Essentials of undue influence

Introduction:  An agreement is enforceable by law when it is made by competent parties, out of their free consent, lawful object and lawful consideration. A consent is said to be free when it is not caused by coercion[1], undue influence[2], fraud[3] and misrepresentation[4]. Undue influence makes the contract voidable at the option of the party whose will was dominated by undue influence.

Definition[5]:     (1) A contract is said to be induced by "Undue influence" where the relation 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 passion to obtain an unfair advantage over the other.

(2) 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.

(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 contact was not induced by undue influence shall lie upon the person in a position to nominate the will of the order.

Nothing in this sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872 (1of 1872).

Exception – Section 111 of Indian Evidence Act is an exception to Section 16(3) of Indian Contract Act.

Section 111 of The Indian Evidence Act – Proof of good faith in transaction where one party is in relation of active confidence.  Where there is a question as to the good faith of a transaction between parties, one of whom stands to the other in a position of active confidence, the burden of proving the good faith of the transaction is on the party who is in a position of active confidence.

Ingredients of Undue Influence:

• There is a contract.
• One of the party to the contract is capable of dominating the will of other.
• Such party uses is position to obtain an unfair advantage over the other party.
• A person is deemed to dominate the will of other.
• Such person hold real or apparent authority.

Conclusion:          There are certain relationship which subsists between the persons, where one can dominate the will of another. i.e. Company and Directors, firm and partners, master and servant, guardian and ward, teacher and student, doctor and patient, advocate and clients etc. in such cases there is a presumption in law that there is undue influence.

[1] Section 15 of Indian Contract Act, 1872

[2] Section 16 of Indian Contract Act,1872

[3] Section 17 of Indian Contract Act,1872

[4] Section 18 of Indian Contract Act,1872

[5] Section 16 of Indian Contract Act,1872