Undue Influence : Meaning, Presumption and Effects

According to the Indian Contract Act, 1872, consent is when two or more persons agree upon the same thing in the same sense. To create a legal relationship between two parties to a contract, they must agree to the same thing in the same sense. Here, an agreement will be completed only when both parties to the contract agree or are ready to perform a contract in the same sense or harmony. For free consent in a contract, both parties to the contract should commit to the same thing and must show mutual trust between them.

As per the provisions of the Indian Contract Act 1872, when the relations between the two parties are of the nature that one party is in a position to dominate the decision-making of the other party and the party in the dominant position uses his influence to obtain an unfair and unjust advantage of the other party, such influence is called Undue Influence. It is to be noted that in any case where consent is affected by influence and there is any reposition or betrayal of confidence, the principle of equity shall be applied.

Geeky Takeaways:

• Consent is considered to be the most fundamental component of any contract. Every valid contract works on the principle of consensus ad idem; i.e., meeting of minds.
• Two or more people will be considered to have given consent for a contract when they agree upon the same thing in the same sense.
• To make the contract a fruitful junction between the two parties, consent is required.
• The Indian Contract Act, 1872 makes sure that under the contract, none of the parties to the contract shall have any undue advantage over the other.
• The consent of any party to the contract can be affected by different things; they can be either coercion, fraud, misrepresentation, or undue influence.

What is a Free Consent?

As per the provisions of Section 14 of the Indian Contract Act, consent is said to be free when it is not caused by any of the following:

• Coercion (Section 15)
• Undue Influence (Section 16)
• Fraud (Section 17)
• Misrepresentation (Section 18)
• Mistake (Section 20)

When consent to an agreement is caused by either of any elements like coercion, fraud, misrepresentation, or undue influence, the agreement will be a contract voidable at the option of the party whose consent was so compromised. When the consent is caused by mistake, the contract will be treated as void.

For example, Aliya agrees to sell her mobile phone to Ranbir. Aliya owns three phones and wants to sell her Motorola phone to Ranbir, but Ranbir thinks he is buying her iPhone. Here, Aliya and Ranbir have not agreed upon the same thing in the same sense. Therefore, there is no consent and no contract established between Aliya and Ranbir.

What is Undue Influence?

Section 16(1) of the Indian Contract Act 1872 defines the term ‘Undue Influence’ as follows: “A contract is said to be induced by undue influence where, (i) 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 (ii) he uses the position to obtain an unfair advantage over the other.”

A person is deemed to be in a position to dominate the will of another in cases where:

• One party holds real or apparent authority over the other.
• One party stands in a fiduciary relationship with the other.
• One party makes a contract with a person whose mental ability for decision-making is temporarily or permanently affected because of his age, illness, or mental or physical distress. For example, an old illiterate person.

Under undue influence, the dominant party must have the objective of taking advantage of the other party. If influence is wielded for the benefit of the other party, it will not be undue influence. But if the consent is not free due to undue influence, the contract will be voidable at the option of the aggrieved party. In such a case, the burden of proof will be on the dominant party to prove the absence of influence.

Illustrations for Undue Influence:

• Suresh, a student, agrees to pay ₹15,000 to his teacher, as he promised to give him better grades in practical physics. Here, Suresh is under the undue influence of his teacher.
• Monica is a psychologist for Ross. Ross was consulting with Monica to treat his mental health. Monica was aware that Ross had a flat in Pune, which was worth ₹ 5 crore. However, Monica, using her place of power, convinced Ross that the house he possessed wasn’t according to the Vastu and he should sell it. Monica purchased the flat from Ross for a mere ₹ 10 lakh.
• Manish, a minor entered into a contract with Misti. However, Manish failed to understand the complex terms of the contract, and Misti took advantage of this and conveyed the wrong terms to Manish. It will amount to undue influence.

Presumption of Undue Influence

This occurs when there is a special relationship between the parties. The unique relationships that the law considered to have the effect of undue influence include:

• Parent and child;
• Guardian and ward;
• Solicitor and client
• Doctor and patient;
• Religious leader and follower; and
• Trustee and beneficiary.

In the above relationships, the court presumes that the party with less power has been influenced, and they have entered into a contract under the influence of the dominant party. The mere status of parties is enough to prove the existence of undue influence in these cases.

There is, however, no presumption of undue influence in the following cases:

• Husband and wife (In case of persons engaged to marry, the presumption of undue influence will arise)
• Mother and daughter
• Grandson and grandfather
• Landlord and tenant
• Creditor and debtor

In these above-mentioned cases, undue influence shall have to be proved by the party alleging that undue influence existed.

Burden of Proof and Rebutting the Presumption

According to Section 16(3), in cases where there is a presumption of undue influence, the burden of proving that the person who was in a position to dominate the will of another, did not use his position to obtain an unfair advantage, will lie upon the person who was in a position to dominate the will of the other.

However, this burden or proof can also be shifted over to the defendant in a case where the plaintiff can prove that a confidential relationship existed between the party and the defendant, and due to such a relationship, the plaintiff has entered into the contract against his own will. The burden shifts totally on the defendant to prove that undue influence was not exerted on the weaker party.

When a person is found to be in a position by which he can dominate the will of the other party or where a transaction appears to have taken place due to dominance, the burden of proof that no undue influence was exerted or exercised lies on the party who is in a position to dominate the will of others. The presumption of undue influence implements public policy against the abuse of fiduciary or confidential relationships and therefore, it is a presumption shifting the burden of proof. When a presumption of undue influence occurs, the undue influencer must rebut the presumption with the greater weight of the evidence by showing the facts of the case, which indicate that the decedent made the disposition of his own free will.

For example, an old illiterate woman made a gift of almost the whole of her property to her nephew, who was managing her estate. On a petition by the old lady for setting aside the gift deed on the ground of undue influence, the onus lies on the nephew to prove that the transaction is bona fide, well understood, and free from undue influence because undue influence is presumed in such a case.

Effect of Undue Influence

Section 19A of the Indian Contract Act, 1872 has established that an agreement that is induced by undue influence or where the aggrieved party has entered the contract by getting affected by undue influence is voidable at the option of that party whose consent was taken by influencing him. The act has also established that the performance of such agreements may be avoided either absolutely or by prescribing certain terms and conditions.

For example, X’s son has forged Y’s name on a promissory note. Y, under the threat of prosecuting X’s son, obtains a bond from X for the amount of the forged note. If Y sues on this bond, the court may set the bond aside.

Conclusion

Consent is considered to be the most fundamental component of any contract. Every valid contract works on the principle of consensus ad idem, which refers to the meeting of minds. Two or more people will be considered to have given consent for a contract when they agree upon the same thing in the same sense. The consent of any party to the contract can be affected by different things; they can be either coercion, fraud, misrepresentation, or undue influence. According to Section 16 of the Indian Contract Act 1872, 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 others. It states that when the relations between the two parties are of the nature that one party is in a position to dominate the decision-making of the other party and the party in the dominant position uses his influence to obtain an unfair and unjust advantage over the other party, such influence is called undue influence. The party who is bringing the claim has the onus to prove the truth of the facts on which the party is relying. The aggrieved party has entered the contract by getting affected by undue influence is voidable at the option of that party whose consent was taken by influencing him.

Undue Influence – FAQs

What is Undue influence?

According to Section 16 of the Indian Contract Act 1872, “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 others”.

What is Free Consent?

As per the provisions of Section 14 of the Indian Contract Act, consent is said to be free when it is not caused by coercion, fraud, undue influence, misrepresentation, or mistake.

What is Consent?

Consent is when two or more persons agree upon the same thing and in the same sense. So for creating a legal relationship between two people, they must agree to something in the same sense as well.

What is the effect of Undue Influence?

An agreement that is induced by undue influence or where the aggrieved party has entered the contract by getting affected by undue influence is voidable at the option of that party whose consent was taken by influencing him. The act has also established that the performance of such agreements may be avoided either absolutely or by prescribing certain terms and conditions.

What is the effect of Undue Influence?

This occurs when there is a special relationship between the parties. The unique relationships that the law considered to have the effect of undue influence include:

• Parent and child;
• Guardian and ward;
• Solicitor and client
• Doctor and patient;
• Religious leader and follower; and
• Trustee and beneficiary.