Definition: Undue Influence can be described as the practice of affecting the will of the other person by the use of the relation existing amidst the parties. Further, to employ undue influence one party has to be dominant and the other being weaker, so as to use the position to get an unfair benefit over the other.
Undue Influence is covered under Section 16 of the Indian Contract Act, 1872.
Characteristics of Undue Influence
Undue influence is present when one party is able to influence, modify or change the will or decisions of the other party and make them enter into a contract which is unreasonable. So, there are certain elements which are present in the case of undue influence:
- Relation Between Parties: A person can influence the will of another person only when close relation subsists between them.
- Position to dominate the consent: It should be noted that the relation between the parties should be such that one is dominant and the other is subservient. Therefore, the former is in a position to easily influence the will of the latter. Now, there are certain conditions in which a person is assumed to be in a position to dominate another person’s independent will. These are:
- Real and Apparent Authority: If a person is actually holding authority over the other person, such as employer and employee, parent and children.
- Fiduciary Relationship: If a person is standing in a fiduciary relationship with the other, then also the dominant party can influence another person’s free will. A fiduciary relationship is one where there is trust and confidence. It exists between principal-agent, customer-bank, patient-doctor, client-lawyer, husband-wife, minor-guardian, trustee-beneficiary, etc.
- Mental Distress: There are instances when undue influence is used against a person to obtain their consent on an agreement who is mentally incapable of contracting due to age, illness, distress etc.
- Unconscionable bargains: In case if one party to the contract is in a position to dominate other’s will and the contract took place between the parties and the transaction seems apparent or evidently unreasonable. Hence, it is presumed that the consent is not free.
- Undue Advantage: The main object of using undue influence in obtaining the consent is to take undue advantage.
- Burden of Proof: The burden of proof concerning the consent of the party was obtained without employing undue influence, rests on the party, who is in a position to dominate the other one.
Upcoming examples will explain the cases of undue influence:
- James, an old man suffering through cancer, is induced by Daniel, his doctor, to pay an exorbitant amount for the professional services provided. James transfers the money to Daniel’s account.
- A landlord induced his tenant to sell his new motorbike to the former at a price which is less than its market price, to live in the house for the next few months. Due to the influence, the tenant sold his motorbike to the landlord.
- Paul, the lawyer of Ben induces him to transfer his agricultural land, so as to save him from imprisonment from the fraud case charged on him. Accordingly, Ben transfers his land.
If the consent of one of the party is induced by undue influence, the contract is voidable at the option of the party whose consent was influenced.
Hence, the concerned party may rescind the contract or if the party whose consent was influenced has received any benefit, has to return the same, according to the terms and conditions, as the court finds just.
Further, when in any case there is a presumption of undue influence between the parties concerned, the presumption can be proven as false by presenting or disclosing all the material facts, making clear that there is an adequate consideration and showing that the weaker party to the contract has received independent legal advice.