Undue Influence
Introduction:
Undue influence is a concept in contract law that refers to a situation where one party is able to dominate the will of another party to the extent that the dominated party enters into a contract against their own free will. This type of influence is considered unfair and unethical, and contracts made under such circumstances are typically considered to be voidable. In this response, we will explore undue influence in detail, including its definition, general features, examples, important points, persons who can use it, burden of proof, legal effect, and refund of benefit.
Definition of Undue
Influence:
According to Section 16(1)
of Contract Act, 1872
“Undue influence as a situation where one party to a contract is in a position to dominate the will of the other and uses that position to obtain an unfair advantage.”
According to section 16(2) of Contract
Act, 1872
“a person is deemed to be in a position to dominate the will of another if he/she holds a real or apparent authority over the other or if he/she stands in a fiduciary relationship with the other.”
General Features of Undue
Influence:
Some general features of undue influence include:
1. Confidential Relationship: When there
is a special relationship of trust and confidence between the parties, such as
a doctor and a patient, or a financial advisor and a client.
2. Lack of Independent Advice: When the
dominated party did not receive independent legal advice before entering into
the contract.
3. Timing: The contract was entered into immediately
after a traumatic event, such as a death in the family.
4. Inequality of Bargaining Power: When there
is a significant inequality of bargaining power between the parties.
5. Threats or Coercion: When the dominating party used
threats or coercion to induce the dominated party to enter into the contract.
6. Deception: When the dominating party made misrepresentations or withheld important
information from the dominated party.
Examples of Undue Influence:
Some examples of undue influence include:
1. An employer
forcing an employee to sign a contract under threat of termination.
2. A doctor
taking advantage of a patient's vulnerability to persuade them to sign a
contract.
3. A family
member pressuring an elderly relative to sign over their assets.
Important Points of Undue
Influence:
Two important points of undue influence are:
Dominating Position:
A
dominating position refers to a position of power or influence that one party
has over the other party.
For example, an employer
has a dominating position over their employees or a doctor has a dominating
position over their patients.
Use of Position:
The use of position refers to a situation
where a party uses their dominating position to influence the other party to
enter into a contract against their own free will.
For example, an employer
threatens to fire an employee if they do
not sign a contract.
Persons who can use Undue
Influence:
Any
person who holds a position of power or influence over another person can
potentially use undue influence. This can include employers, doctors, family
members, and other parties who hold a dominating position over the other party.
Burden of Proof of Undue Influence:
The
burden of proving overdue influence
rests with the party who alleges it.
Case Law:
In
the case of Mohori Bibeev. Dharmodas Ghose, the Supreme Court held that
if a contract is found to be induced by undue influence, then it is voidable at
the option of the party who was influenced. The Court further held that in
cases where a person is in a position to dominate the will of another, the
burden of proof lies with the dominant party to show that there was no undue
influence.
No Presentation of Undue
Influence:
If
there is no evidence of undue influence, then the contract will be considered
to be valid. However, it should be noted that the absence of evidence does not
necessarily mean that there was no undue influence.
Legal Effect of Undue
Influence
If
a contract is found to be induced by undue influence, then it is voidable at
the option of the party who was influenced. The contract is considered voidable
because the dominated party did not exercise their own free will when entering
into the contract. This means that the party who was influenced can either
choose to enforce the contract or to
have it set aside.
Case law:
In
the case of Raghunath Prasad v. Saraswati Devi, the Supreme Court held
that where a contract is found to be induced by undue influence, the party who
was influenced is entitled to rescind the contract and to claim back any
property that was transferred under the contract. The Court further held that
even if the dominating party acted in good faith, the contract is still
voidable at the option of the influenced party.
Refund of Benefit:
If
a contract is found to be induced by undue influence and is subsequently set
aside, any benefit received by the dominating party under the contract must be
returned to the influenced party. This means that if the dominating party
received any property or money as a result of the contract, they must return it
to the influenced party.
Crux of all this:
In
summary, undue influence is a situation where one party to a contract is able
to dominate the will of another party to the extent that the dominated party
enters into a contract against their own free will. Some general features of
undue influence include a dominating position and the use of that position to
obtain an unfair advantage. Any person who holds a position of power or
influence over another person can potentially use undue influence, and the
burden of proving undue influence rests with the party who alleges it. If a
contract is found to be induced by undue influence, it is voidable at the
option of the party who was influenced, and any benefit received by the
dominating party must be returned to the influenced party. It is important to
note that undue influence is considered to be unfair and unethical, and
contracts made under such circumstances are typically considered to be
voidable.
.jpg)
0 Comments