Definition
The term undue influence means the unfair use of one’s superior power in order to obtain the consent of person who is in a weaker position. It is described under 1. section 16 (1 & 2).
Section. 16 (16)
It defines undue influence as, “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”. It is further explained as follows:
a. Position to Dominate
In order to prove undue influence the relations existing between the parties should be such that one of them must be in a position to dominate the will of the other party. The person in a superior position may obtain the consent of other party.
Example
U, a spiritual advisor induced his follower M, to gift him his property to secure benefits in the next world. It was held that gift was obtained by undue influence as U was in a position to dominate. (Mannu Singh vs. Umadat Pandey).
b. Unfair Advantage
In order to prove undue influence, it is necessary that the party who is in a dominating position must have used his position to obtain an unfair advantage from the other party.
Example
A, having advanced money to his son B, obtains a bond for an amount greater than the sum advanced, by misuse of parental influence. A obtains unfair advantage.
2. Section 16 (2)
A person is deemed to be in a position to dominate the will of another as follows:
(1) Where he holds a real or apparent authority over the other; or
(2) Where he stands in a fiduciary relation to the other; or
(3) 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, e.g. old age, illiterate persons etc.
It is further explained as under:
a. Real or Apparent Authority
A person is authority can dominate the will of the person over whom the authority is held. The authority may be real or apparent. For example, the authority of an income tax officer over an assessee, police officer over an accused person.
Example
A, a police officer bought a property worth Rs. 1 Lac for Rs. 50,000 from B, an accused under his custody. Later, B sued to cancel the contract. A is a in a position to dominate the will of B.
b. Fiduciary Relation
Fiduciary relation is a relationship of mutual trust and confidence. It exists in case of father and son, guardian and minor, advocate and client, doctor and patient, religious advisor and follower, etc.
Example
An illiterate elderly woman made a deed of gift of her whole property to her nephew who managed her estate. The deed was cancelled on the ground of undue influence. (I Gariah vs. Shaikh Alie Bin Omar).
c. Mental distress
A person is said to be in distress when his mental capacityis temporarily or permanently affected. It may be due to old age, mental or physical illness, etc. such a person is easily persuaded to give consent to a contract which may be unfavorable to him.
Example
A moneylender gave a loan at 100% interest rate to a needy widow. It was held that undue influence was used and the court reduced the interest rate to 24%. (Rannee Annapurni vs. Swaminatha).
Presumption of Undue Influence
It is presumed that the dominating person has exercised undue influence in these cases: father and son, guardian and minor, doctor and patient, advocate and client, trustee and beneficiary, spiritual advisor and follower, teacher and student, master and servant.
Burden of Proof
In these cases, the burden of proof lies on the dominating person. He can disprove the presumption by arguing that;
(1)The facts were fully disclosed.
(2) The price was enough.
(3) The dominated party was in a position to receive independent advice.
(4) The dominated party gave his free consent.
No Presumption of Undue Influence
It is not presumed that the dominating person has used undue influence in these cases: Husband and wife, landlord and tenant, creditor and debtor, principal and agent, mother and daughter.
Burden of Proof
In these cases, the weaker party person will prove that undue influence has been exercised over him.
Effect of Undue Influence
The effects of undue influence are as follows :(Sec. 19A).
The agreement is voidable at the option of the party whose consent was taken by under influence.
The court may direct the aggrieved party to refund the benefit or cancel the contract.
If the aggrieved party does not cancel the contract, it remains a valid contract.