Meaning And Essentials of Undue Influence in Contract Law

Meaning And Essentials of Undue Influence in Contract Law

Undue Influence meaning and essentials of undue influence have been provided under section 16 of the Contract Act, which is a person who is influenced

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Undue Influence meaning and essentials of undue influence have been provided under section 16 of the Contract Act, which is a person who is influenced (prevented) by someone from exercising an independent judgment, such a person is said to be influenced. Undue influence makes a contract voidable. Let's discuss what is undue influence means?

Undue influenced means is given under section 16 of the Indian Contract Act, 1872 as 

1) 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.

2) In particular and without prejudice to the generally 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 because of age, illness, or mental or bodily distress.

3) 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 the undue influence shall be upon the person in a position to dominate the will of the other.

Generally, undue influence in English law can be defined as 'when a superior party uses force to his inferior person and he is in the position to dominate the will of the other person and contract formed is apparently unconscionable that the consent must have been obtained by the Undue Influence.

Undue influence makes a contract voidable at the option of the party whose will is dominated by the other party.

Example: A, a person enfeebled by disease or age, is being 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 over A.

Essentials of Undue Influence

As per the definition of undue influence, the following are the essentials of undue influence;

  1. There must be some relation between the contracting parties.
  2. One of the parties to the contract dominate the will of the other
  3. The dominating party has taken unfair advantage of the weaker party.
  4. Obtained consent is unconscionable.

1. There must be Some Relation Between the Contracting Parties

The contracting parties must hold some relationship. For Example, employer-employee, principal-agent etc.

The parties to the contract must be well known to each other and one of the parties must be in relation with another party.

Section 16(2) of the Indian Contract Act, 1872, stated that undue influence can emerge into the provision on real or apparent authority and fiduciary relation. The relationship between the contracting parties can be either a real/apparent relation or fiduciary relation.

a) Real or Apparent Authority

The real or apparent authority is a relationship between the contracting parties where one party is superior and in a position to dominate the will of the other party.  For example, Father-Son, Employer-Employee.

b) Fiduciary Relation

The fiduciary relationship is a relationship between the contracting parties where the relation is made up of trust or belief between the parties. For example, the Advocate and his Client, Doctor and Patient, Husband and Wife.

2. One of the Parties to the Contract Dominate the Will of the Another

As stated above, the parties to the contract must hold a certain relationship. And, one of the parties to the contract must be in a position to dominate the will of the other party to the contract.

For example, principal and agent, here one party is in the position to dominate the will of the other party.

3. Dominating Party has Taken Unfair Advantage Over the Weaker Party

One of the parties to the contract must be in the position to dominate the will of another party and the dominating party must have taken unfair advantage of his position by dominating the other weaker party.

4. Obtained Consent is Unconscionable

As we know, the contract is made without the free consent of the parties is voidable. Here, also in a contract, if one party is superior to the other party, it can dominate the weaker party to obtain the other party's consent to enter into a contract. 

This is an example of obtained consent being unconscionable.

Effects of Undue Influence in Contract Law

According to section 19(A) of the Indian Contract Act, 1872, stated that "An agreement induced by the Undue Influence is voidable at the option of that party whose consent was obtained by undue influence."

So, the agreement made up by the undue influence between the contracting parties becomes voidable at the option of the party who is dominated by the other party. In such a situation, the agreement can be either a valid contract or a void contract.

Lakshmi Amma v/s T. Narayana Bhatt, 1970

In this case, a person suffered from ailments and he was getting treatment in the nursing home. And, his son took care of him and also requested his father to make a gift deed of all his properties in favour of his son otherwise he will not take care of him.

At this time he made a gift deed and all the properties belonging to him was gifted by him to his son excluding his other family members.

The court held that the person is suffering from ailments and in this situation deed made by him is under influence of his son, the gift deed was voidable.

Conclusion

Undue influence is one of the ways, where the consent of the party is inadequate as stated under section 13 of the Indian Contract Act, 1872. One party influences the other party to enter into a contract with him by influencing the other party due to the use of fiduciary relation or real/apparent authority. Such agreements are voidable at the option of the party whose consent was obtained by influencing him.