Undue Influence Under Law Of Contracts

TABLE OF CONTENTS

• Introduction
• Definition of Undue Influence
• Types of Undue Influence

1. Relationships
2. Dominating Position
3. Unfair Advantage
4. Real and Apparent Authority
5. Fiduciary Relationship
6. Parent and Child
7. Affecting Mental Capacity

• The parties which can bring an action for undue influence.
• Conclusion

KEY TAKEAWAYS

• In accordance with the Indian Contract Act,1872 any contract made while a person was under undue influence is void because it wasn't made with their free consent.
• The age of the children is always taken into consideration when estimating the level of parental influence.
• Unfair advantage can be well understood through the landmark judgement of Ganesh Narayan Nagarkar v. Vishnu Ramchandra Saraf
• Party or its legal representatives who signed the contract or executed the document while being under the other party's control must be the only one to claim for undue influence.

If you google the meaning of undue influence it’s mentioned, “which a person is induced to act otherwise than by their own free will or without adequate attention to the consequences.”

In accordance with the Indian Contract Act,1872 any contract made while a person was under undue influence is void because it wasn't made with their free consent.

The definition and types of undue influence will be covered in this article, along with some significant cases that have paved the way in the field.

DEFINITION

When someone has the ability to alter another's opinion due to their interpersonal relationship, this is known as unfair influence. One of the parties is typically in a position of power over the other due to differences in status, expertise, or strong emotional relationships. By using this advantage, the stronger person can coerce the weaker person into making decisions that may not be in their long-term best interests.

Referringto Section 16 of the ICA, "a contract is considered to be induced by undue influence" when "the other party is able to control the will of the consenting party owing to the presence of the relationship subsisting between them." While the contract is being created, one side exerts influence over the other to gain an unfair advantage. The ability to control another person's will is further qualified by the following:

1. Has a fiduciary relationship (relationship of trust) with them that gives them actual or seeming authority, or
2. Contracts with a party whose mental ability is temporarily or permanently impaired owing to a disease, old age, or mental suffering.

The defendant, or the person who was in a position to control the other party's will, has the duty of proving that the contract was not impacted by undue influence. Additionally, this clause states that it will not alter Section 111 of the Evidence Act of 1872, which addresses the parties' good faith in their transaction.

Types of undue influence

The party claiming damages must prove the following two circumstances:

1. Firstly that there is a relationship between the parties that allows one to have an influence on the choice and intent of the other, and secondly
2. Second the defendant or donee exploited his position improperly to benefit himself.

But here, a joint discussion of all the cases would be feasible and will prevent the confusion in understanding them. Mainly, all the cases of undue influence fall under the following categories.

1. Relationship

It is not necessary for a case to fall into this category for the parties to be related to one another through blood, marriage, or adoption; instead, it is necessary for one party to be in a stronger position and be able to control the other's will. It applies to all types of interactions and is not limited to strictly fiduciary ones. However, the presence of such ties alone cannot establish excessive influence; dominance must also be exercised.

2. Dominating Position

The context in which the contract was made as well as their ties are taken into account in this category of undue influence. It is necessary for invoking an action that a dominant position exist and be used. Once dominance has been established, it is assumed that there was a use in that specific situation unless an opposing evidence shows up.

3. Unfair Advantage

Unfair advantage can be well understood through the landmark judgement of

Ganesh Narayan Nagarkar v. Vishnu Ramchandra Saraf, (1908)ILR31BOM37)

According to the court, "unfair advantage is the benefit or enrichment achieved via unlawful or unrighteous methods." When a deal benefits an influential individual at the expense of others, it is believed to have happened.

4. Real and Apparent Authority

A legitimate authority figure, such as a police officer or an employer, wields this kind of influence and earns profit off of it. It is possible to appear to have real authority without actually having it.

5. Fiduciary Relationship

The only foundation for this kind of connection is mutual trust between the parties. The situation is such that one of the parties automatically places its trust in the other, and as that trust grows over time, one side progressively begins to influence the other. The typical examples of this kind of connection include between a doctor and a patient, a lawyer and a client, a parent and a kid, a teacher and a student, and the beneficiary of a trust (cestui que trust), and many others. A judgement of this sort of situation may be seen in the Mannu Singh v. Umadat Pande, ILR 12 All 523

In this case where a guru persuaded his disciple to accept his property as a gift by promising to guarantee advantages for him in the hereafter. The gift was disallowed by the court because it was not formed with free consent

6. Parent and Child

There is an innate impact on children from childhood that lasts throughout life since parents want to meet all of their children's needs and want them to behave under their supervision. Therefore, the courts of equity regard it to be parental jealousy when any advantage is given to the parent or any third party at the expense of the kid. As a result, the age of the children is always taken into consideration when estimating the level of parental influence.

In the case Lancashire Loans Ltd v. Black (1934) 1 K.B. 380, it was determined that a girl's agreement to act as her mother's guarantee in a loan transaction immediately before her marriage was made under duress.

7. Affecting Mental Capacity

According to the precedent-setting case of Inder Singh v. Dayal Singh(1926) 28 BOMLR 1372

“Undue influence emerges when one party takes use of the short or long-term benefit of another's mental state to execute a contract. However, until the defendant takes advantage of this chance, a merely distressed state of mind cannot amount to undue influence. Due to the plaintiff's inexperience, it is also considered undue influence under this category to encourage a person who has recently reached majority to enter into a contract.

After discussing about the types of undue influence, we will discuss about the party which can bring action for undue influence .

Referencing the case of M. Venkatasubbaiah v. M. Subbamma

According to the ruling, the party or its legal representatives who signed the contract or executed the document while being under the other party's control must make the claim of undue influence. Any third person, regardless matter how strongly he feels about it, is not permitted to assert difficulty or a lack of unanimity. However, a contract may be annulled if a person (other than the parties to the contract) exerted undue influence over them[15]. Similar to this, a party to a contract may forfeit its rights thereunder if that party conspired with a third party, served as that third party's agent or principle through which it was able to exert its influence, over the contract

CONCLUSION

A psychological process called "undue influence" replaces a person's free will with that of another. Additionally, it is against equity to create a contract by improper influence. Therefore, one must ensure that the contract they have established is devoid of any external expression in fiduciary relationships and other situations where one party enjoys actual or perceived authority or influence. However, the person whose assent is sought may choose to nullify such contracts.

Learn the practical aspects of CrPC HERE, CPC HERE, IPC HERE, Evidence Act HERE, Family Laws HERE, DV Act HERE