Business and Labour Laws - MGT 611 VU

Lesson 10
FREE CONSENT

We have already discussed the concept of legal capacity of parties to a contract and are in the process of
understanding the concept and scope of free consent.

Consent is said to be free if not caused by:

¾ Coercion or
¾ Undue influence or
¾ Fraud or
¾ Misrepresentation or
¾ Mistake
We have already discussed the concept and effects of coercion and shall discuss other factors in the
following paragraphs:

Undue influence
It means the exercise of the power or influence by a person who has some control or influence on the other
person, it is not just the existence of the influence or position of dominance but to prove undue influence, it
is required that influence of the power/ dominance vested in a person has been exercised to derive undue
advantage from the other party. In certain situations a party is in a position of dominance over other party.

Undue Influence has been defined in section 16 of the Act, same is reproduced below:
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 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) where 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.

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 face of it or on the evidence adduced, to be unconscionable, the 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.

Undue influence shall be considered to have been exercised if the following conditions appear:

Position of dominance / ability to dominate the other person

As we have discussed, a person must be enjoying a position of dominance or ability to dominate the other
person. Exercising undue influence due to the presence of fiduciary relation between the parties. This
relationship signifies a relationship of trust and confidence, such as relation between a doctor and his
patient. There must be actual use of the influence or exercise of that influence and deriving undue
advantage / benefit by virtue of that position of dominance / influence.

Illustrations on Undue influence

© Copyright Virtual University of Pakistan 1

Business and Labour Laws - MGT 611 VU
(a) A, having advanced money to his son, B, during his minority, upon B's coming of age obtains, by
misuse of parental influence, a bond from B For a greater amount than the sum due in respect of
the advance. A employs undue influence.
(b) A, a man enfeebled by disease or age, is induced, by B's influence over him as his medical attendant,
to agree to pay B an unreasonable sum for his professional services. B employs undue influence.
(c) 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 undue influence.
(d) A applies to a banker for a loan at a time when there is stringency. in the money market. The
banker declines to make the loan except at an unusually high rate of interest. A accepts the loan on
these terms. This is a transaction in the ordinary course of business, and the contract is not induced
by undue influence.

Explanation:

The above factors have been discussed in greater detail in the following paragraphs.

It will be sufficient for the present purpose to refer to a few of the leading authorities on the various points
dealt with by the text of the Act. The first paragraph of the section lays down the principle in general terms;
the second and third define the presumptions by which the Court is enabled to apply the principle. It is
obvious that the same power which can "dominate the will" of a weaker party is often also in a position to
suppress the evidence which would be required to prove more constraint in a specific instance.
Modification of the ordinary rules of evidence is accordingly necessary to prevent a failure of justice in such
cases. Where the special presumptions do not apply, proof of undue influence on the particular occasion
remains admissible, though strong evidence is required to show that, in the absence of any of the relations
which are generally accompanied by more or' less control on one side and submission on the other, the
consent of a contracting party was not free. In the case of a pure voluntary gift (though there is no general
presumption against the validity of gifts) the proof is less difficult; but this is not within our subject.

General meanings of Undue influence: The first paragraph gives the elements of undue influence; a
dominant position and the use of it to obtain an unfair advantage. The words "unfair advantage" must be
taken with the context. They do not limit the jurisdiction to cases where the transaction would be obviously
unfair as between persons dealing on an equal footing.

It is an essential condition for the application of the section that one of the parties should be in a position
to dominate the will of the other. No further question arises until this is proved. A plea of undue influence
can only be raised by a party to the contract and not by a third party.

Different forms of influence: ---The second paragraph of the present section makes a division of the
subject-matter on a different principle, according to the origin of the relation of dependence, continuing or
transitory, which makes undue influence possible. Such a relation may arise from a special authority or
confidence committed to the donee, or from the feebleness in body or mind of the donor. However, it is
impossible to find plain and clear-cut categories for transactions which are often obscure and complicated,
and sometimes purposely made so. Practically the most important thing to bear in mind is that persons in
authority, or holding confidential employments such as that of spiritual, medical, or legal adviser, are called
on the act with good faith and more than good faith in the matter of accepting any benefit (beyond ordinary
professional remuneration for professional work done) from those who are under their authority or
guidance. In fact, their honourable and prudent course is to insist on the other party taking independent
advice.

Mental distress: --- "A state of fear by itself does not constitute undue influence. Assuming a state of fear
amounting to mental distress which enfeebles the mind, there must further be action of some kind, the
employment of pressure or influence by or on behalf of the other party to the agreement." The mere fact,
therefore, that a submission was executed by the defendant during the pendency and under fear of a

© Copyright Virtual University of Pakistan 2

Business and Labour Laws - MGT 611 VU
criminal prosecution instituted against him by the plaintiff will not avoid the transaction on the ground of
"undue influence."

An aged father executed deeds of gift and a wakfnama at a time when he was in a weak state of mind as the
result of a long drawn out illness. These transactions were brought at the instance of his son and had the
effect of depriving the other members of the family of their just share of the inheritance. As it was proved
that the son was in a position to dominate the will of the father and that he used that position to his own
advantage, the deeds of gift and the wakfnama were set aside.

Proof of undue influence.---In dealing with cases of undue influence there are four important questions
which the Court should consider, namely, (1) whether the transaction is a righteous transaction, that is,
whether it is a thing which a right-minded person might be expected to do; (2) whether it was improvident,
that is to say, whether it shows so much improvidence as to suggest the idea that the donor was not master
of himself and not in a state of mind to weigh what he was doing; (3)whether it was a matter requiring a
legal adviser; and (4) whether the intention of making the gift originated with the donor.

Lapse of time and limitation: ---Delay and acquiescence do not bar a party's right to equitable relief on
the ground of undue influence; unless he knew that he had the right, or, being a free agent at the time,
deliberately determined not to inquire what his rights were or to act upon them. Lapse of time is not a bar
in itself to such a relief. There must be conduct amounting to confirmation of ratification of the transaction.

Consent of a party to transaction induced by suggestion of a fraudulent fact---Person so deceived

having means of discovering truth with ordinary diligence.

Effect---Where consent of a party was induced by the suggestion of a fact which was not true, and was
fraudulent, exchange deed so effected, held, would nevertheless be not voidable where person deceived had
means of discovering truth with ordinary diligence.

Question about exercise of undue influence---Pre-eminently a question of fact--Concurrent finding on

question of soundness of mind of vendor and absence of undue influence over him---Not open to
challenge, when these findings arc fully sustainable on record---Constitution of Pakistan, 1973, Article 188.

Transfer of Property Act (IV of 1882), S. 54---Qanun-e-Shahadat Order (X of 1984), Articles. 70 & 71---
Sale transaction---Undue influence---Proof---Oral depositions of witnesses produced by plaintiff to
prove mental incapacity of vendor and undue influence of vendees on such vendor in respect of disputed
sale transaction, being not based on personal observations or knowledge of witnesses, held, could not be
relied upon---Important facts like exercise of undue influence on vendor by vendees and mental incapacity
of vendor which could affect sale transactions, could, hardly be established by such unreliable oral evidence.

Defendant alleging execution under undue influence---Onus of proof of allegations---Mere

advantageous position not sufficient to prove undue influence.

The onus of providing that plaintiff was in a position to dominate the will of the defendant is entirely on the
defendant. Defendant is further called upon to prove that plaintiff has used that position to obtain in unfair
advantage for himself. Merely showing that the plaintiff was in a more advantageous position as compared
to that of the defendant so as to be able to drive a benefit by dominating the will of defendant is not
enough.

What is ‘Undue influence’--Facts to be proved to avoid contract for undue influence.

To prove that a contract was entered into under undue influence it must be established,

© Copyright Virtual University of Pakistan 3

Business and Labour Laws - MGT 611 VU
¾ that the relations subsisting between the parties should be such that one of them is in a position to
dominate the will of the other;
¾ that the dominant party obtains an unfair advantage over the other; and
¾ that the dominant party uses his dominant position to obtain that unfair advantage.

Raising merely an atmosphere of suspicion is not sufficient in a case of undue influence but there must be
clear and definite evidence of the case propounded. It must be established that but for the undue influence
which was practiced upon him, he would not have entered into the transaction. In order that a contract may
be had on this ground it is further to be established that the contract was unfair and unconscionable.

Undue influence---Contract induced by person in a position to dominate will of another---Burden

of proof. Sub-section (3) of section 16 lays down that 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 face of it or on the
evidence adduced, to be unconscionable, the 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.

Coercion---Mental capacity of person affected temporarily by action of another---Other person may

be guilty of coercion. If a person's mental capacity is temporarily affected by reason of mental or bodily
distress by the action of another person, that person would be deemed to be in a position to dominate his
will, and as such the latter may be said to have coerced the other into the doing of certain acts at that time.

Execution of receipt admitted but receipt of consideration denied---Allegation of undue influence--

-Burden of proof is on person denying consideration or alleging undue influence. Where the
defendant admits that he signed the receipt, the presumption would be that he had received the
consideration. It was for the defendant to prove that he had not received the consideration mentioned in
the receipt or that he had executed the receipt under undue influence.

Party denying execution of document and alleging her signatures were obtained on blank paper---
Onus of proof that signatures were properly obtained lies on the other party. Ordinarily in cases
where a document is admitted to have been signed by a party and the payment of consideration is denied,
the onus to prove that the consideration was not paid or the document was obtained by misrepresentation
or fraud is on the party who admits his signature but contends that his signature was taken upon a blank
paper. Such statement is taken as a denial and not execution of the document. In such cases the onus to
prove the execution of the document lies heavily on the respondent.

Onus---Undue influence---How proved and by whom. In order to determine the question of onus in a
case attracted by section 16 (b) the first thing to be considered is the relationship between the parties that is
to say whether one party was in a position to dominate over the other and then it must be proved that
position was used to obtain an unfair advantage and even though the transaction may be unconscionable
relief cannot be granted until the initial fact of the position to dominate the will is established. If such a
position is proved and the transaction also appears to be unconscionable, the burden of proof that the
contract was not induced by undue influence lies on the person in a position to dominate the will of the
other.

When there is evidence of overpowering influence and the transaction is immoderate and irrational, proof
of undue influence is complete. It is not necessary that such overpowering influence should be by threat or
by committing any act forbidden by law or by unlawful detention etc. If a person has some influence over
the other and by means of that influence reduces the will of the other to his subjection, whatever may be
the nature of the influence spiritual moral, social or any other influence, then it is such coercion as is
sufficient to constitute undue influence.

© Copyright Virtual University of Pakistan 4

Business and Labour Laws - MGT 611 VU
Relationship of tile parties---If sufficient to prove undue influence---How proved. "Undue influence
is not established by proof of the relations of the parties having been such that the one naturally relied upon
the other for advice and the other was in a position to dominate the will of the first in giving it."

Up to the point "influence" alone has been made out. Such influence may be used wisely, judicially and
helpfully. It must be established that the person in a position of domination has used that position to
obtain unfair advantage for himself and so to cause injury to the person relying upon his authority or aid.
And where the relation of influence as above set forth has been established, and the second thing is also
made clear viz. that the bargain is with the influencer and in itself unconscionable then the person in a
position to use his dominating power has the burden thrown upon him, and it is a heavy burden of
establishing affirmatively that no domination was practiced so as to bring about the transaction but grantor
of the deed was scrupulously advised in the independence of a free agent.

Undue influence---How proved---Mere relationship or position from which One's will can be
dominated not sufficient---Urgent need of party, a criterion. For avoiding a contract on the ground of
undue influence existence of a particular relationship is not necessary. The only difference in the kinds of
cases is, that where no such relationship exists the burden of proving the exercise of undue influence rests
on the party who seeks to avoid the contract whereas in the case of existence of such relationship it is for
the party who is in a position to influence the other to show that the transaction was fair.

After having determined as to whether one party was in a position to dominate the will of another, there
still remains another question and that is whether an unfair advantage was taken. That again depends upon
the circumstances of each case and the criterion would be whether the Court considering all the attendant
circumstances regards the transaction as unconscionable.

Urgent need and helplessness, however have both of them reference to the effect of the failure of the
borrower to secure the money and obviously the difference between the two is only a matter of degree.
How is this degree of the need of the borrower to be determined? It is not possible to lay down any hard
and fast rule. Each case must be decided on its own facts.

Undue influence---What is? In order to determine the question of onus in a case attracted by section 16
(b) the first thing to be considered is the relationship between the parties, that is to say, whether one party is
in a position to dominate over the other and then it must be proved that position was used to obtain an
unfair advantage and even though the transaction may be unconscionable, relief cannot be granted until the
initial fact of the position to dominate the will is established, If such position is proved and the transaction
also appears to be unconscionable, the burden of proof that the contract was not induced by undue
influence lies on the person in position to dominate the will of the other.

When there is evidence of the overpowering influence and the transaction is immoderate and irrational,
proof of undue influence is complete. It is not necessary that such overpowering influence should be by
threat or by committing any act forbidden by law or by unlawful detention, etc. If a person has some
influence over another and by means of that influence reduces the will of the other to his subjection
whatever may be the nature of the influence, spiritual, moral, social or any other influence, then it is such
coercion as is sufficient to constitute undue influence.

S. 16 (2) read with Constitution of Pakistan (1973), Art. 185 (3)---Contract---Undue influence---Both
Courts below recording concurrent findings of fact on question of soundness of mind of vendor and
absence of undue influence over him and such finding sustainable on record---Question being pre-
eminently one of fact, interference by Supreme Court, held, not justified.

© Copyright Virtual University of Pakistan 5

Business and Labour Laws - MGT 611 VU
An influence by a physician over his patient who is in critical condition, demanding and receiving
unreasonable and extraordinary amount on account of his professional charges would tent amount to undue
influence.

Undue influence may also be exercised in the following situations:

Undue influence—Master and Servant

If an employer exercises his influence over his employee so as to enter into a contract or agreement by
compelling him to accept the terms and conditions which are not otherwise in his favor would lead to an
agreement caused by use of undue influence. It would be voidable at the option of the aggrieved party that
is the employee since his consent is not free.

Undue influence---Counsel and Client

A counsel and client are in fiduciary relationship and if counsel exercises his influence and demands
unreasonable professional fee that would tantamount to exercising undue influence.

Undue influence—Creditor and Debtor

If a creditor exploiting the financial difficulties of a debtor, charges extra ordinary markup on the amount of
finance disbursed to the debtor, it would amount to the exercise of undue influence by the creditor.

Burden of Proof

Burden of proof is on the person who claims that undue influence has been exercised upon him by the
other party.

© Copyright Virtual University of Pakistan 6