legal provisions for consent obtained by undue
influence:
Real or apparent authority:
Real authority is said to exist between two people in the cases such as police officer or
an employer, etc. and apparent authority is the authority which is pretending real
authority without its existence. When a person who holds such authority exerts
influence over the other party for his wrongful enrichment then it is said to be undue
influence.
Fiduciary relationship:
These are the relationships which are based on good will and trust existing for each
other between two parties. Where such a relationship exists, one party disposes his/her
confidence in the other party and makes the other party’s influence dominate him/her.
The other party, when, misuses such trust to the detriment of the victim it is said to be
undue influence. Examples of such relationships are parent-child, doctor-patient,
lawyer-client, etc.
Affecting mental capacity:
the case of Inder Singh v. Dayal Singh establishes the principle that where one party
uses the temporary or permanent decline of the mental capacity of another person to
his or her advantage , it is said to be undue influence. This decline in the mental
capacity of one person may be due to the reason of old age, illness or mental or bodily
distress.
Burden of proof:
if there transpires a transaction which, prima-facie, appears to be unconscionable, then
the onus of proving that the consent was not induced by undue influence lies on the
party which is in the dominant position over the other party. A case may appear
unconscionable when one party is in a position to dominate the will of the other and
the transaction results in the enrichment of the dominating party.
Near relations:
just because the parties were closely related to each other, it is not necessary that the
contract was induced by undue influence.
Contract with a pardanashin woman:
the term ‘pardanashin’ literally means hidden behind a veil. But for the purpose of
this Section, all the women who are do not have a knowledge of the workings of the
worldly matter or are old and illiterate and are prone to succumb to easy
manipulation, are considered in this provision. In case when such a woman acts under
full confidence of another party, who falsely manipulates her, and enters into a
contract, her consent is said to be vitiated and not free.
Case laws
Mannu Singh v. Umadat Pandey- this case explains how a contract can be affected by undue
influence which may be exerted in a fiduciary relationship. The plaintiff was an old man who
was influenced by his spiritual guru in signing off his property to the guru. Later he filed a
petition for cancellation of the legal instrument because the consent given by him was not
free.
Marci Celine D’Souza v. Renie Fernandez- this case is an example of misuse of the influence
by a medical attendant over a mentally infirm person. The plaintiff made a gift deed in favour
of the medical attendant which was not signed by any witnesses. The burden to prove the
contract conscionable fell upon the medical attendant and upon failing to do so, the
instrument was held cancelled.
Lancashire Loans Ltd v. Black- a money lending transaction, entered into by a girl just before
her marriage, as surety for her mother was held to be entered under undue influence.
Critical analysis
The concept of undue influence is based on Doctrine of Equity in order to prevent unjust
enrichment by entering into unconscionable agreements. This is applicable in all the cases
where there exists an influence with one party and misuse of such influence takes place, also
where betrayal of trust and confidence occurs. The law provides for the contract to be
voidable at the option of the victim of undue influence so as to protect the vulnerable party
and helpless people like a minor, mentally ill person, a person of old age, or a pardanashin
lady, who are dependant on others for dealing with certain matters and are unable to properly
comprehend the consequences of their actions. This provision prevents the misuse of
authority, real or apparent, which exists with one person over the other and safeguards the
interest of the public.
Conclusion
The Indian Contract Act extensively deals with the provisions for undue influence. For any
agreement to be a contract it must have the element of free consent, and for consent to be free
it must be exempt from any kind of undue influence. It must be kept in mind that undue
influence exists where a party is in a position to dominate the will of the other to their own
advantage. But the mere existence of such authority or relationship between the parties does
not renders a contract voidable. The party which is in the dominant position must exert its
influence over the other party to unjustly enrich himself or herself. The provision for undue
influence protects the vulnerable party in case of fiduciary relationships such as child-parent,
patient-doctor, client-counsel, etc., mental incapacity of a person due to the reasons of old
age, illness or distress, and pardanashin women, etc. the burden to prove that an agreement,
which appears to be unconscionable on the face of it, is valid in actual is put over the party in
the dominant position and thus the victim of the undue influence is given the benefit of the
doubt.
